If you are new to the crypto industry, you might feel overwhelmed with all the different cryptocurrency types that you need to familiarize yourself with. Even worse, choosing the right crypto to invest in can be difficult. There are many things to consider, such as volume, market volatility, price value, use case, and many more.
Therefore, it is important that you know the different types of cryptocurrencies and how they work using their platform. This article will provide you with a list of cryptocurrencies and everything else that you need to learn about these crypto investments.
How does crypto trading actually work?
Crypto trading is all about taking advantage of the motions of the market. By using coin pairs like BTC/USDT, you trade the price of BTC against the price of USDT. People worldwide trade against this price, and the price usually goes down when a lot of people sell in contrast to buying. The price increases when there is a surplus of buyers and the demand is high.
Why do people engage in cryptocurrency trading?
Many people have made a fortune on cryptocurrency, whether they have traded or invested. In contrast to forex and stocks, cryptocurrency is more liquid and volatile. The volatility may also have downsides, but when you position yourself in the right place, it could grant you great profits whether the market is going up or down.
One of the major reasons that people put their money in crypto is because of decentralization. Decentralization means that no governing body can manipulate your holdings and that your funds are secured through a network of computers to validate the transaction’s legitimacy. This network is called a blockchain.
Types of Cryptocurrencies
There are 2 types of cryptocurrencies, coins, and tokens, and though many interchanges them as if they mean the same thing, they are not. They serve different purposes, and there are key differences you need to know to understand the difference.
Coins
Coins are made on the certain blockchain they are from. Similar to BTC being the coin of the Bitcoin Blockchain, to make it a currency. Coins are meant to be used as a store of value and exchanged with peers, much like a fiat, as it is meant to defy fiat currencies and their centralized nature.
Tokens
Tokens are developed on an existing blockchain. They serve more purposes than just a store of value. They can represent real-world items, like money, digital assets, and physical assets, and they can be exchanged with others. An example of tokens would be ERC20 tokens running on the Ethereum blockchain, ETH is the coin of the blockchain, and the other currencies built on the Ethereum blockchain are tokens.
There are numerous ERC20 tokens, and when programmed, they must abide by the rules outlined by the ERC20 standard. Tether (USDT) is an example of a token using the ERC20 standard. Its use case is to mimic the price of USD 1:1.
How To Choose What Type of Crypto To Invest In
Investing based on hearsay is the worst way to approach investments. Millions have been lost because they hear the word “Bitcoin” and put a significant amount of money in it, only to be caught out at the wrong time, and the price goes down significantly once again (like it has done many times). We want you to be prepared. Here are ways you can make investment decisions in crypto:
Fundamentalist Approach
Taking a fundamentalist approach is similar to how fundamentalist trading and investing work in stocks. You use the knowledge you can get from the people behind your investment and the news around it and use the perceived value against the actual value.
You can use a more modern approach when it comes to crypto, like seeing the talks within the community, what big names are saying about it and how the masses respond. All these can stimulate the price of crypto.
One of the best ways to look into a crypto’s fundamentals is by reading its whitepaper. A whitepaper documents the purpose, vision, and how it works. Many don’t read the whitepaper on their investments, which will give you an edge and a further understanding of your investments.
Technology and Use Case
Cryptocurrencies can be a great investment if they have a strong purpose behind them. No matter how hard the market crashes, tokens with an important use case in the modern world will be hard to kill. Take for example Solana (SOL), they are known as the “Ethereum Killer,” it is used as a blockchain platform for dApps (decentralized applications) that users can create many things on like games, decentralized exchanges (DEX), non-fungible tokens (NFT), and more. Because it is used for more than just investment and currency, it will always be more than just its price.
How and where do you trade cryptocurrency?
There are many places you can trade cryptocurrency. However, the most convenient and fastest ways to trade are on trading platforms that support cryptocurrencies. In contrast to stocks, crypto can be traded at any time. The market truly never sleeps in crypto.
Most trading platforms allow you to deposit money and buy crypto directly. However, you may need to go through KYC verification to unlock features. Some platforms don’t need you to do this. However, the more popular platforms with many safety features require this. Once you have deposited your money, you can go to the trading view, where you can see the live prices and candlestick chart.
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