Trading Cryptocurrency: Exchange Basics

cryptocurrency trading meaning

Cryptocurrency mining requires expensive computer hardware and large amounts of electricity supply. The more miners there are on a blockchain, the harder the cryptographic calculations become to solve and the more difficult it is to mine a cryptocurrency. Central bank digital currencies (CBDC) are created or backed by a central bank. The People’s Bank of China (PBoC) is currently developing its digital yuan. The Bank of England suggested it might promote a digital pound it cheekily called Britcoin.

  • However, as a trader you must remember that every asset is subject to unique market forces and behaves in a different way (for example, some products are more volatile than others).
  • Dedicated crypto and bitcoin exchanges will allow you to withdraw your crypto funds and transfer them to another wallet of your choice.
  • Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded.
  • It also summarises the datasets that have been used in cryptocurrency trading research.
  • Cryptocurrency exchanges allow customers to trade cryptocurrencies[99] for other assets, such as conventional fiat money, or to trade between different digital currencies.

The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero. Cryptocurrency brokers offer the most suitable environment for users just getting started with cryptocurrency markets and beginners who are looking to buy Bitcoin, Litecoin, Ethereum or other cryptocurrencies. Exchanging fiat currencies for cryptocurrencies, and vice versa, takes place between the buyer or seller and the broker platform. Over the past decade, cryptocurrency trading has gained increased momentum. These digital currencies operate on blockchain technology and can produce significant returns.

Best for Low Fees: Bitstamp

If you want to buy cryptocurrencies, you can do so by choosing the ‘buy’ option, selecting the order type, entering the amount of crypto and then confirming the order. The first step to starting crypto trading is to choose a relevant platform. Cryptocurrency is a digitally based form of virtual money which is secured by cryptography. In 1982, computer programmer David Chaum posited the idea of an electronic currency called ecash. It required users to download software, and use it to withdraw money from a bank, before sending it using private codes to someone.

However, this high volatility also means trading cryptocurrencies carry a high risk of losing money if prices collapse. The value of a cryptocurrency is mainly determined by supply and demand, just like any other asset or product. There are several factors that influence traders’ and investors’ interest in cryptocurrencies and the supply of coins and tokens in circulation.


The company behind it has worked with various banks and financial institutions. This alerts the trader that they need to add funds to their account in order to keep the position open. If no additional margin is added, the broker may close the position in order to prevent further losses.

  • That means investors are entirely responsible for the security of any cryptocurrency spot holdings.
  • Mining cryptocurrency is generally only possible for a proof-of-stake cryptocurrency such as Bitcoin.
  • Some crypto exchanges support as many as 500 currencies, while others may only support a single coin.
  • She has more than a decade of experience working in news, public relations and communications.
  • DISCLAIMERThis article does not constitute investment advice, nor is it an offer or invitation to purchase any crypto assets.

Colianni et al. (2015) cleaned data and applied supervised machine learning algorithms such as logistic regression, Naive Bayes and support vector machines, etc. on Twitter Sentiment Analysis for cryptocurrency trading. Garcia and Schweitzer (2015) applied multidimensional analysis and impulse analysis in social signals of sentiment effects and algorithmic trading of Bitcoin. The results verified the long-standing assumption that transaction-based social media sentiment has the potential to generate a positive return on investment. Zamuda et al. (2019) adopted new sentiment analysis indicators and used multi-target portfolio selection to avoid risks in cryptocurrency trading.

Transaction (TX)

You just need to choose two currencies, one available on your account balance and one you want to receive. When you need money urgently, you can sell Bitcoins for cash using our mobile app and get funds directly to your linked card. The Instant Sell option is available on the Buy/Sell menu and allows you to convert your digital funds into real ones in a matter of seconds. Thus, trusting a platform with extensive coverage and a positive reputation among its users might save your time. If your prediction of the price movement is correct, you’d make a profit. While crypto is almost in its teen years, it’s safe to say that it’s far more volatile than the average adolescent.

cryptocurrency trading meaning

Given their short history, the volume and diversity of cryptocurrencies being traded is also far less than that of stock exchanges. Given their maturity, stock exchanges have high volumes and diversity of trade. The maturity of the stock market has, however, given ample opportunity for some traders to dominate trading circles. This can be to the disadvantage to smaller investors because the stock market rewards bigger investors with lower fees or commissions on trade. This article details the basic functions of cryptocurrency exchanges, how they operate, and what types of orders and trades you can execute. These wallets come in many forms, including web-based, desktop, mobile, paper, and hardware.

Having a diversified portfolio is a sensible way to minimize losses and take advantage of market gains. This type of analysis may help you decide whether to keep more of your portfolio in BTC cryptocurrency trading meaning or branch out into coins that usually gain or lose value compared to Bitcoin. Effective traders know they must overcome the natural emotions of hope, greed, panic, guilt and excitement.

What is an example of crypto trading?

CFD trading example: Sell Ethereum/USD

You believe the value of ethereum will fall against the US dollar, and therefore open a sell CFD position, selling 5 units to open at 429. This is the equivalent of selling 5 ether tokens, so you will gain or lose $5 for every $1 change in the value of ethereum.