How to buy and sell crypto in 2022? Guide to choosing a crypto exchange

How to buy and sell crypto
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Cryptocurrencies are changing how money works, and they're already reshaping financial markets. More and more people are joining the train in fear of missing out on what is touted to be the future of monetary transactions. While cryptocurrency is reaching a broader audience, you won't be late if you followed the trend right now. If you want to learn how to enter the market the safe way, this where you need to be to learn how to do that.

Understanding cryptocurrencies

Cryptocurrencies are virtual currencies that exist as digital records on blockchains. A cryptocurrency (sometimes wrongly called crypto currency) is protected by cryptography, hence the name. Security is one of the driving features of the technology, as no one can make changes to the blockchain without verification. Bitcoin's boom brought about a wide range of different cryptocurrencies with diverse real-world applications. You can buy and sell crypto via centralized and decentralized exchanges, but their value can be traded on derivative markets.

Each cryptocurrency asset you buy is stored in a wallet. Every wallet's transactions history can be publicly accessed on the blockchain that underlies the cryptocurrency.

Users transfer crypto assets via wallet addresses. If you send a cryptocurrency asset using the wallet address of a different crypto asset, your token will be lost forever.

Your wallet won't be credited with the crypto asset until the transaction has been verified on the blockchain.

The cryptocurrency market

The crypto market isn't regulated by any government or central authority. Instead, they're decentralized and run on the internet. Before buying and selling crypto assets, you should understand how the market works and the risks involved. You should find out how crypto prices are affected, how to verify the current price of a cryptocurrency asset and understand the implication of purchasing the token. However, cryptocurrencies are traded the same way you buy and sell currencies or stocks. Prices go up when the demand rises and fall when investors choose to liquidate their assets.

What affects cryptocurrency prices?

cryptocurrency price chart

As we mentioned, a coin's demand and supply ultimately decide its price. For example, Bitcoin's price rose astronomically in 2018 due to the high demand at the time. The same happened in 2021's bull run.

The same will happen with any crypto asset whose demand is higher than its supply. Conversely, when a crypto asset's demand is lower than its supply, the price goes down.

Other factors affect crypto prices. For example, a cryptocurrency project's success could drive demand, which will bump up the price. But, on the other hand, the price will fall if the project decides to pump more crypto tokens into the market without the corresponding demand. Financial regulation news that affects the crypto market will also cause drastic price changes. For example, reports that the SEC was taking Ripple to court saw the price of the XRP cryptocurrency fall.

So, you must follow the news and crypto projects closely before buying any coin.

Cryptocurrency tokenomics

A cryptocurrency's tokenomics is data that helps you understand its value. The term was coined by mixing the words "Token" and "Economics." Every cryptocurrency project has a detailed tokenomics report. Most of them are detailed in the project's whitepaper. The data includes the token's supply, how the coins will be distributed, who receives what, and the release schedule.

As we mentioned, a cryptocurrency's supply determines its price to a large extent. Also, you can't peg a token's value to its price.

For example, a crypto token of $100 isn't necessarily more valuable than another token worth $1. You'll have to put the token's circulation supply and market cap into consideration.

More on that below.

Token supply

A cryptocurrency's supply is divided into three categories: circulating, total, and maximum. The circulating supply is the number of tokens that are publicly available for trading on exchanges.

The total supply is the number of coins in existence. Unlike the circulating supply, it includes coins that haven't been released to the open market because they've been locked for staking or in smart contracts.

However, the total supply does not include verifiably destroyed coins and those that haven't been mined.

The maximum supply includes every token in a cryptocurrency's life span. That means it covers the total supply, coins that haven't been mined, and those that have been destroyed.

Market cap

A cryptocurrency's market cap (or market capitalization) is the total value of the entire tokens in circulation. To calculate a cryptocurrency's market cap, you must multiply its current price by its circulating supply.

For example, if Bitcoin's circulating supply is 17,000,000 and its price is $40,000, its market cap is $720,000,000,000. A cryptocurrency's fully diluted market cap is the total value of the token's maximum supply. For example, if Bitcoin's maximum supply is 21,000,000 and its current price is $40,000, its fully diluted market cap is 840,000,000,000.


Things to consider before buying and selling cryptocurrencies

 Things to consider before buying and selling cryptocurrencies

While the news of cryptocurrency gains and advantages are legitimate, they shouldn't be the only things that sway your decision to buy or sell. Cryptocurrencies are highly volatile assets. They experience sharp price hikes and drops, and you can lose a lot of money if you don't know what you're doing. You must have a clear objective and strategy.

Here are some pointers you should consider before investing into crypto:

1. How much are you ready to lose?

As we mentioned, cryptocurrency's volatility makes it riskier than many other financial assets. It's also unregulated, and you don't get any insurance for losing your funds. Every exchange boldly put out disclaimers of crypto's risks, making sure you understand what you're getting into and that you can't hold them liable for the losses you may suffer.

Before you start trading, you should be ready to lose everything. So, consider going in with what you're comfortable losing.

2. Do your research

You should comb through articles like this to learn everything you can about cryptocurrencies before investing. In addition, there are lots of educational resources online to help you know everything you should. Compare these articles to make sure you're consuming genuine information and read them over and over until you understand every term and process.

3. Read up about a cryptocurrency asset before buying

Before you jump on a trending cryptocurrency asset, make sure you learn everything about the project behind it. People who go into crypto compare projects before choosing one to invest in. You should do the same. Resist the fear of missing out (FOMO in crypto speak) and stick to projects you understand and trust. Check out the cryptocurrency's tokenomics to be sure it's what you want to follow.

Check out a coin's community and developer activities to know how active the project is. Conversely, a crypto project that has been around for a while with low dev and community activity is one you should probably avoid.

4. Do you want to invest long-term or make short-term profits?

Your goal should determine where you put your money and how to trade. For instance, if you want to make quick gains rather than long-term investments, you should consider short-term trends and metrics, and coins that will provide high returns shortly. However, if you don't mind waiting for years, you can go for cryptocurrencies with low market capitalization and vesting periods. First, make sure you confirm that the project is promising and has a great future.

5. Think diversification

While it's vital to compare crypto assets and focus on a number of coins, you shouldn't throw all your funds into a single project. Not only will you mitigate your overall risk by investing in multiple projects, but you also maximize profit when different crypto assets appreciate. The only challenge with diversifying your asset is tracking your extensive crypto portfolio. It can bedifficult to keep track of every asset's performance as a lot could be happening at once.

This is why most people go for coin tracking methods. You might be wondering, "Is cointracking safe?" Well, there's no simple answer. Different tracking tools can help you keep up with your portfolio. All you have to do is check their reviews and track records to know the safest one to use.

6. Understand and know how to use crypto tools

From cryptocurrency wallets to metric tools, there are different cryptocurrency trading tools at your disposal that you can use to track prices, follow trends, and keep your funds safe.

7. Learn how to secure your funds

This is the most crucial aspect of cryptotrading and buying currencies online. Unfortunately, there are many easy ways to lose your funds. For starters, there's no way to recover your assets once you send them to the wrong address, and if anyone gains access to your wallet's cryptographic keys, they have total control of your coins. Learn to keep the keys to your wallets safe and consider going for hardware wallets to boost security.

Buy trade sell and exchange crypto

Buy trade sell and exchange crypto

Now that you're ready to be a coin trader, you should decide whether you're going to be making money trading cryptocurrency in the short term or if you want to hold tangible crypto assets.

Your choice will determine whether you're involved in spot, margin, or futures trading.

Choosing the crypto exchange

You should do your due diligence before choosing a digital exchange system to trade cryptocurrencies. Then, you can decide to go for a centralized or decentralized crypto exchange.

Centralized exchanges control a user's crypto assets as they hold the cryptographic keys to their wallets. This makes it easy to execute trades instantaneously. This marketplace can be akin to a trade exchange, as buy orders can be swiftly matched to sell orders. To enjoy the full benefits of a centralized exchange, you have to go through a rigorous registration process, providing proof of identity and other personal information.

On the other hand, users are in complete control of their assets in decentralized exchanges. They don't have to sign up or provide personal data to trade. Instead, you'll use your wallet address to sign in to the exchange and execute smart contracts to swap assets in your wallet for other assets. Centralized exchanges are faster, easier to use, and more straightforward than decentralized exchanges. They also expose you to more trading pairs.

So, make sure you research these trading platforms and check out exchange reviews before you start trading.

Whether you're going for a centralized or decentralized exchange, you should know how they work, their trading fees, limitations, and trading pairs. In addition, you should check their liquidity, response time, and customer support.

Spot crypto trading

With spot trading, you're buying a crypto asset at its original price. This is where coin selling and buying take place. This process should be easy if you know how to buy and sell currency in a centralized FOREX exchange. However, if this is your first time, this guide will show you the ropes.

People who trade cryptocurrencies exchange crypto assets for fiat currencies or other crypto tokens. When you place a buy order, it is automatically matched with another trader's sell order. In addition, everything works on the digital exchange server, which means you don't have to be online for the exchange to fill your orders. Spot Trading is the safest way to buy cryptocurrency and keep it. You can transfer a token to any other wallet from that of the exchange where you purchased it. You have to understand crypto trading pairs and buying and selling mechanisms if you've not done this before.

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