Cryptocurrency investing has become incredibly popular over the last few years. Almost everyone has heard of Bitcoin by this point, and even those who don’t understand the basics of digital currency can likely understand what investment opportunities it presents. Cryptocurrencies are decentralized and digital, meaning that they operate independently of any government or central authority. This makes them somewhat immune to the whims of central banks, which has made them an attractive proposition for investors with a long-term outlook. In this blog post, you’ll learn about the top trends in cryptocurrency trading you need to be familiar with. Let’s get started.
- Speculation is King.
One of the major trends that are driving Cryptocurrencies these days is speculation. Many people are investing in digital currencies to try and profit from price fluctuations. The volatility of Bitcoin, for example, can fluctuate by as much as 100% in just 24 hours.
This type of investment isn’t for everyone, especially if you need your money soon or if you don’t have a lot of experience investing in volatile assets. However, if you have the time horizon to hold onto your investment and take advantage of market swings, then this could be the perfect opportunity for you to make some money.
2. There are a Lot of Weird Altcoins.
Investing in Cryptocurrencies is a great way to diversify your portfolio. If you invest in Bitcoin, for instance, and the currency crashes, you could start to panic and sell all of your coins at a loss. If you were invested in other Cryptocurrencies, however, this crash would have less impact on your investment strategy.
One of the top trends in cryptocurrency trading you need to be familiar with is the number of altcoins available for purchase. Hundreds of different currencies are available for trade on cryptocurrency exchanges like Bitcoin Code. One of the challenges with these altcoins lies in understanding which ones are legitimate investments and which ones exist only as scams designed to take your money. It can be challenging for new investors to spend time researching each one before investing, but it’s worth it if you want to minimize risk.
3. Liquidity is King.
Investors, no matter how much they are looking to trade, need liquidity to be successful. The less liquidity a cryptocurrency has, the more difficult it will be for an investor to buy and sell. This can cause prices to fluctuate wildly, sometimes with only minor news releases or changes in value. When speaking of liquidity and Cryptocurrencies, there are a few different factors that come into play.
The volume of a currency is the amount of it that changes hands over some time. The higher the volume of a currency is on exchanges, the more liquid it is considered to be.
b. Market Capitalization.
Market Capitalization refers to the total value of all coins in circulation at once multiplied by their price per coin. A currency with a lower market capitalization and lower trading volume may not have enough liquidity for an investor to buy or sell without triggering significant fluctuations in price. Fortunately, this doesn’t mean that these currencies don’t have any potential; they just may not be as easily tradable as others right now.
4. The DAO Heist.
The DAO was a digital decentralized autonomous organization that represented one of the first attempts at creating a decentralized and democratic investor-directed venture capital fund. In May 2016, someone exploited an error in The DAO code to siphon off more than 3.6 million ETH (worth $50M at the time).
Rather than “breaking” or “hacking” The DAO, the attacker found an obscure loophole in the code and executed it cleverly.
This led to a split into two branches, both using the acronym ETC (Ethereum Classic) but with different values: the original branch which opposes this method of collective decision making is referred to as Ethereum Classic and remains unaffected by this exploit; the new branch is simply called Ethereum.
5. ICOs are King.
Initial Coin Offerings, or ICOs, are the hottest trend in cryptocurrency trading. Cryptocurrencies that operate on a blockchain are not pre-mined and no single person controls them. ICOs give investors a chance to buy new Cryptocurrencies before they even launch, and sometimes at a discounted rate. This is an excellent way for startups to raise funds to get their new cryptocurrency off the ground. There has been an increase in fraudulent ICOs recently, however, so you need to do some research before investing in any given ICO.
Cryptocurrency trading can be a tricky thing. While it’s a popular topic for discussion, not everyone has the expertise to avoid making costly mistakes. But don’t worry! We’ve put together a list of helpful articles and resources to ensure that you’re up to speed on the latest trends in this space and will be able to make informed decisions about your cryptocurrency portfolio.