If we’re talking about digital currencies that operate virtually then there is cryptocurrency. Cryptography is used to protect transactions against any improper invasion. It is not pretty easy to make a duplicate cryptocurrency due to cryptography. The central banks or other government agencies are not involved in cryptocurrency transaction management. Therefore, it makes them resistant to any regulations by the government or manipulations by any third party. The transfer of funds by using cryptos is done between parties virtually. The transfers are undertaken by using public and private keys as a means of security.
Despite the secure blockchain system, Crypto scams commonly occur every day. The new crypto traders are often the targets of crypto scammers. Crypto cheaters look for some alternatives or the other to trick people. People must take responsibility for their crypto’s protection and avoid crypto scams.
To safeguard yourself from these frauds, it is essential that you lengthen your understanding about the crypto market and these frauds. Let’s get started with some basics.
Table of Contents
There are several features of cryptocurrencies, some of them listed below.
● Cryptocurrencies are secure:
Digital currencies are protected and secured with the help of cryptographic codes and locked with the usage of cryptographic systems. Every cryptocurrency owner has a private key. Hence, no one has access to that private key except the owner. Cryptography is used for creating this private key.
● Transactions in cryptocurrencies are irreversible:
The transactions in cryptocurrencies are not reversible. When you use a digital currency like bitcoin, you must confirm the occurrence of your trade. After you give the confirmation, the transaction begins. And no one would be able to stop that transaction. Hence, to manage cryptocurrency transactions, you must take responsibility before confirming the transaction.
● No permission required:
You don’t need anybody’s permission to use cryptocurrency. Which means no gatekeepers would restrict you from using digital currency. You have to install the free software and utilize it. The specific feature of this software grants users freedom, and they can use the cryptos as and when they want.
● Cryptocurrencies are anonymous:
Since no central authority administers this market, while performing the cryptocurrency transaction, user’s need not recognize themselves publicly as there is no such requirement. When the request for the transaction is submitted, the decentralized network checks the transaction activity, verifies it, and records it on the blockchain. For authenticating these transactions, the cryptocurrencies like bitcoin use the systems of private and public keys. It means that the users can create unidentifiable digital identities and digital wallets for sending and receiving cryptos on the non-centralized system and still be able to authenticate their transactions securely.
● Permanent transactions:
The cryptocurrency transactions that you perform are recorded on the ledger. Therefore, there is no chance of optimizing the data on the records as it is permanent.
Cryptocurrency trading involves the purchasing and selling of cryptocurrencies. It is done through a cryptocurrency platform or a cryptocurrency exchange. In some of the most popular cryptocurrency trading platforms, Crypto trading aims to achieve profitable results within a certain period.
Steps to trade cryptocurrencies:
For those who want to begin cryptocurrency trading, it is crucial to follow the correct steps. Below is the step-by-step procedure to start your crypto trading journey.
Step 1: Check for the best cryptocurrency exchange:
In the initial step, looking for the best cryptocurrency exchange is very important. Many popular crypto exchanges exist in the market, all it takes is some research and evaluation from your end. Next, you must open a cryptocurrency brokerage account. In addition to this, please make sure to give the required information.
Step 2: Funding your account:
After you create your crypto exchange account, you must put funds into your account. You can easily add money to your digital wallet using debit cards and wire transfers. Wire transfer is one of the easy options to fund your account. Few reliable and renowned crypto exchanges also provide wire transfers as a channel for funding, without any additional fee.
Step 3: Selecting the cryptocurrency:
There are various digital currencies worldwide, but most of the experts in crypto trading prefer Bitcoin and Ethereum. That is because these cryptocurrencies are more foreseeable when compared to other small coins. Contradictorily, a smaller coin may have more scope in terms of growth if it’s based on a sustainable plan.
Step 4: Selecting a strategy:
Pick a strategy is an essential step for crypto trading. Hence, you can gain high profits in digital currency trading using trading indicators and proper fundamental and technical analysis.
Step 5: Storing your digital currency:
Storing your digital currency in a safe place is very important. Hence you can choose a digital wallet, which can be either a software or hardware. Cryptocurrency wallets are recommendable for storing your digital assets. However, the highest level of security for your cryptocurrencies can be gained mostly with hardware wallets.
Crypto trading strategies:
Several crypto trading strategies help enhance your chances of profiting with a crypto trading activity. Below are the plans for effective crypto trading.
● Day trading:
In the day trading strategy, the trader takes the position and exits them on the same day. To trade successfully, investors depend on technical indicators to determine the entry and exit points for a particular digital currency.
● Range trading:
The market players depend on experienced analysts who give indications on support and resistance levels daily. The “Resistance” level is the level up to which a price may increase; hence, a resistance level is a price that is more than the current price. “Support” is the level below which the cost of the cryptocurrency must not reduce, so the support level is always below the current price.
The scalping strategy uses the raised trading volumes to book the profits. Even though risks are involved, an intelligent trader considers the margin requirement and other essential rules to prevent bad trading experiences. The scalpers analyze the crypto assets, past trends, and volumes and then select an entry and exit point within a day.
● High-Frequency Trading (HFT):
HFT, also called High-Frequency Trading, is a type of algorithmic strategy utilized by quant traders. In this, algorithm development and trading bots assist in entering and exiting a crypto asset faster. You need to understand complex market concepts and have a strong knowledge of mathematics and computer science to develop such bots.
● Dollar-Cost Averaging:
When determining the perfect entry and exit points in the cryptocurrency market, it is better to assume that the perfect time in the crypto market is unidentifiable. Hence, the best way to go about crypto investing is “Dollar-cost averaging .” Dollar-cost averaging is to put a fixed amount at a regular interval. DCA helps investors focus on gaining wealth in the long term rather than timing the market.
The exit strategy may also be tricky in DCA. It needs studying of the market trend and a deep understanding of the market cycle. Reading the technical charts can also guide you through exciting times. Additionally, Crypto investors must check on oversold and overbought regions before making a decision.
● Avoid making trading calls based on hype:
New investors’ most common mistake is relying on social media for news regarding cryptocurrencies. Crypto traders should never make investment decisions based on the hype on social media. Wrong information about virtual currency spreads like wildfire on social media since cryptocurrency is always trending.
● Primary Research:
Doing primary research is very important. To do this activity, one doesn’t always need to be a professional. Research the cryptocurrency asset you want to buy, thoroughly. Due to this activity, you will remain updated with the news regarding the crypto industry. The best alternative is you take care of your finances and set a goal for your investments before investing in a volatile asset class like crypto.
In the arbitrage trading strategy, the trader purchases crypto in one market and sells it in another. Spread is the variation between the buying and selling price.
● Swing Trading:
In the swing trading strategy, the trades are usually scheduled for more than a day but not longer than a few weeks or months. Therefore, some people consider this strategy medium-term because it positions itself between day trading and position trading strategies, giving them more time to consider their decisions. Here you would not have to take the decisions spontaneously as in short-term plans. Well, you can make decisions related to trading with fewer emotions.
Benefits of cryptocurrency:
There are several benefits of cryptocurrencies mentioned below.
- The cryptocurrency markets are always open seven days a week, and that too, without any exceptions.
- Cryptocurrencies do not depend on national borders. If a person in one country wants to send crypto to someone else staying in another country, it can be done without any problems. For example, if A, living in the USA, wants to send cryptos to B, residing in Canada, it can be sent without any difficulties.
- Cryptocurrencies’ transaction speed is fast, and these transactions can be done in a matter of minutes.
- Cryptocurrency transactions are usually less costly when compared to other financial markets.
- Anybody, regardless of region and country, can use digital currencies. You only need a phone or a computer, and an internet connection.
- Digital currencies can be exchanged against various currencies. Different crypto wallets and exchanges assist in the conversion of one currency to another with crypto trading that costs minimum transaction fees.
Various disadvantages arise with the usage of cryptocurrencies.
● Fake apps:
In this fake app scam, the tricksters defraud the crypto users and ask them to invest in crypto through their app. Unfortunately, many quickly fall for this scam by downloading fake cryptocurrency apps and investing through them.
For example, a crypto user A comes across a fake cryptocurrency app in the Google Play store and downloads it on his phone. Then some random person contacts A through this phony app and convinces A to invest in crypto. Naturally, A gets excited and does so. However, after a few days, A realizes that he/she lost the invested money and that the app was fake.
● Blackmail and extortion scams:
In this type of scam, the scammers call the crypto users, saying that they have a list of inappropriate websites visited by the users, and blackmail them. These scammers blackmail the user by asking them to pay in crypto; and if the users fail to follow their instructions then they claim that their name along with the list of websites will be released publicly.
● Phishing scams:
In the phishing scam, the fraudsters contact you directly or through social media by sending you a link, hidden or attached in their message. That link leads you to a fake crypto website where they can get access to your crypto account.
Crypto users should be familiar with crypto scams before investing in cryptocurrency, as it can aid in saving oneself from them. Investors and traders are generally responsible for protecting their own crypto assets, against scams and losses. Hence, you need to follow Tips to spot Cryptocurrency Scams and do not rush any of your financial or investment decisions.