Cryptocurrency has been a hot topic for the last year or so. It’s been all over the news and even in some of our local newspapers. But what is it? And how do we trade it? In this article, I’ll try to give you a brief overview of what it is, how it works, and what you can do with it.
First, let me define what I mean by cryptocurrency. A cryptocurrency is simply a digital currency that is not backed by any government or central bank. Instead, it’s based on a complex mathematical algorithm called the blockchain. This algorithm makes sure that the currency cannot be counterfeited or manipulated. There is no physical coin or paper money involved. The only thing that exists is a string of numbers and letters that represent value.
How does this work? Basically, the algorithm uses cryptography to create an unbreakable code that is used to generate the currency. To generate new currency, you need to use a special type of computer called a “miner.” Miners are rewarded with new currency for doing the work of generating it. These rewards are called “block rewards.” Every time a miner solves a block of the algorithm, they get a reward of new currency.
Now, here’s where it gets interesting. Because there is no central bank backing the currency, there is no way to print more of it. So the supply of the currency is limited. Also, because there is no central bank, there is no way to inflate the currency either. If the currency is worth $100 today, it will probably still be worth $100 tomorrow.
The way that this affects you as a trader is that it makes the currency very volatile. For example, if the currency is worth $100, and you buy it at $95, then you could lose 15% of your investment. However, if you buy it at $105, you could potentially make 35%. You see, the currency goes up and down based on supply and demand.
So how can you trade it? Well, if you’re interested in trading cryptocurrencies, you can trade them through various exchanges. There are dozens of these online, but I would recommend starting out with two of the biggest ones: Coinbase and Bittrex. These two are both well-known and trusted, and offer great customer service. They also have excellent trading platforms. You can find a list of other exchanges here.
If you’re looking to trade currencies, I would highly recommend that you do your research before jumping in. Cryptocurrencies are still a relatively new phenomenon, and many people don’t know how to trade them yet. So make sure that you’re comfortable with the risk before investing.
