Trading Cryptocurrency: Guidance from Forbes Advisor UK

Forbes Advisor offers this material solely for informational purposes, and it should not influence your decision to invest in cryptocurrencies. Should you choose to invest in cryptocurrency, be sure to seek professional financial advice and only invest money you can afford to lose.

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Forbes Advisor’s latest research shows that nearly two-thirds (65%) of the investment community holds cryptocurrency investments. Cryptocurrency serves as a digital form of currency that allows person-to-person transactions without requiring an intermediary institution.

For example, to pay a dog groomer, traditionally you would use either cash sanctioned by the government or a bank transfer. But if the groomer accepts Bitcoin (BTC), you could pay them directly from your digital wallet to theirs, avoiding middleman fees or delays.

Cryptocurrencies operate on a decentralized infrastructure, meaning no single entity has control over it.

Cryptocurrency Trading Guide

Here’s a step-by-step rundown on how one might engage in cryptocurrency trading:

1. Sign Up for a Crypto Exchange Account

Trading crypto typically starts by creating an account on a cryptocurrency exchange. It’s important to assess the exchange’s features, services, and fees to determine the right fit. For assistance, Forbes has compiled a selection of top crypto exchanges.

After selecting an exchange, the next step is account registration, which involves providing some personal information and completing identity verification.

2. Deposit Funds into the Account

To start trading, you need to fund the account with fiat money. In the UK, this will be in pounds Sterling. Note that many exchanges require a minimum deposit to begin trading.

3. Choose a Cryptocurrency to Trade

Identify the cryptocurrency you wish to trade on the exchange platform. If unsure, Forbes has extensive coverage on major cryptocurrencies, their functionalities, and values.

4. Develop a Trading Strategy

Before engaging in the market, decide on a trading approach. Various strategies exist, and further information can be found here.

5. Start Trading

Once a cryptocurrency and strategy have been chosen, head to the relevant section on the exchange to commence trading.

6. Secure Cryptocurrency Storage

Consider how to securely store your cryptocurrencies. Options include custodial wallets offered by exchanges (hot wallets) and non-custodial (cold wallets), such as USB drives. Each has its advantages and potential risks.

Understanding the Blockchain

The system operates on blockchain technology, a distributed digital ledger that is maintained by a network of volunteers and is virtually tamper-proof due to encryption.

After completing a cryptocurrency transaction, network volunteers record it in a shared ledger. Once enough transactions are logged, they form a new block on the blockchain, through a consensus process involving computational power or staking of cryptocurrency.

The chosen method to add a block to the chain requires validation from the majority of the network to be accepted and in return, contributors earn cryptocurrency rewards.

Cryptocurrencies exist solely as transaction records, and while they can be exchanged for goods, services, or other cryptocurrencies, they have no physical form like traditional coins or notes.

Crypto Trading Explained

Crypto trading involves speculating on price movements and executing buy and sell orders accordingly via platforms such as eToro or Uphold. The objective is to purchase low, sell high, and profit.

Cryptocurrency Trading Methods

Trading strategies include day trading, swing trading, and position trading. Each approach differs in terms of the duration and strategy for buying, holding, and selling assets.

Market Influences

Numerous factors affect cryptocurrency prices, including supply, demand, market sentiment, and competition. Understanding these factors and staying informed through the news can assist in making accurate price predictions.

Cryptocurrency Storage Solutions

Investors need a secure wallet to store their public and private keys, which are required for authorizing transactions. Wallets are available in various forms, with their own sets of strengths and potential vulnerabilities.

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The FCA has issued warnings to UK consumers about the lack of regulatory protection in the cryptocurrency market and the potential for complete loss of investment.