Cryptocurrencies are clearly becoming more and more popular from year to year.
However, not everyone is aware of what exactly cryptocurrencies are, and where exactly they can be purchased. The vast majority of people still cannot be convinced by the advantages of cryptocurrencies.
So what exactly are cryptocurrencies and what are they for? How to invest in cryptocurrencies?
In this guide, we will answer all your cryptocurrency-related questions in detail.
Cryptocurrencies in the simplest terms possible can be defined as digital currencies that use cryptography.
It is, in turn, a modern technique of encrypted communication. This encryption makes all transactions very secure. It is not possible to counterfeit a given cryptocurrency.
In addition, the vast majority of the most popular cryptocurrencies are decentralized systems that use blockchain. It is good to know that the blockchain is a public record of transactions that are carried out by thousands of people around the world.
This means that all transactions made with the use of virtual currency are anonymous, but the list of transactions is available to the public.
Of course, cryptocurrencies do not exist in traditional circulation. Hence, there are no physical notes or coins that could correspond to a certain denomination. It is also worth knowing that all transactions made via cryptocurrencies work without any administrator. The issuance and value of the virtual currency are monitored by users.
Most popular cryptocurrencies in terms of the percentage of total market capitalization. Source: Coinmarketcap.
Bitcoin, the first cryptocurrency that made its debut in 2009, contributed to the huge interest in virtual currencies. In addition, Bitcoin is considered by the vast majority of people to be a synonym of cryptocurrencies. It was created on the basis of blockchain technology. It is also worth noting that the mentioned cryptocurrency is still the leader of the entire market. It has not been officially established who exactly is its creator.
The second most famous cryptocurrency is Ethereum. It is worth knowing that its beginnings date back to mid-2015. Ethereum, just like the aforementioned bitcoin, uses blockchain technology. However, it differs from bitcoin in that it also allows you to create the so-called Smart Contracts. These are algorithms that allow you to perform very specific activities. They include, among others sharing funds between individual shareholders in the case of fundraising for a specific project. This means that this Ethereum can definitely facilitate crowdfunding or investing.
Ripple (XRP) is another cryptocurrency worth mentioning. Ripple company has not only created virtually every unit of this cryptocurrency, but is also its sole distributor. It is a completely different technology from blockchain. It should also be noted that Ripple primarily aims to cooperate with various financial institutions and banks. In addition, the full Ripple stock is exactly 100 billion units.
However, it is sometimes worth knowing about the existence of other (including less popular) cryptocurrencies that can potentially bring higher profits. Among them, you can distinguish EOS, Dash, Monero, Litecoin and NEO.
By far the most frequently cited argument for investing in cryptocurrencies is that they are not supervised in any way. Thus, there is no entity that could inform the tax authorities. It is also necessary to note that the cryptocurrencies are resistant to the actions of the authorities of individual countries. They are also safe from all sorts of manipulation or speculation by those in power.
The advantages of cryptocurrencies also include the possibility of exchanging for real goods. In addition, cryptocurrencies can not only be traded, but also sold for real money.
The very low fees are also an advantage. As you know, every foreign transaction is associated with bank charges. Often, you also have to pay for account maintenance. In turn, the advantage of cryptocurrency users are very low transaction fees. Trading platforms in the vast majority of cases charge small commissions compared to commercial banks.
It is also worth knowing that digital currencies usually have a limited number of units. It is therefore not possible to produce more coins than the number indicated.
This allows for a much greater stability of cryptocurrency prices in the future.
Beginner investors very often wonder where to buy cryptocurrencies. Online exchanges such as Allianz Market are among the most popular places to buy cryptocurrencies.
Allianz Market is highly rated by both users and specialists on various websites and platforms.
It is worth knowing that a very large number of cryptocurrency exchanges require verification. Before creating an account, the user will have to undergo a process of verifying his identity. Usually this is done by comparing the person's photo with the actual document.
In addition, before choosing a cryptocurrency exchange, it is recommended to very carefully check whether it actually has adequate liquidity. This will guarantee the user not only comfort, but also security related to asset trading.
Some users still choose bitcoin exchanges. However, it is worth checking the exchange office before making the final decision to purchase. Be careful, because every year more and more fraudal platfroms are created to make money on investors through scams.
It's good to know that trading cryptocurrencies is not as complicated as it may seem.
However, it is recommended to regularly check the latest news from the market on sites such as Bithub, Kryptofama and Bitcoin.com. It is also worth following the blogs of the most popular traders and then analyze their trading activities.
It is also worth following the blogs of the most popular traders and then analyze their trading activities. It is worth knowing that some experienced investors inform about planned moves even before opening a position on their blogs. They also inform why you should buy a given cryptocurrency at a given moment. Then it is worth checking the mentioned trade. You can easily draw the right conclusions for the future.
It is also recommended to systematically analyze the charts. You can see how the chart has behaved in the past, and in which direction the price of a given cryptocurrency may go. However, it is worth analyzing these charts on the trading platform where you trade cryptocurrencies, as the price may vary due to the different commissions of the platforms.
At Allianz Market, we pride ourselves on the lowest commission level on the market!
In the case of cryptocurrencies, it is worth using fundamental analysis. It is worth knowing that the cryptocurrencies react to both economic and political information. Moreover, they do it the way investors expect. Good news tends to an increase of their value, while bad news to a decline. Investors thus have a much more transparent trading environment compared to fiat currencies available on the Forex market. It is also worth regularly following the information coming from exchange offices or cryptocurrency brokers.
Investors wishing to use technical analysis should familiarize themselves with the Elliot wave theory. It is also recommended to use the RSI oscillator, i.e. an indicator that determines the current strength of a given trend. The indicator is able to give the investor information whether a given asset is oversold or overbought.
Buying cryptocurrencies step-by-step:
1 We set up an account on the trading platform
2 We check which cryptocurrencies are oversold
3 We check the latest news about the cryptocurrency (in the absence of large negative news, we can proceed to the next step)
4 We buy (CFD contracts on) cryptocurrencies with a Stop Loss order (sell automatically when a lower amount is reached) with a value 5-15% lower than the current one (depends on the period - the longer, the greater the percentage of the difference).
5 We are waiting for the cryptocurrency peak when it is relatively overbought according to the RSI index.
5 We sell and earn $$$. By using leverage, you can increase your profit by multiple times, but there is a greater probability of reaching a Stop Loss position where you can lose a few percent of the amount invested.
Lots of information, right?
To get a better overview of Crypto and the basics of cryptocurrency trading, please read the main points in our recap: