Private investors are becoming more and more interested in cryptocurrencies. For beginners in crypto, the topic is usually elusive, too abstract, and of course new. Crypto and other assets are very different. Many errors can occur here, some of which can even lead to a total loss.
How does cryptocurrency trading work?
Trading in cryptocurrencies works in a similar way to trading in foreign exchange. Trading means exchanging a certain amount of one currency for another at a trade rate set by the market.
This rate is the ratio at which you can exchange one currency for another. If, for instance, interest in Bitcoin rises after a while and more and more individuals exchange euros or US dollars for Bitcoin, then this drives up the value of this currency.
If you have now exchanged your dollars for Bitcoin and the price has risen, you can sell them again. You can now get more money back than you exchanged at the beginning.
How does a crypto investment work?
Crypto investments, which are more long-term, are not about fast action, but about extensive investment periods. In the case of cryptocurrencies (kryptowährungen), one speaks of investment from about 3 months.
For such a long-term investment, you do not necessarily need a broker, but you can also exchange cryptocurrencies for real money on exchange programs. Nevertheless, the comfort and security are severely limited here compared to using a regulated broker.
In addition, the fees are usually lower when using a broker and execution is faster.
What are the advantages of cryptocurrency trading?
There are some advantages to trading cryptocurrency that other assets cannot offer. For example, it is possible to trade cryptocurrencies 24 hours a day and 7 days a week as the market here never closes.
Furthermore, cryptocurrencies are typically very volatile. On the one hand, you can see this as a disadvantage in terms of investment. For day traders or general short-term trading, this leads to an exciting price development with large profits but also lost opportunities.
Another benefit is that there is a tremendously large range of cryptos and new attention-grabbing and innovative tokens and coins are continuously being added. In comparison, the international currency business is relatively uninteresting. On the other hand, with cryptocurrencies, you regularly have the chance to participate in and benefit from exciting developments, IPOs, mergers, and forks.