Cryptocurrency Trading: How to Get Started and What Are the Risks Involved
The meteoric rise of bitcoin in 2017 has attracted a lot of investors into cryptocurrency trading. Many have seen and heard news about how individual traders almost instantly became millionaires by investing in Bitcoin. Sure bitcoin isn’t what it used to be in terms of price, but many people still opt for cryptocurrencies as their preferred investment channel.
Getting Started
Before anything else, you should determine how much you want to put in trading cryptocurrencies. Common sense dictates that you should only risk money that you can afford to lose and this is especially important when it comes new kinds of assets like cryptocurrencies.
Next thing to do is get a cryptocurrency wallet. While cryptocurrency exchanges already have wallets in their system, it is not recommended to keep your holdings there as many of them have fallen victim to hacking in the past.
The last thing you need to do is to find the right cryptocurrency exchange for you. The internet is full of them, so choose carefully. Visit forums, review sites or ask a friend of yours who knows a thing or two about cryptocurrency trading.
Recommended Picks
Bitcoin used to be the only cryptocurrency in the past and it wasn’t until years later that other cryptocurrencies surfaced. Nowadays there are thousands of cryptocurrencies and there is always a new one popping up every now and then. Bitcoin is still considered the most recommended asset for those interested in cryptocurrency trading. But that doesn’t mean that you shouldn’t try to diversify your portfolio with other cryptos as you gain experience.
Here are other cryptocurrencies you might want to have:
- Ethereum
- Ripple
- Litecoin
The ones listed above are the three leading cryptos along with bitcoin. It is recommended that your cryptocurrency trading portfolio include some or all of them.
Risks
Volatility
Cryptocurrencies are extremely volatile. Huge price fluctuations happen often. In 2017 bitcoin reached around $19,000, but near the end of the year it plummeted to $8000.
Not Tradable for Fiat Currency
Another cryptocurrency trading risk is that unpopular coins can’t be traded for real money. You will have to exchange them for more popular cryptocurrencies, like bitcoin, and then convert them to fiat currency.
Hacking
Incidents of hacking of crypto exchanges are well-known and made investors suffer from major losses
No Refunds or Chargebacks
Cryptocurrency trading involves constantly having to send and receive cryptocurrencies. Cryptocurrencies are decentralized so there is no central authority to go to in the event of getting scammed during a transaction.