The Ultimate beginner guide to Crypto: How to trade digital assets - TopForex.Trade

The Ultimate beginner guide to Crypto: How to trade digital assets

What is Cryptocurrency? Types of digital assets, analysis of Crypto price moves, benefits, risks and legality of Crypto. An expert guide to trading and investing in Cryptocurrency. The best Forex brokers providing Crypto trading with top coins like Bitcoin, Ethereum, Solana, XRP, Dodgecoin and dozens of others.

What is Cryptocurrency?

Ultimate-guide-to-crypto-trading

Cryptocurrency is one of many digital assets that are not linked to any country or government. It is instead stored on a blockchain-encrypted computer database, which is protected by powerful cryptography.

Blockchain technology, used by Bitcoin and the majority of other Cryptocurrencies, maintains a tamper-proof record of transactions and ownership. They are frequently decentralized, which means they operate without a centralized authority like a bank or government.

The term Cryptocurrency refers to the cryptographic procedures that are employed to prevent fraud. These advancements solved a problem that past attempts to develop digital currency had: how to prevent users from copying and spending their holdings twice.

Depending on their application, Cryptocurrency units are referred to as coins or tokens. Some are meant to be units of exchange for goods and services, while others are value stores.

Bitcoin generates its Cryptocurrency through a process known as mining. Mining is a time-consuming and energy-intensive process in which computers answer complex riddles to authenticate network transactions. Owners of those computers could be rewarded with a newly-created coin. Other Cryptocurrencies create and distribute tokens in different methods, and some have a smaller environmental impact.

Although Cryptocurrencies can be used to purchase everyday products in some places, they are more typically exchanged as digital assets for investment purposes.

 

Cryptocurrency security and mining: Proof of Work (PoW)

PoW, PoS

Proof of Work (PoW) is a decentralized consensus technique that requires network participants to collaborate in solving an arbitrary mathematical puzzle in order to prevent the system from being hacked.

In cryptocurrency mining, Proof of Work is commonly employed to validate transactions and mine new tokens. Bitcoin and other Cryptocurrency transactions may be conducted peer-to-peer securely thanks to exactly PoW, which eliminates the need for a trusted third party.

Blockchains, like Crypto networks, are designed to be decentralized, thus they require a mechanism to achieve both consensus and security. Proof of Work is exactly the thing that makes attempting to overrun the network excessively resource-intensive, thus keeping it safe. At scale, Proof of Work demands enormous quantities of energy, which only grows as more miners join the network. Proof of Stake (POS) was one of a number of innovative consensus techniques developed as a replacement for Proof of Work.

 

Types of Cryptocurrencies

Types of Crypto

In today’s market, there are thousands of Cryptocurrencies. However, Bitcoin is the one most widely used and valued. In 2008, a white paper authored by an unknown author going by the name of Satoshi Nakamoto revealed the technology’s origins. 

Bitcoin became available to the public in 2009. Currently, there are 18.8 million Bitcoins in circulation, with a market capitalization of over $1.2 trillion by the end of 2021. However, there will only ever be 21 million Bitcoins in existence.

Now all existing Crypto assets can be categorized into three groups:

Cryptocurrencies: Digital currencies that are designed to function as a means of exchange. They are also known as “payment tokens” or “exchange tokens.” Cryptocurrencies are comparable to traditional currencies in certain aspects, but they are distinguished by the fact that they are not issued by any central body. This means they are potentially impervious to government meddling and manipulation. Bitcoin, Bitcoin Cash, and Litecoin are examples of well-known cryptocurrencies.

Utility Tokens: Assets that entitle the owner to use a function, product, or service supplied by the token issuer. In exchange for your investment in a utility token, you get some type of defined benefit. For example, Ethereum’s ether is marketed as “gas” for the platform’s smart contracts, which are built on top of the Ethereum virtual currency. 

Digital currency: All cryptocurrencies are digital currencies, but not all digital currencies are cryptocurrencies. Because they only exist in digital form, these assets can only be accessed through computers or mobile phones. They do not require intermediaries and are often the cheapest method of trading currencies.

Digital currencies have several advantages, including the ability to transfer value seamlessly and the ability to reduce transaction costs.

Security tokens: Digital assets that represent legal ownership rights in physical assets like stocks, commodities, and real estate. Security tokens are intended to be used as investment opportunities and share many of the same characteristics as traditional financial products. 

Many new Cryptocurrencies, dubbed “altcoins,” have been established in the aftermath of Bitcoin’s popularity. Some of these are Bitcoin clones or forks, while others are entirely new digital currencies. More than $2.1 trillion worth of Cryptocurrencies were in existence as of November 2021.  However, as the most popular currency, Bitcoin accounted for around 41% of that total. 

 

What is a Non-Fungible Token (NFT)?

NFTs are digital tokens that can be used to indicate ownership of one-of-a-kind items. They enable us to tokenize assets such as artwork, collectibles, and even real estate. Protected by Ethereum Blockchain, they can only have one official owner at a time, meaning that no one can change the ownership record nor create a new NFT for the same item.

In theory, NFTs can be used for anything that requires verifiable ownership. Here are some current examples of NFTs to help you get the idea:

  • A unique digital artwork (drawing, photos, GIFs);
  • Videos and sports highlights;
  • Music;
  • An essay;
  • A domain name;
  • A ticket that gives you access to an event or a coupon;

NFTs are essentially digital versions of physical collector’s artifacts. As a result, rather than receiving an actual oil painting to put on the wall, the customer gets a digital file. Artists can also sign their work by adding their signature in the metadata of an NFT.

 

What causes Cryptocurrency price movements?

The Cryptocurrency market, like financial markets, swings up and down spectacularly, but it varies from the stock market in terms of volatility – it moves very quickly.

These changes may be worrisome, but they are also the key to understanding how to make money with Cryptocurrencies. As a result, it’s essential to understand what drives price movements.

Here are some of the primary price change catalysts:

  • Integration: Cryptocurrencies are becoming more popular as a form of exchange for purchasing goods. Prices tend to climb when they are accepted by more retailers and linked to more banking and payment systems.
  • Market news: Crypto traders spend a lot of time reading the latest updates about their coins. Buying or selling coins can be triggered by either good or bad news, and this can lead the market to move very quickly.
  • Global events: The market is also affected by broader events, including political developments and government actions involving Cryptocurrencies. For example, Bitcoin’s value plummeted after China implemented stricter regulations on the “mining” of digital currency.

 

Legality of Cryptocurrency

Crypto global legality map

The government or monetary authorities grant fiat currencies their power as mediums of exchange. The Federal Reserve, for instance, backstops each dollar bill. However, policy towards Cryptocurrency varies from country to country: while some governments remain cautious towards digital access, others – fast-developing ones – are readily embracing new technologies. 

For example, El Salvador was the first country in the world to accept Bitcoin as legal money for monetary transactions as of December 2021. Or, in Japan, 

The Payment Services Act of Japan declared Bitcoin to be legal property. In December, it was reported that India was developing a framework for cryptocurrency. 

In the European Union, Cryptocurrencies are also legal, classifying derivatives and other products based on them as “financial instruments.” The European Commission issued the Regulation of Markets in Crypto-Assets (MiCA) in June 2021, which defines regulatory safeguards and requirements for organizations or suppliers providing financial services utilizing Cryptocurrency. 

Crypto derivatives such as Bitcoin futures are accessible on the Chicago Mercantile Exchange in the United States, the world’s largest and most sophisticated financial exchange. 

 

Advantages and disadvantages of Cryptocurrencies

Pros and cons of crypto

Cryptocurrencies were developed with the goal of revolutionizing financial infrastructure. And while their theoretical ideal usage is catching up to reality, traders argue about the pros and cons of investments in Crypto. 

The main arguments for a positive viewpoint are the following: 

Cryptocurrencies such as Bitcoin are seen as the currency of the future, and supporters are rushing to purchase them now, presumably before it becomes more valuable (and costly to acquire as well). 

Anyone with a Crypto broker account is free to trade. There are no further hurdles to entry for retail traders to access, research, and participate with the Crypto markets aside from authenticating their identification and topping up their account. Those who wish to acquire Bitcoin but cannot afford to pay $60000 or more can buy and sell a fraction of any Cryptocurrency they choose.

AvaTrade gives the opportunity to trade not only the most popular Cryptocurrencies such as Bitcoin, Ethereum, Ripple, or Litecoin but also more exotic kinds. And even trading these relatively new assets, traders can be assured of their safety, since the broker is regulated by six of the most recognized regulatory bodies in the world, including ASIC and CySEC. 

With AvaTrade users have access to a comprehensive range of tradable assets, including Forex pairs, equities, commodities, and Cryptocurrencies, available on a variety of trading platforms for both manual and automated trading, across multiple devices types.

AvaTrade also offers AvaCopy, which allows you to generate passive income by automatically following the actions of more experienced traders. The combination of AvaTrade’s global reputation and technologically advanced systems provides traders with the peace of mind that their trades and capital are in the hands of some top traders in the world.

97
Min. deposit
50$
Min. Spread
0.1
Bonus
Max. leverage
1:400
Used by
350000+
Trading platforms
Web Platform
ZuluTrade
MetaTrader 5
MetaTrader 4
Deposit methods
Bitcoin, Sofort, UnionPay, Credit/Debit Cards, Neteller, Wire, Skrill
Regulated by
ISA
ADGM
FFA of Japan
FSA of Japan
FSCA of South Africa
Central Bank of Ireland
CySEC
FSC of BVI
ASIC
97
Min. deposit
50$
Max. leverage
1:400
Bonus
Used by
350000+
Min. Spread
0.1
Trading platforms
Web Platform
ZuluTrade
MetaTrader 5
MetaTrader 4
Deposit methods
Bitcoin, Sofort, UnionPay, Credit/Debit Cards, Neteller, Wire, Skrill
Regulated by
ISA
ADGM
FFA of Japan
FSA of Japan
FSCA of South Africa
Central Bank of Ireland
CySEC
FSC of BVI
ASIC

Many economists and investors are expecting Cryptocurrency to remove Central banks from managing the money supply because these institutions tend to devalue money over time through inflation.

Technical and security specialists fancy Blockchain technology that underpins Cryptocurrencies because as a decentralized processing and recording system that has the potential to be more secure than traditional payment systems.

Experienced traders or newbies who use Copy Trading feature love Cryptocurrencies for their volatile nature: once you master the logic (or just follow someone who did it), you can profit from their price moves. 

Some Cryptocurrencies allow their owners to earn passive income through a practice known as staking. Crypto staking entails utilizing your Cryptocurrency to assist in the verification of transactions on Blockchain technology. Though staking involves some risks, it might help traders grow their Crypto holdings without having to acquire more.

At the same time, the opposite opinion is backed up by: 

Cryptocurrency calls for fair caution as any other asset or technology on the launching stage before it spreads wide and reaches its full potential. 

Governments throughout the world have yet to properly comprehend how to deal with digital currencies, so legislative reforms and crackdowns have the potential to have unanticipated effects on the market. 

However, price movements caused by geopolitical situations is a general characteristic of any, even the most traditional market (for example, Commodity trading of oil and gas).

Other risks may exist for short-term Cryptocurrency investors. Its prices fluctuate swiftly, which means that while many people have made money quickly by investing at the high time, some who were less experienced or lucky may lose money by doing so shortly before a Crypto crash.

Trading experience and intuition are key to successful trade when it comes to Crypto as much as to any other asset. The long-term gains will be well worth it if you put in the time and effort to learn and perfect the necessary discipline and market expertise. Copy Trading, on the other hand, significantly simplified things allowing beginners to borrow the experience of professional traders.

Like any other social networking platform, you may use the tool to follow experts and automatically duplicate their trading decisions. Profits are yours to keep, and you may learn from experienced traders by analyzing their tactics and developing your own strategies.

NAGA Markets, a trustful broker originated from Germany, is in the market to introduce users to all possible benefits of Copy Trading. NAGA Autocopy is an innovative feature that lets you automatically copy leading traders on the platform and learn from their experiences.

Moreover, it offers a wide choice of trade instruments and educational materials to make trading more effective and secure. Among more than 950 instruments are Bitcoin and Ethereum, so you can trade the most famous Cryptocurrencies with the highest level of security: it is guaranteed by several reputable regulative bodies, those rules NAGA has to follow such as FCA and CySEC. Moreover, the broker issues its own NAGA coin (NGC), traded for the price of $0.89 with a total market cap of more than $70 million.

96
Min. deposit
250$
Min. Spread
0.7
Bonus
Max. leverage
1:1000
Used by
1000000+
Trading platforms
Web Platform
MetaTrader 5
MetaTrader 4
Deposit methods
Maestro, GiroPay, iDEAL, PayPal, Credit/Debit Cards, Skrill
Regulated by
FCA
CySEC
96
Min. deposit
250$
Max. leverage
1:1000
Bonus
Used by
1000000+
Min. Spread
0.7
Trading platforms
Web Platform
MetaTrader 5
MetaTrader 4
Deposit methods
Maestro, GiroPay, iDEAL, PayPal, Credit/Debit Cards, Skrill
Regulated by
FCA
CySEC

 

Trading Cryptocurrencies: Brokers VS Exchanges

crypto trading with a broker

As it is still a relatively new industry, some people may not be aware that there are two ways to trade Cryptocurrencies. Traders can handle it through an exchange or a broker, both of which offer their own set of advantages.

A Cryptocurrency exchange allows traders to purchase and sell coins, tokens, and other assets on a single platform. The exchange acts as a go-between for buyers and sellers, normally charging a fee for the service. A wide selection of Crypto pairings are available on exchanges. An example of a pairing might be Bitcoin to the US dollar, abbreviated as BTC to USD.

With a Cryptocurrency brokerage, client funds are traded via a dealer network rather than a centralized exchange, which is known as an OTC (over the counter) market. These brokers locate large pools of Cryptocurrency held by sellers or buyers and bring them together for a sale. It is typically a more flexible and convenient transaction, with a faster settlement period than an exchange.

Another thing to keep in mind is that brokers will deal with transactions as they come. An exchange, on the other hand, balances trades from all over the world in real-time, 24/7. Typically, the latest agreed-upon price between sellers and buyers determines the equilibrium price on the exchanges.

Moreover, as a new trader you should know that, unlike other assets, Crypto assets require a private key, which serves as proof of ownership and is required for transaction execution.  If you lose your private keys, you lose your Crypto holdings as well. If someone obtains your private keys, they have complete control over your Cryptocurrencies.

Trading with internationally regulated brokers helps you avoid this situation. Choosing an on-platform kind of storage allows you to delegate security-related problem-solving to a third-party provider with relevant experience. You don’t need to keep track of your own private keys because everything you need is available when you log in.

eToro provides investors, from beginners to experts, with a comprehensive Crypto trading experience, on a powerful yet user-friendly platform. Users can trade more than 40 (!) Cryptocurrencies, including a wide variety of leading and exotic, crypto crosses, follow each coin’s trends with advanced charts and analysis tools or even create a custom Watch-list and stay informed with real-time updates. 

New users can try out all the features of eToro’s trading platform risk-free with $100,000 in a virtual portfolio. The broker also has some impressive features, CopyTrader, the Social News Feed, and CopyPortfolios being among the most popular ones. CopyTrader and CopyPortfolio allow users to find and duplicate the strategy of successful traders, enabling them to clone up to 100 market experts.

Trader updates from others can be accessed in a Twitter-like thread using the Social News Feed. Traders can receive notifications based on certain market factors, talk about markets and strategies.

98
Min. deposit
50$
Min. Spread
0.5
Bonus
Max. leverage
1:30
Used by
20000000+
Trading platforms
Own Platform
MetaTrader 4
MetaTrader 5
Web trader
Deposit methods
Trustly, iDEAL, Rapid, PayPal, Klarna, Credit/Debit Cards, Neteller, Wire, Skrill
Regulated by
MiFID
FCA
CySEC
ASIC
98
Min. deposit
50$
Max. leverage
1:30
Bonus
Used by
20000000+
Min. Spread
0.5
Trading platforms
Own Platform
MetaTrader 4
MetaTrader 5
Web trader
Deposit methods
Trustly, iDEAL, Rapid, PayPal, Klarna, Credit/Debit Cards, Neteller, Wire, Skrill
Regulated by
MiFID
FCA
CySEC
ASIC

 

Benefits of Trading Cryptocurrencies

Taking all the fair caution towards Crypto trading into account, it still has several essential benefits: 

Volatility: Crypto-assets like Bitcoin, Ethereum, and XRP are significantly more volatile than traditional assets like stocks, bonds, and real estate. 

Consider the case of Bitcoin. Its price typically fluctuates by 5% in a single day. Because of the high level of volatility, traders will always have lots of possibilities. And if you trade with a broker like, for example, eToro, you do it in both directions, meaning you can earn from both upward and downward market swings.

Low minimum deposit: you can start trading with just a small amount of money since you can purchase even a fraction of a coin, or choose another, less costly one among more exotic kinds. 

Ability to trade 24/7: Unlike traditional exchanges working on a schedule, a major appeal of Crypto trading is that the market is open for you anytime you want, on your own schedule.

Trading with leverage: When you trade Crypto using CFDs, you can utilize leverage to trade with a bigger amount of money than you invested. This can work in your favor because your gains will be amplified. For example, eToro presently offers leverage of x2 (meaning you can trade $2000 with a $1000 deposit).

 

Best brokers for Cryptocurrency trading

Cryptocurrencies and Bitcoin, in particular, have proven to be popular trading vehicles. Many countries are confidently popularizing Crypto trading and most Forex brokers offer a variety of instruments including digital assets available for trading.

Brokers our experts list below offer a wide range of tradable instruments, Crypto trading, Copy Trading, trading conditions with leverage, low minimum deposit requirements, tight spreads and low commissions. Traders can use a wide range of trading strategies when dealing with these brokers, and diversify their portfolio even with only Crypto trading, just by choosing different coin types. These brokers provide demo accounts, popular trading platforms, and a wide choice of retail investor account types. 

eToro Crypto Trading

eToro is one of the most recognizable and credible brokers in the world, that recently became available even in the US. Regulated by ASIC, CySEC, and FCA, it is held in high regard for its truly trader-oriented features.

eToro offers a comprehensive Crypto trading experience on a powerful yet user-friendly platform to investors ranging from beginners to experts. Users can trade over 40 Cryptocurrencies, including a wide array of leading and exotic crypto crosses, as well as monitor each coin’s trends with extensive charting and analytical tools, establish a unique Watch-list, and remain up to date with real-time updates.

Overall, it’s a primary player in the world of online trading that offers more than 2000 instruments, multiple tools and perks to make trading as comfortable as potentially efficient. Therefore, whether you are a beginner, a professional trader, or just want to try CopyTrader – eToro has something to offer.

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NAGA Markets Crypto Trading

NAGA is a trustful broker that originated from Germany, with a great range of trading instruments and a very competitive, but friendly social trading environment. By registering, you benefit from over 950 markets, including Crypto CFDs, ETFs, Forex, commodities, a wide range of professional tools, and educational materials for traders of any level.

Together with more than a million users, you can trade and invest, learn from them and automatically copy the best traders or become a trading pro yourself. As one, you’ll get a chance to earn extra income and a largely reduced commission. Or as a trading newbie, you can highly benefit from auto-copying the most successful traders in real-time: make money and learn at the same time.

AvaTrade Crypto Trading

AvaTrade is one of the most popular Forex brokers in the world, offering very competitive trading conditions. It gives the opportunity to trade not only the most popular Cryptocurrencies such as Bitcoin, Ethereum, Ripple, or Litecoin but also more exotic kinds. And even trading these relatively new assets, traders can be assured of their safety, since the broker is regulated by six of the most recognized regulatory bodies in the world, including ASIC and CySEC. 

AvaTrade also offers AvaCopy, which allows you to generate passive income by automatically following the actions of more experienced traders. The combination of AvaTrade’s global reputation and technologically advanced systems provides traders with the peace of mind that their trades and capital are in the hands of some top traders in the world.


Another point that speaks for the credibility of these regulated international brokers is that they give you an opportunity to try out their platforms and tools before you actually start trading: opening a demo account with each of them is completely free. You can register with several of them just to see how suitable and user-friendly they are for your trading needs. 

Moreover, it is a great strategy to manage risks by diversifying a trading portfolio. It will help compare trading platforms to pick the best one for you, but also make the most of the benefits you receive. You can also trade on your own with some brokers while using the Copy Trading feature with others. It will inspire you to keep trading and improve your chances of earning some passive income.

 

The Ultimate beginner guide to Crypto: How to trade digital assets - FAQ

Cryptocurrencies were created to simplify existing financial architecture in order to make it faster and less costly. Their technology and architecture decentralize existing monetary systems, allowing transacting parties to exchange value and money without the need for intermediary entities like banks. Although Cryptocurrencies can be used to purchase everyday products in some places, nowadays, they are more typically exchanged as digital assets for trading and investment purposes. It includes trading with Forex brokers, which offer hundreds of assets available for trading (including even exotic Crypto coins), the best trading services, Copy Trading, and transparent bonus programs for different kinds of trader's activity.
Traders and investors today have access to literally thousands of different Crypto assets. Bitcoin (BTC) is undoubtedly the most well-known currency, designed to be an alternative to traditional ‘fiat’ currencies. Runner ups by market cap would be Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), Solana (SOL) and XRP (XRP, ex-Ripple). In this article, our expert team analyzed the market to distinguish these Crypto price moving factors, the main differences between coin types, and ways you can use each of them in your everyday life.
There are several ways to trade cryptocurrencies, including centralized and decentralized exchanges and Forex brokers, each with its own benefits. Exchanges act as a third party overseeing transactions and selling crypto at market rates. Brokers deal with transactions as they come at Crypto price at the moment, being typically more flexible and convenient, with a faster settlement period than an exchange. Trading with some of the reputable brokers we mention in the article also secures you from losing your Crypto holdings if you misplace your private keys: everything you need is available when you log in to the trading platform.
The legality of Crypto trading varies by county. While some governments remain cautious towards digital access, others - fast-developing ones - are readily embracing new technologies. Crypto trading is a relatively new field not only for newbies but even for more experienced traders. To make it safer, in this article our expert team recommends only regulated brokers with time-proved reliability, which give traders the opportunity to trade not only famous Cryptocurrencies like Bitcoin and Ethereum but also more rare coins
Usually, Cryptocurrencies are generated through “mining”. The procedure entails downloading software that provides a partial or complete history of transactions that have taken place on the network. Though everyone with a computer and an Internet connection can mine bitcoin, the business is dominated by large corporations because of its energy and resource-intensive nature.