This is how you start crypto trading!
Crypto trading is hot! More and more people are starting to trade in cryptocurrency, as it becomes an increasingly popular market. Because of this, prices can rise and fall sharply, which can scare off newcomers. Here we explain the most important topics for when you want to start with crypto trading!
What is cryptocurrency?
A cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a P2P (peer-to-peer) exchange system that allows anyone anywhere to send and receive payments. It is not physical money, but digital currencies. When you transfer money in the form of crypto coins, the transaction is recorded in the blockchain. You keep your crypto coins in a digital wallet, which is called a wallet.
These virtual currencies are so named because they use encryption to verify transactions. They use advanced encryption to store and transfer cryptographic data from wallets to the public blockchain. The purpose of encryption is to ensure security.
There are an awful lot of cryptocurrencies
out there. Therefore, as a beginner, it can seem rather overwhelming when you are just starting out. Therefore, we will briefly tell you about the best known and most popular cryptocurrencies.
Conceived in 2008 by an anonymous person known by the pseudonym "Satoshi Nakamoto," it is by far the most important crypto money in terms of market capitalization. It can be used as a means of payment at businesses in sectors ranging from travel to gift cards to jewellers who have accepted Bitcoin payments through anonymous transactions. It is also possible today to pay with Bitcoin at Tesla.
Ether (ETH), developed in 2012 by Toronto-based programmer Vitalik Buterin and backed by an initial equity financing of $18 million, is a cryptocurrency based on a blockchain network called Ethereum. While Bitcoin was designed to be a digital currency, the Ethereum network is a broader application of blockchain technology.
In particular, the Ethereum network allows its users to create decentralized applications called "dApps" and "smart contracts." dApps are software applications that run on the blockchain. Smart contracts are binding agreements designed as lines of code and are therefore able to enforce and execute their own terms. Ether is used to process transactions over the network, including transactions automated by dApps and smart contracts.
Litecoin was launched in October 2011 by a former Google employee, Charlie Lee. Launched with the intention of making it a cheaper version of Bitcoin for everyday use, Litecoin was formed in a "hard fork" (split) of the Bitcoin Core client, the free and open-source software on which the cryptocurrency is based. Litecoin offers faster transactions than Bitcoin and more reserves: there can be 84 million Litecoin versus 21 million Bitcoin.
The Value of Bitcoin
Now that you know what cryptocurrencies are, you may be asking yourself if how the value is determined. With physical money, there is a value behind it; there are only a few bills in circulation, and that takes care of the value determination. With Bitcoin, it's the same thing, only there's still a big difference from physical money.
Bitcoin has an intrinsic value since a lot of energy is needed to produce them. In addition, less and fewer Bitcoins are being created. In a few years, no new Bitcoins will be created. As a result, the supply will continue to decline while demand increases. Therefore, many analysts expect the value of Bitcoin to rise sharply in the future.
DCA or "Dollar Cost Averaging" is an investment strategy in which you buy a cryptocurrency for the same amount in dollars or euros at regular, pre-programmed intervals. The purpose of these periodic purchases for the same amount is to reduce the risk taken, without depending on the exchange rate.
This strategy, which is appreciated by long-term investors, is not always the most profitable, but it is undoubtedly one of the least risky. After all, in falling periods, only part of the investment is affected by the currency's decline, namely the last purchases. Unless there is a collapse, the rest of the investment is "protected" from volatility.
To begin a DCA strategy, you need to determine two parameters: the amount you are willing to invest with each purchase and the time between trades.
When you have an account at Coinmerce, follow these next steps to start with Dollar Cost Averaging
- First, go to the coin you want to buy on Coinmerce.
- Click on ‘Repeating Order’ in the right table.
- Fill in the interval of the order, time and amount you want to spend for this coin.
- Click on ‘Save Order’. Coinmerce will buy the coin on the date and time you’ve set.
While a market order is simply the order that traders place to immediately buy or sell a cryptocurrency at any price, a limit order
, in the strictest sense of the word, is the order to buy or sell a cryptocurrency at a specific price. Limit orders are placed to limit price risk.
Let's give an example to make it clearer. The price of a Bitcoin is currently €9,000, and you place a limit order to buy it at the limit price of €8,500. Your order will then be executed at the €8,500 price as soon as there is a sell order that matches this price or a better price.
Let's say a trader wants to buy Bitcoin at a certain price. The trader places a limit order for Bitcoin at that particular price. For example, if the price of Bitcoin drops to €9,000 and the trader wants to buy 1 BTC, the trader sets the limit price at €9,000. On the other hand, if the trader wants to sell when the price of Bitcoin reaches €10,000, the limit price should be set to €10,000 on the selling side.
The disadvantage of a limit order is that if the limit price is not reached by an interested buyer or seller within the given period, the order will not be executed. In addition, and perhaps most importantly, timing is an essential factor in placing limit orders. Each order placed in an order book on an exchange is time-stamped. If two trades have the same limit price, the one done first takes precedence.
You can use a limit order at Coinmerce by following these steps:
- Go to the cryptocurrency you want to buy or sell, and then indicate on the right whether you want to buy or sell the coin. Then under the blue button click on 'Stop limit order'.
- Then indicate the limit price you want to use for your order.
- After this, you indicate when your order expires. You can never let your order expire, or let it expire after 2, 8 or 24 hours.
- Click the blue-button to place the limit order with Coinmerce.
In crypto trading, security is paramount. At Coinmerce, we work to make cryptocurrency trading as safe as possible. Since 2020, Coinmerce has been one of the first Dutch crypto exchanges to be registered with De Nederlandsche Bank (DNB), which is the national bank of the Netherlands.
This means that you can buy, sell and store cryptocurrency at a platform that complies with the laws and regulations on the prevention of money laundering and terrorist financing.
There are a lot of different cryptocurrencies. At Coinmerce, you have a choice of a total of 150 different cryptocurrencies. These include, of course, well-known coins such as Bitcoin, Ethereum, Cardano
, but also lesser-known coins.
When you want to buy a cryptocurrency, go to the desired cryptocurrency, and enter the amount you want to spend. Then you select to buy. When you have paid, you will receive the cryptocurrency directly in your digital wallet!
At Coinmerce, you buy crypto coins with a variety of payment methods. We support payments via iDeal, credit card, Bankcontact, EPS, MyBank, Sofort and bank transfer (for Bunq and Rabobank). First, you buy Coinmerce Coins. These are stable coins, which always represent a value of €1. You can then buy the coins you want with Coinmerce Coins.