Cryptocurrency Trading for Beginners

Altcoins and Bitcoin trading are becoming increasingly popular as hodling is losing ground in the cryptocurrency markets. This article will give a brief cryptocurrency introduction, detail how to buy cryptocurrency, and how to invest in cryptocurrency before explaining cryptocurrency trading for beginners and give a concise list of good cryptocurrency trading sites depending on what you might want to do.

Q: What is cryptocurrency for dummies?

A: Cryptocurrencies are a new form of electronic cash that appeared in 2008 following the introduction of Bitcoin by Satoshi Nakamoto on October 31, 2008. They have since become increasingly popular not only as a mean of border-less, low transaction fee, near instantaneous,  deflationary, and immutable payment method but also as a value holder.


Cryptocurrencies use a new decentralized network called blockchain to validate all transactions; making transactions more secure, less prone to manipulations, immutable, and transparent.


Q: How to buy Cryptocurrency?

A: Cryptocurrencies can be bought or received as gifts from airdrops, promotional activities or simple presents. Currently, the two ways of buying cryptocurrencies are to either exchange them against national currencies, also called fiat currencies, such as Dollars or Euros, or to exchange them against other cryptocurrencies.


To buy cryptocurrency using fiat currency, head to a fiat-to-cryptocurrency exchange such as Coinbase, Bitfinex, Bitstamp, or a localbitcoins site. To exchange cryptocurrencies against each other, head to a coin-to-coin exchange such as Poloniex, Kraken, or CEX.io.

Q: How to invest in cryptocurrency?

A: The cryptocurrency markets are very volatile and caution is advised when entering the market. Investments with cryptocurrencies can be made by either purchasing cryptocurrencies as a means of a store of value, which is increasingly popular, or for use as a method of payment for traditional investments.

When purchasing cryptocurrencies as a store or value two distinct predominant strategies exist in the market; hodling and trading. Hodling refers to the buying and keeping, or holding, of a particular coin, say Bitcoin or ethereum, in the hopes of the price going higher. The investors would, thus, buy low and sell high over a long period of time. Trading cryptocurrencies is done over a considerably smaller period of time and will be covered later in this article.

Using cryptocurrencies to make traditional investments is also increasingly popular as the new technology is becoming an accepted means of payment using applications such as BitPay or Bitcoin Lightning. These applications then, in turn, allow investors to minimize the fees charged, allow border-less near instantaneous safe transfer, and expand their portfolio options.

Q: How to: Crypto trading for beginners?

A: Cryptocurrency trading is slowly replacing hodling is the favorite, and most profitable, strategy for cryptocurrency enthusiasts. Cryptocurrency trading is usually done on the same day, intraday, and can take three forms; fiat-to-cryptocurrency trading, coin-to-coin trading, and cryptocurrency derivatives trading.

As previously mentioned, fiat-to-cryptocurrency trading involves the buying or selling of national currencies, such as Pounds, or Renminbi, against cryptocurrencies such as Bitcoin Cash or Monero. For example with BTCUSD as a trading pair a trader would buy BTC using USD when the price is low and sell it back once the price rises; thus, making a profit. A trader can also profit from a difference in price between different pairs and buy BTCUSD before selling his BTC in Euro at a higher price using BTCEUR (assuming the BTCEUR price would be higher than the BTCUSD price at the moment); this is called arbitraging. Arbitraging can also be done by buying and selling across different exchanges and profiting from the difference in prices; an example of this would be buying BTC in an exchange where the BTCUSD price is low and selling BTCUSD in an exchange where the price is higher.

Coin-to-coin trading works in much the same way fiat-to-cryptocurrency does except traders can only trade using cryptocurrencies. An example of this would be BTCETH which is a Bitcoin against Ethereum trading pair. Buy low sell high still applies as does arbitraging across the different trading pairs and exchanges.


While these two trading methods were predominant in the early days with the bull market going strong, the market is slowly shifting to derivatives as a new means to profit from bull and bear markets.


Derivatives such as futures work on the speculation of the future price of an asset. As such a trader must first choose a direction before entering a trade with short positions profiting from a fall in market prices and long positions inversely profiting from a rise in market prices.  In traditional finance, the derivatives markets are 17 times larger than traditional equity markets which is not the case in today’s cryptocurrency markets. To remedy this, and in expectation of an exponential growth of the crypto derivatives market in the coming years, exchanges such as Bybit have started to propose futures and perpetual contracts for Bitcoin, Ethereum, and other promising altcoins. Entering the derivatives market is the recommended trading strategy nowadays but remain careful as trading is a risky business and only invest as much as you are comfortable losing.

Q: What are some good cryptocurrency trading sites?

A: Following is a short, non-exhaustive, list of cryptocurrency trading websites we recommend:


Fiat-to-cryptocurrency:

Coinbase
Bitfinex
Bitstamp
Localbitcoins
Coincola

Coin-to-coin:

Kraken
Coinbase

Poloniex
CEX.io

Derivatives:
Bybit
Deribit
Okex

This concludes today’s article about cryptocurrency trading for beginners, we hope you learned a lot about derivatives, fiat-to-cryptocurrency, and coin-to-coin trading. Remember to learn how to trade, make your own research, and invest wisely before entering the cryptocurrency markets. This article was provided by Bybit, a cryptocurrency derivatives exchange trying to offer more fairness, transparency, speed, and a human touch as the cryptocurrency market becomes more mainstream and attracts new traders from all over the world.