Cryptocurrencies are a form of digital currency, or virtual currency that can be used to buy goods, replace them with other cryptocurrencies, or even trade them as CFDs. When trading CFDs for cryptocurrencies, you are beating the movement of the preferred currency pair. A currency pair usually consists of cryptocurrencies against other cryptocurrencies, or for banknotes such as USD, GBP, and eur, in which case it is called an encrypted forex pair.
Cryptocurrency prices are known to be very volatile, sometimes experiencing huge price hikes during the day. Therefore, you should use a risk management strategy, and trade only what you can afford to lose.
How cryptocurrencies trade cryptocurrencies
There is a difference between buying and selling cryptocurrencies and trading CFDs for cryptocurrencies, you may be able to buy cryptocurrency directly from the cryptocurrency exchange, but then you’ll need to create an cryptocurrency portfolio and pay high transaction fees. In addition, save your encrypted digital currency without forgetting the passcode, and also make sure your device is protected from piracy threats.
Trading cryptocurrencies with a CFD issuer allows you to speculate on the movement of underlying asset prices without owning it, where you can make gains or losses as a result of the underlying asset’s price movement.
Does cryptocurrency trading look like forex trading?
When trading cryptocurrencies, there are some important things to keep in mind. First, there are major cryptocurrencies such as Bitcoin (BTC), Eth, and Ribel (XRP) just like in banknotes, there are major currencies such as the US dollar, the Japanese yen, the pound sterling and the euro. These major cryptocurrencies account for the highest volume of trading and are used as base currencies against both banknotes and other cryptocurrencies.
Important facts about cryptocurrency trading
Cryptocurrencies are more volatile than banknotes such as the US Dollar (USD), the Pound sterling (GBP) and the euro (EUR). Their prices fluctuate very strongly during the day. It is common that the price of bitcoin (BTC) fluctuates by 10% or more during the day.
In practice, all cryptocurrency cryptocurrencies are pegged to bitcoin, so when Bitcoin performs well, the entire cryptocurrency market tends to follow. A number of cryptocurrency derivatives have already been introduced into European and American trading markets.
It should also be noted that there is still a great deal of regulatory uncertainty surrounding cryptocurrency trading, and a large number of frauds and fraudulent activities have already been reported.
Key pairs in cryptocurrency trading
When choosing a pair of cryptocurrencies to trade, you should evaluate the liquidity available in the market, as some cryptocurrency pairs have a higher volume of trading than others. Here are the most cryptocurrency pairs:
BTC/USD – Bitcoin (BTC) against the US Dollar (USD) is the most traded pair to date. In this case, bitcoin is the main currency, and the US dollar represents the quoted currency.
ETH/USD – ETH is the second largest cryptocurrency after Bitcoin. For this reason, it also has a large trading volume against the US dollar, with a lot of liquidity.
LTC/USD – Litecoin (LTC) vs. USD. Litecoin is a currency designed to be faster than Bitcoin.
XRP/USD – Ripple (XRP) vs. USD (USD) is another very popular trading pair. Ripple currency is designed for large settlements between financial institutions, as well as cross-border transactions in general.
The impact of cryptocurrencies on Forex
So far, cryptocurrency trading is not as popular as forex trading, but traders are becoming increasingly interested in cryptocurrencies because of the high level of price volatility of cryptocurrencies.