September 22nd, 2021

How to Get Started in Crypto Trading

How to start thinking about crypto trading and the tools that can help along the way.

The last year has seen massive gains in what some are calling a new asset class – cryptocurrencies. As a result, retail investors, wealthy individuals, financial institutions, and everyone in between are wondering how to diversify and grow their assets through crypto trading. It is important to understand how to read graphs and live stock charts when deciding if cryptocurrency should be added to your investment portfolio. 

For those who are curious, but don’t know where to begin, this article provides the information necessary to start thinking about crypto trading and the tools that can help along the way. We cover basic principles about cryptos: what they are, how to buy, hold, and sell them, and key points for assessing their place in your portfolio.

What Are Cryptocurrencies?

Cryptocurrencies – also known as crypto assets – are units of binary data that represent value on a public ledger through blockchain and cryptographic technologies. The blockchain verification allows users to transfer and store the units as a medium of exchange for other utilities without a trusted third party like a bank. Most notably, cryptocurrencies began in 2008 with the anonymous creation of Bitcoin by Satoshi Nakamoto. Bitcoin’s currently the most valuable crypto based on its market cap of over $800 billion. However, that valuation constantly changes based on market transactions.

The crypto landscape continues to grow with new cryptocurrencies entering the marketplace through initial coin offerings (ICOs). In addition to new ways of storing and transferring data, some cryptocurrencies have other utilities such as exchanging nonfungible tokens (NFTs), participation in decentralized finance applications (i.e., lending, capital raising, etc.), and other uses in what is being called the web 3.0. The advent of cryptocurrencies marks an exciting time in human history that develops and matures every day.

How Do you Buy, Sell, and Store Cryptocurrencies?

The exact methods and tools for buying, selling, and holding cryptocurrencies will depend on the specific crypto a person is dealing with. Generally, the process involves the use of crypto wallets and crypto exchanges. A crypto wallet is a private account that allows a person to store their cryptocurrencies. A combination of spending and private keys held by the wallet’s owner is what keeps the accumulated assets secured.

Crypto wallets come in two forms:

  • Hot (i.e., software application wallets on your phone and
    computer) and
  • Cold (i.e., physical wallets).

A crypto exchange is a marketplace, not unlike a stock exchange.  Investors can buy and sell various cryptocurrencies. Many of the exchanges have mobile apps that allow people to buy and sell from almost anywhere. Creating an account is not complicated but requires providing basic information for compliance with know your customer (KYC) laws.

Key Considerations for Crypto Trading and Investing

Cryptocurrencies are still young, which makes them a highly speculative asset for trading and investing. In other words, the potential for great reward also comes with significant risk. Cryptos have also proven to be volatile assets that are subject to wild swings in valuation. Conventional wisdom suggests a person should only invest money into crypto that they could afford to lose. With these thoughts in mind, it’s important to understand other market measures and characteristics that influence the price of each crypto.

Not All Cryptos Are the Same: Review Characteristics Closely to Assess Value

The creators of cryptocurrencies set different attributes for their networks that have varying economic and utility values. Some of these standards include:

  • The circulating supply (i.e., how many coins exist in the market?)
  • Total supply (i.e., how many could exist in the market, and is that number fixed or not?)
  • The founders and maintainers of the network (who built it, and are they actively working on it?) Having a firm sense of the traits that make each cryptocurrency unique can provide greater clarity on their future valuation and whether it’s a good candidate for investment or trading.
  • How decentralized or centralized the network is (how many users and validators exist that confirm transactions on the blockchain)
  • Is the cryptocurrency its own network, or does it depend on an underlying blockchain (e.g., the difference between Eth on the Ethereum network and Uniswap tokens that run on the Ethereum network)
  • How does the network validate transactions (e.g., proof of work, proof of stake, etc.)?
  • How fast is the network (i.e., how many transactions per second)?
  • Other utilities (e.g., smart contracts)

No individual cryptocurrency is perfect. Each has its own set of attributes that carry their own advantages and downsides. Understanding the values of different crypto attributes is necessary for assessing their value for crypto trading and investment.

Know Your Investment Timeline

Not unlike other investments, knowing the investment timeline in advance helps with making decisions about buying, selling, and holding. An investment timeline usually falls into one of two categories: a short-term strategy (less than a year) or a long-term strategy (a year or longer). Consider the timeline for any specific cryptos to avoid missing buy or sell opportunities when certain price targets materialize during the scope of that timeline.

Be Mindful of News and Future Regulation

The prices of cryptos are not immune to the effects of news stories and public comments, especially from noteworthy individuals. For example, tweets from the likes of Elon Musk and Mark Cuban this year appeared to drive the value of cryptos like Dogecoin. Stay aware of press releases. Always consider how the substance of the news might affect the short and long-term value of a crypto.

Not much regulation currently exists because cryptocurrencies are still so new. Again, successful investors keep tabs on proposed regulation and laws that can impact the value of cryptocurrencies. This is vital for accurately assessing overall value. With cryptocurrencies, news from the SEC, the IRS, and Congress are especially influential.

The Importance of Live Stock Charts, Graphs, and Data Points in Crypto Trading

Another fundamental for trading cryptocurrencies is using live stock charts. Good graphs can reveal critical data on crypto markets.

Understanding market metrics like market cap, daily trading volume, and historical price data helps identify patterns in a crypto asset. In combination with the fundamentals explained above, access to algorithms and information that analyzes market data can help investors and traders determine the price points for entering and exiting crypto markets.

Vig’s Live Stock Charts Can Help Crypto Traders and Investors

The past year has given a new life to crypto markets with increased participants looking to find new sources of value for their portfolios. Engaging in the crypto market requires a solid understanding of asset fundamentals and the most current data for executing trades. Vig gives its customers access to these data points crypto assets. This data comes in a variety of market tools and live stock charts from industry providers with the goal of bolstering the investing experience of Vig’s users.

The market tools, accessible through Vig’s internet platform, are built with an investor’s end goals in mind. Primarily, having data that is easy to access and interpret through the design of web and mobile applications. Equally important is the development of proprietary models that integrate market data into undiscovered trends that allow investors to create trading strategies with new perspectives.

Sign up for a free account today with basic tools and purchase access to our advanced analytics to begin crypto trading.

How to Get Started in Crypto Trading