Sure, you are aware of the boom around the recent sharp rise of Bitcoin. Virtual money is gaining in popularity. However, most people are not aware of what cryptocurrency is and how to use it.
In order not to lag behind our fast-developing world, let’s have a closer look at TOP-7 most common questions concerning digital assets.
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What is cryptocurrency?
Cryptocurrency represents electronic money, decentralized digital assets that exist only in digital form. In other terms, this is a virtual currency, a medium of exchange, which is stored in special electronic registers. The registers are called blockchains, and they aim to keep a record of the number of digital assets and monitor the transactions. Unlike material money, crypto is not controlled by any central authority.
Indeed, Bitcoin is the first and the most popular cryptocurrency. Any cryptocurrency competing with Bitcoin is called “altcoin.” Namely, these are Ethereum, EOS, Litecoin, etc. According to Coinmarketcap, more than 9,000 cryptocurrencies are now in circulation.
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What is cryptocurrency trading?
Cryptocurrency trading is a process of buying or selling cryptocurrency via an exchange, taking advantage of markets falling or rising in price. To put it differently, crypto trading is speculating on market price movements.
- How can I start trading?
If you are eager to start trading, follow some steps:
- Choose cryptocurrency exchange
- Create an account
- Confirm your identity (KYC-know your customer procedure), providing documents that could be required (Passport, Social Security Number). Usually, trusted exchanges require this step.
- Fund your online wallet
- Choose crypto to invest in or trade
- Adopt a strategy
- Store your digital assets
Generally speaking, to get profit, you need to buy crypto lower in cost and to sell it for a higher price, or vice versa: to sell for a higher price and then to buy cheaper. The difference between purchase and sale price is your profit.
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What is a cryptocurrency wallet?
The cryptocurrency is usually kept in a particular place called “Wallet.” To be precise, cryptocurrency wallets represent the public and private keys’ storage, allowing you to control your digital currency holdings.
A cryptocurrency wallet, or an account, could represent a physical medium, allowing storing and sending the digital assets. You can have one of two types of crypto wallets: hot and cold.
Hot wallets
Hot wallets refer to a program that you could install on your device. They are easy to create and use. As a rule, hot wallets connect to the Internet. There are some types:
- Desktop wallets function as an address to exchange crypto, e.g., Bitcoin Core, MultiBit, and Electrum;
- Mobile wallets are compatible with iOS and Android systems. They allow to pay via NFC or QR codes, e.g., Bitcoin Wallet, Hive Android, Edge, Trust Wallet;
In case you trade or make purchases for crypto on a daily basis, hot wallets will come in handy. They enable you to make transactions within a few clicks.
Despite the simplicity of use, hot wallets have one major disadvantage: security.
Unfortunately, digital assets stored in a hot wallet are susceptible to cyber threats and thefts. So be careful storing large amounts of crypto.
Cold wallets
Cold or hardware wallets represent a physical device, medium, allowing to store cryptocurrency. They are less vulnerable to hacker attacks and are believed to be more secure than hot wallets. Namely, there are two types of cold wallets:
- Hardware wallets are devices, usually USB sticks, e.g., Ledger Nano X, Trezor, and SafePal;
- Paper wallets — their name speaks for themselves. They are pieces of paper that have a public wallet address and a private key.
If you want just to store your crypto assets, a cold wallet is a great solution.
Even though cold wallets are secure, they are impractical for everyday use. Thus, you need to proceed with transferring digital money to hot wallets in order to use them.
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What are the most popular pairs at cryptocurrency exchanges?
The popularity of the pairs is usually determined by interest and demand. The pairs with fiat and stablecoins are in great demand.
Among the most popular cryptocurrencies are BTC, ETH, USDT, LTC, XRP, and so on. However, there are many new DeFi tokens which become trendy, like ZIL, gZIL, TON, etc.
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What influences market fluctuation?
Many factors are influencing the price, namely:
– news on projects (if they are negative, then tokens are sold, and, consequently, they go down in price)
– the economic situation – people are looking for something to invest money in, and they see the potential in cryptocurrency. Thus, they start investing in it, pushing the price up.
– the interest of prominent players – companies, financial institutions, etc. invest in digital assets making the price go up.
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Which crypto will explode in 2021?
Taking into consideration that the cryptocurrency market is volatile, we cannot affirm that one or another digital asset will be 100% lucrative. Many experts have different opinions but most agree that the most high-potential cryptocurrencies next year might be the following:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Tether (USDT)
If you are wondering how to buy Tether (USDT) with a credit or debit card or you want to know the methods of purchasing another crypto, read more here.
Before investing, always do a detailed market analysis, and make informed decisions.