Cryptocurrencies are a hot topic at the moment. Last year saw a meteoric rise in the value of Bitcoin and then an equally astonishing fall. There is enormous potential in cryptocurrencies but also a lot of potential risks. So, why should you consider trading or investing in cryptocurrencies?
Basics of investing and trading
The difference between investing in a cryptocurrency and trading it is an important one to start with. When you buy a currency, you take ownership of it and must pay the full value of it to complete the transaction. You must pay capital gains tax on any profit you make, and you feel the full force of changes in value. You need an exchange account to buy and sell the currencies, and there are introductory limits on maximum deposits as well as the chance of deposit withdrawal fees.
On the other hand, when you trade with cryptocurrencies, you speculate on the price but don’t own it. You use leverage so that you only put up a small percentage of the cost of the currency and this type of spread betting means no capital gains tax. You only gain indirect exposure to multiple underlying exchanges with one account, and you can start trading immediately with no need for an exchange account of your own. Finally, there are no maximum deposit limits, withdrawal or deposit fees.
How to trade in cryptocurrencies
The most common way to trade in cryptocurrencies is through CFD trading – Contract for Difference. You can open a position with only a small amount of the full value of the trade (in this case, the currency) which means you could gain broad exposure to the financial market while using only a small amount of your capital. Not only does this potentially make for more significant gains but can also limit losses if things go against you.
Trading with cryptocurrencies is something you can get into much quicker and because you don’t own the entire currency, if there is another rise and fall as seen with Bitcoin, you don’t face the full brunt of the changes.
How to buy cryptocurrencies
If you like the idea of cryptocurrencies, the technology they represent and don’t want to trade or make gains from the currency, then buying it may be the way to go. When you buy and sell cryptocurrencies, you need to access an exchange. It means learning not only the technology used within them but how to make sense of the data they provide.
You need to set up an account to trade. Accounts can take quite a few days to set up as every person needs to be manually approved by the operator of the exchange. And with the popularity of buying and selling cryptocurrencies, that can be a lot of people.
As a new account holder, there are likely to be limits on what you can do. For example, you may only be able to deposit a set amount each week and these deposits, along with any withdrawals, will incur fees from the exchange.
For those looking for the long term, buying cryptocurrencies can be an option. However, the volatility of the market is not your friend and can wipe out much of the value of what you hold.
Finding the right trading platform
While buying is an option if you aren’t worried about the short term, don’t want to make money now and can hope the currency keeps its value, many people turn to trading as the preferred option. Once you find an excellent trading platform such as Wilkins Finance Cryptocurrencies, you can start to trade almost instantly and enjoy the fascinating market of cryptocurrencies.