As the crypto industry gradually evolves, many newcomers start trading cryptocurrencies. There is a crypto platform that people can use to get more opportunities and benefits. This is one of the most effective ways for traders and investors to hone their skills and earn passive income. However, there may be risks and drawbacks that you may encounter. Therefore, it is imperative to understand what you need to invest in the cryptocurrency and the platform at the initial stage.
Definition and meaning of cryptocurrency
Cryptocurrency is any form of currency that exists in digital or virtual form and uses cryptography to protect transactions. There is no central authority that issues or regulates cryptocurrencies. Instead, they use a decentralized system to record transactions and publish new units.
Instead of physical money exchanged in the real world, cryptocurrencies exist only as digital records in online databases describing each transaction. When you flip cryptocurrencies, the transactions are recorded in a public ledger. Cryptocurrencies are stored in digital wallets, known as wallets.
Cryptocurrencies owe their name to the fact that they use encryption to verify transactions. Cryptocurrency data is stored and transmitted between digital wallets and the public registry using sophisticated encryption. The purpose of this encryption is to increase security.
The first cryptocurrency, bitcoin, was launched in 2009 and is by far the best known. The main purpose of cryptocurrencies is to trade them for profit, and speculators sometimes inflate prices. You don’t have to disclose unnecessary personal information to the merchant if you pay with cryptocurrencies. This ensures that your financial information won’t be shared with third parties, such as banks, payment processors, advertisers, and credit bureaus. And because sensitive data doesn’t need to be sent over the Internet, the risk of your financial information falling into the wrong hands or your personal information being stolen is shallow.
Features of cryptocurrencies:
- Regarding market capitalization, the most popular cryptocurrencies are Bitcoin, Ethereum, Bitcoin Cash, and Bitcoin. Some of them are comparable to bitcoins. Others rely on other technologies or, through new features, can do more than transfer assets.
- Cryptocurrencies allow assets to be transferred online without intermediaries such as a bank or payment system. Thus, support can be shared worldwide in near real-time, around the clock, and with low fees.
- The cryptocurrency blockchain is comparable to a bank balance sheet or ledger. Each currency has its blockchain. It is a continuous, constantly revisited registry in which every transaction made with that currency is recorded.
- Unlike the bank ledger, the cryptocurrency blockchain is distributed among all participants in the digital currency network.
- No single company, country, or third party controls this network, and anyone can become part of it. Blockchain is a breakthrough technology that has only recently become available and is the result of decades of computer science and mathematics innovation.
- Because your cryptocurrency assets are not tied to any financial institution or government agency, they are available to you no matter where you are or what happens to the world’s largest financial intermediaries.
It is helpful for beginners to study not only crypto trading platforms but also to understand in more detail the characteristics of the exchange of digital currencies. Few people know that cryptocurrency orders play a leading role in exchange processes. On the crypto trading platform, there is a book of orders, which is needed for investments. What it is and what orders are, we will tell below.
Peculiarities of cryptocurrency orders and what they are needed for
You have to understand that each crypto platform has its order book. What is it? It is a list of trading pairs to sell or buy cryptocurrencies. If you want to buy an asset, you need to place your bid. When the price is gained, such an asset is sold. There are several types of orders today. Below we will look at each of the options.
Market order
This is the first and primary type of order on crypto trading platforms. Thanks to this order, traders can buy and sell assets at a favorable price in a short period of time. The prerequisite for this type of order is liquidity. They are executed based on previously placed limit orders. Because of the rapid sale of an asset, traders must pay a commission. A market order helps to achieve their goals.
What problems can arise in trading? First and foremost is the size of the mandatory commission. Sometimes it is only sometimes advisable to sell a market order when large assets are involved.
Limit order
This type is placed on a crypto exchange platform if you need to set a specific value. The peculiarity of this type is the achievement of the market value of a given price or its insignificant increase. Thanks to limit orders, traders can determine the market trend. If you understand the workings of a line order in more detail, you will be able to know where and when to place a short or long asset.
Limit orders are placed in chronological order. That’s why it’s hard to tell exactly which asset will be realized. If the value threshold on limit orders is reached, other orders are no longer meaningful. The trading strategy is violated if the order is not executed. Which negatively affects the trader’s performance.
Stop order
A stop order allows traders to save their savings. That is, such orders can be quickly sold on the platform. The last two types, on the contrary, must receive a given value before they can be sold. It can be activated at a price higher than the set one. Thanks to such limits, the risk of losing savings is minimal. Due to the volatility of the cryptocurrency market, the price can fluctuate. Therefore, stop orders help to save funds and sell the asset at a favorable price.
Cryptocurrencies are in vogue now but remember: they are still relatively new and highly speculative. So investing in this new market takes a lot of work. If you want to make money here, learn a lot and invest cautiously.
