You have read many about cryptocurrencies. Your cousin has told you that he has made enough trading Bitcoin that he has gone on vacation. You read that prices are going down and encourage you to invest for when they eventually go up. The world of cryptocurrency investing is complicated and scary, but tempting at the same time.
But the last thing you should do is enter without the knowledge of how it operates and all that it implies. There are professional and basic traders, who simply leave you at ease buying from the dozens of cryptocurrencies in different blockchains that exist. The ideal in these cases is to learn about operations, But... Where and why?
Why is it important to learn about cryptocurrencies to trade them?
The most basic reason is that, although its access is much easier than access to stocks, futures, options and other operations of risk investment groups, its implications remain. You are trading crypto assets over which one person has no control, and you should not trade with money you cannot afford to lose, as it can lose all value at any time.
That is something that applies even in basic investment products. Is there something specialized in cryptocurrencies? With the rise of them, there are groups that seek to share their knowledge and provide platforms to those interested in cryptocurrencies, like the Bitcoin360 AI platform.
What makes these platforms better than other exchanges and wallets? Here the difference is that they benefit from users learning the world of cryptocurrencies. Put simply, they hope to teach you, without really being an academy, by putting you through simulations and giving you small-scale tools for cryptocurrency investing.
Although they present themselves as online trading platforms, they stand out by keeping the focus on training people to trade independently. Instead of leaving the curious to chance, they are optimized to help users navigate the markets and become more experienced cryptocurrency traders. Despite the relative youth of cryptocurrencies, let us not forget that they have been with us for more than a decade, revaluing, devaluing and more, due to factors that are repeated and can even be predicted, or at least reacted to.
How is a cryptocurrency different from a normal currency to invest?
The basic and simplified definition is that a cryptocurrency is a digital asset hosted on a blockchain, which is an accounting book kept between hundreds or thousands of terminals to ensure that it is not modified without the agreement of the majority. This form is what is called decentralized accounting.
The value of the cryptocurrency is given by numerous factors, but generally the trust that has been placed in it and the viability that is seen in the blockchain itself, which can have smart contracts, or be more efficient and popular and more used, to sustain or increase its value as an investment asset or even as legal tender. This has already been put to the test in two countries, El Salvador being the most notable about it.
But cryptocurrencies are not something foreign to central banks, because although it is not said publicly, it is to be expected that the vast majority of countries are developing their digital currency, managed by their central banks. This is still a cryptocurrency, but it is not decentralized since its value is decided by a single body.
What basics do I have to learn about cryptocurrency trading?
Here we are going to make a few definitions of the most basic concepts that you should know about the world of cryptocurrency trading.
First of all, there is not only Bitcoin as a cryptocurrency. It is true that it is the most popular, but there are others such as Ethereum, Ethereum Classic, Solana, Cardano, Tezanos... There are countless cryptocurrencies. Some of them are called altcoin, which are the non-majority cryptocurrencies that are used regularly, and others like DogeCoin are known as shitcoins, because its value is so low that it is not considered profitable to devote effort to it. It is well known that traders do not invest only in Bitcoin, but in dozens at least, so that they have many fronts in which to put their investments in case one appreciates a lot.
Another key factor is that trading cryptocurrencies is not mining them. With an operator you are not setting up a mining kit, but you are exchanging crypto assets. Yes, it is true that the electricity cost must be paid to the miners that generate new blocks of the blockchain in which the cryptoactives are registered. Herein lies the importance of the difference between Proof of Stake and Proof of Work for mining, which can affect transaction fees due to the power of energy that needs to be compensated to miners in order to validate transactions and create the blockchain blocks.
Then, there is that cryptocurrencies can be affected by thousands of values external to them, and the value responds. It is for example that certain countries or organizations decide to use them, or that they decide to regulate for fear of their use for fraud or arguing that they want to ban proof of work algorithms due to their electricity consumption, which in such a case would not be affected that operate with the Proof of Stake.
There are many factors that can affect the price, valuation or use of cryptocurrencies. And this is the most basic to understand its operation, without us being a dedicated academy. They are basic concepts. For more advanced things, there are platforms specialized in making you enter and learn the correct operation and the rhythm of operations that must be carried out, and which ones.