Mining isn’t the only way to acquire cryptocurrency. Over the years, trading has become one of the more popular methods to obtain digital coins such as Bitcoin and Ethereum.
Trading cryptocurrencies, such as Bitcoin, Ethereum and the like, isn’t quite like trading in traditional markets as they are purely digital assets. Crypto isn’t affected by the same forces that move the established markets.
Currently, it’s estimated that there are more than 22,000 cryptocurrencies with a total market cap of USD 1.1 trillion, each possessing varying degrees of volatility. Due to the growing availability of online trading platforms, anyone can participate in Bitcoin trading and profit through market speculations. All you have to do to succeed is to understand how it works. Similar to forex market trading, you buy and sell assets when you trade cryptocurrencies. However, instead of fiat currencies, you buy and sell coins such as Bitcoin and Litecoin.
Getting Started With Trading Cryptocurrencies
There are two main goals in trading crypto: to accumulate Bitcoin or Ethereum and to earn profit from the market’s price moves. When you start trading crypto, you need to keep in mind several factors that can impact their prices, including their supply, market capitalisation, and integration, or how the cryptocurrency seamlessly integrates with existing infrastructure like payment systems.
Essentially, the first step in cryptocurrency trading is to open an account. Then, you can deposit funds into it so you can purchase coins.
You then need to pick a cryptocurrency that you want to invest in. Some of the most valuable cryptocurrencies in 2023 include:
· Bitcoin (BTC)
· Ethereum (ETH)
· Tether (USDT)
· Binance Coin (BNB)
· US Dollar Coin (USDC)
Before you buy crypto, you’ll need to have a good trading strategy. The common strategies that can be used when you start trading crypto can be divided into two categories: active trading strategies and passive trading strategies.
Active Trading Strategies
You’re leveraging active trading strategies when you buy and sell crypto assets to generate a profit from the market’s short-term price movements.
Common cryptocurrency trading strategies under this banner include:
· Arbitrage – Crypto investors capitalise on the price discrepancies of their crypto assets across many exchanges.
· High-frequency trading (HFT) – Also known as systematic trading, HFT is when you use an automated trading platform to trade your crypto assets quickly and simultaneously.
· Range trading – Range trading happens when you select a range that you’re comfortable with when it comes to buying and selling crypto for a given period.
Passive Trading Strategies
Passive trading strategies involve investors buying and holding their crypto assets for a relatively longer period with the goal of increasing your portfolio’s value as the value of your crypto assets grow.
The three common strategies under this category are:
· Buy-and-hold – As its name suggests, you purchase a crypto asset and store it in your crypto wallet for a long period. It operates under the idea that your crypto asset will grow in value over time. In turn, your portfolio’s value will also increase as your asset’s value grows.
· Crypto index investing – This strategy is similar to investing in traditional index funds. It involves a pool of funds that’s used to create a unique portfolio to track crypto. The index is managed by professionals.
· Dollar-cost averaging – Dollar-cost averaging is when you invest equal amounts of fiat currencies regularly, regardless of the crypto asset’s price. The idea with dollar-cost averaging is that it benefits the trader because you’re taking on a larger volume of assets. When the price of these assets increases over time, you’ll enjoy gains with relatively less effort.
After choosing a suitable strategy, you may want to consider automated cryptocurrency trading. With this, you’re trading cryptos using a platform that leverages trading bots. This can help you get better results that are more aligned with your investment goals. That’s because automated trading can provide you with different trading methods.
Lastly, you can start storing your cryptocurrencies. For active traders, you may want to store your funds in your preferred crypto exchange. For experienced traders and even beginners who want to hold their cryptocurrencies for the long term, storing them in a cryptocurrency wallet also works.
The thing to remember when you trade crypto is that you should only invest capital that you’re willing to lose. It’s also to your advantage if you work with entities regulated by the Australian government.
So, How Do You Profit?
Traders can profit from selling the coins at a higher price than what they bought them for. Another way to profit is through market speculation using contract for differences (CFDs). You can bet on the price difference between fiat currency and cryptocurrency. You may also bet on the changing values between two digital coins such as a BTC: ETH pair.
A CFD allows you to profit from price movement without owning an underlying asset which, traditionally, is a commodity, share, currency pair or index. If you do cryptocurrency CFD trading, you’re not actually buying and owning crypto—rather, you’re just speculating on how its value will change relative to AUD.
Indeed, cryptocurrency trading is a lot like trading fiat currencies on forex. However, it offers a unique set of benefits that none of the traditional markets have. For instance, trading fees are significantly cheaper than forex-trading fees. Cryptocurrency’s volatile nature is, at times, a perk as well. Thanks to large price fluctuations, you can make substantial profits with a small fund. Best of all, you can trade cryptocurrencies anytime and anywhere unlike forex trading, which is often only available on weekdays. Bitcoin might be a whole lot different from fiat currencies. However, cryptocurrency trading does share similarities with forex trading. Just like the latter, profits aren’t guaranteed when you trade cryptocurrencies. But by understanding how this unique market works, you can improve your likelihood of succeeding. More importantly, you can prevent heavy losses.
Decide How You Want to Trade Cryptocurrencies
Traders have two choices: speculate on prices using contracts for differences or purchase coins through a cryptocurrency exchange.
If you choose the latter, you get to own a portion of the cryptocurrency. You profit if its value increases. Aside from buying coins, you can do CFD trading. Instead of owning crypto, this method entails you to speculate on the value of digital currencies. You “go long” if you think its value will increase and “go short” if you think it will decrease. To profit, you need to make an accurate prediction. By trading CFD, you can acquire significant rewards as the market rises or falls.
CFD trading might have significant benefits, but all of its perks also come with risks. Make sure to understand the risks and the rewards before trading CFDs.
Figure Out Your Trading Style
There are two types of traders in the crypto space: long-term and short-term traders. Compare and understand each style to figure out which one works for you.
Traders who purchase digital currencies with the intention of holding them for weeks, months or even years are considered long-term traders. Often, such traders study how the value of Bitcoin and other currencies fluctuate over a certain period to make informed decisions. If you believe that the value of these digital assets will increase over time, this trading style might be for you.
When it comes to short-term cryptocurrency trading, you forgo the stability of long-term trading for the potential to profit from price swings. The volatile nature of cryptocurrency isn’t always a curse. If you know the market well, you can profit from short-term price spikes. You can explore which trading style fits you best by practicing on a demo account.
Understand How the Cryptocurrency Market Works
Even if you know your way around other financial markets, it’s imperative to learn how the cryptocurrency market works before you start trading. Digital currency is notoriously volatile. By understanding the factors that influence the market, which could be anything from government regulation to ICOs, you can achieve more favourable trading outcomes.
Learning the ins and outs of cryptocurrency trading will help you limit your exposure to potential risks. Investing in different assets at various price points can minimise market exposure and risk.
Set Up a Trading Plan
Practice your strategy on a demo account. Every trader needs to come up with a plan, especially when you trade cryptocurrency. Whether you prefer trading CFDs or buying crypto, creating a strategy will help you succeed. Since crypto markets are extremely volatile, it’s not always easy to trade in this space. In a trading plan, you ought to set up your goals, identify which currencies you want to trade and come up with a strategy for starting and exiting trades.
Know When to Cash Out
Getting into a trade is the easy part. Knowing when it’s time to cash out is the challenge. Remember that cryptocurrencies are extremely volatile. Its value can fluctuate drastically in the blink of an eye. Cash out too early, and you’ll miss an opportunity to make extra profits. But if you’re too late, you might not profit at all. In crypto trading, knowing when to cash out will also help you avoid losses. Trading cryptocurrency has never been easier. With powerful, user-friendly tools, you can definitely learn by doing. Below, you’ll find a list of things you have to do before you can buy and sell cryptocurrency or perform CFD trading.
Secure a Cryptocurrency Wallet
A cryptocurrency wallet can either be a software program or physical medium where you can safely store your digital coins. It won’t actually contain crypto. It can only secure your private keys, which you need to access your digital assets and sign transactions.
Digital wallets come in many forms. Some are apps which you can download on your smartphone, while others are online platforms which you can conveniently access through the web. There are also desktop programs that keep your private keys safe offline. Compare different kinds, and select one that limits your crypto’s exposure to potential theft or cyber threats.
Select a Cryptocurrency Exchange
Crypto exchanges can be separated into three categories: Bitcoin brokers, cryptocurrency trading platforms and peer-to-peer exchanges.
The fastest way to buy digital currency is through Bitcoin brokers. Unlike the other two options, they usually charge higher fees. However, they do have user-friendly interfaces, ideal for first-time traders. As for trading platforms, some of their benefits include a wider cryptocurrency selection and lower transaction fees. The downside is: traders are often required to own crypto to get into this type of exchange. In other words, they aren’t ideal for beginners.
P2P platforms, on the other hand, don’t use middlemen, allowing traders to transact directly with each other. Sellers can dictate the price they prefer, as well as the payment method. With a P2P exchange, you get increased privacy. Since you’re transacting with other traders, you might have to buy Bitcoin for a price higher than the exchange rate.
No matter what type you choose, you should compare all your possible options before selecting a platform for trading.
Create an Account
Opening an account for CFD trading will be quick and easy as it won’t require you to own a crypto wallet or an account with a cryptocurrency exchange. All you have to do to start trading CFD is to set up an account with a trading provider. But if you want to buy and sell crypto, you will have to do the first two steps above. Cryptocurrency exchanges are scattered all around the world. Lucky for you, there are a handful of platforms here in Australia (e.g. Independent Reserve, which we recently wrote about). Buying Bitcoin from an exchange based in the country has its benefits. However, there are also a few disadvantages that you simply can’t ignore. Thus, compare the pros and the cons of buying on an Australian platform before making a decision.
· Every cryptocurrency exchange that’s based here has to comply with AUSTRAC’s anti-money laundering and counter-terrorism regulations
· Supports local payment methods, including BPAY and POLi payments
· Has accessible customer support services
· Offers better consumer protection
· An Australian cryptocurrency exchange isn’t ideal for those who want to trade anonymously since these trading platforms require personal details and ID
· Registration takes longer than in platforms that offer anonymous trading
· Larger firms abroad have better liquidity
Given the exponential growth of the cryptocurrency market, you’ll easily be able to find other platforms outside of the selection mentioned above. Whether you choose one in the country or overseas, you should compare all your options before making a decision. Look for a trading platform that offers the features that cater to your trading style.
Some trading platforms only carry major digital currencies like Bitcoin and Ether, while others support a wide array of coins. Aside from cryptocurrency, you should also look into the fiat currencies they support. Ideally, you should select a platform that supports AUD, among other fiat currencies.
Before you begin to trade cryptocurrencies, make sure that your preferred trading platform caters to your skill level. Compare their features to figure this out.
Select a trading platform that offers the features that make you feel more confident about trading or help you improve your skills. A free demo account and educational resources, for example, are the kind of features first-time traders need to hone their skills. If you want to gain better control over the trade, you might want to look for hedging and stop loss features.
Look up a trading platform’s security features. Does it use two-factor authentication or PGP encryption? While you’re at it, you should also look into the company’s history. Find out if they’ve been hacked before or if they’ve been linked to suspicious activities.
Compare trading platforms’ transaction limits. Some will set limits on the minimum and maximum amount of Bitcoin you can obtain. Often, platforms will also limit the amount of funds you can transfer from your account in a single transaction.
Read reviews to learn more about other traders’ personal experiences on various trading platforms. If many share similar negative experiences on a single platform, it’s best to avoid it.
If you’re not into trading CFDs, you can trade cryptocurrency instead on your chosen platform. There are a few things you have to do before you can buy and sell digital coins. Each platform has its own process. But here’s a good idea of what you’ll have to go through to trade cryptocurrency.
Register an Account
Depending on the cryptocurrency trading platform you use, you might be required to submit some form of ID. This process alone can take a few days. Then, you have to verify the account before you can carry out transactions.
Once your account is all set up, you should be able to link your bank account and deposit funds into it. Some trading platforms take days, but there are others that can do it within minutes.
Buy and Sell Cryptocurrency
If you want to make a purchase, click on the buy option. Decide on the currency and the amount you want to purchase. Many platforms will give you the option to choose your preferred payment method. Always review your transaction details before making a purchase.
To sell your cryptocurrency holdings, transfer your digital coins to the platform’s wallet if you have it stored somewhere else. Instead of selecting the buy option, place a sell order. Then, enter the amount that you wish to trade.
Are you ready to do cryptocurrency trades? View and compare all your options to find the best platform for your trading needs. Soak up as much information as you can on the world of crypto trading, then put it into practice. As you grow and evolve, share the lessons you’ve learned to a community of traders and, in turn, gain new trade secrets.
Read our in-depth article about how to sell Bitcoin in Australia. New platforms pop up each year, joining the already competitive crypto trading market. Below, you’ll find some of the leading platforms for cryptocurrency trading in Australia. Compare their features and functionality to decide which one is right for you.
We recently published an in-depth review of Independent Reserve (which you can find here). The exchange was founded in 2013 and it’s one of Australia’s largest cryptocurrency exchanges. They have an office in Sydney and they are a Gold-certified member of the Australian Digital Commerce Association. Independent Reserve Exchange accepts fiat currencies such as AUD, NZD and USD.
CoinJar is a secure and encrypted exchange that utilises multi-sig technology to protect digital assets online. It might not have the widest selection of cryptocurrencies or fiat currencies, but it probably has everything that matters to you. On the platform, you can buy, sell, or spend BTC, LTC, ETH, XRP and ZEC. Of course, the Australian cryptocurrency exchange allows you to trade in Bitcoin for AUD, as well as GBP, EUR, and USD.
Easily one of the most accessible platforms in the country, CoinSpot is a multi-cryptocurrency exchange that comes with robust features. It focused on Bitcoin trading when it first launched in 2013—but now, you can trade any of the hundreds of coins available. With its user-friendly dashboard, beginners can effortlessly purchase their first digital currency with AUD. CoinSpot makes an excellent entry point for those who aren’t experts in trading digital coins.
eToro caters to crypto traders of all skill levels, as well as other financial markets. As a social trading platform, its key feature allows you to share your trading secrets with other users. It offers opportunities for trading Bitcoin, Ethereum, Bitcoin Cash and other currencies. Since it supports a wide array of deposit methods, including PayPal, online banking and card payments, you can conveniently transfer funds into your account and start trading within minutes. eToro also offers a $100,000 demo account for free which you can use to hone your trading skills.
Binance might be one of the newest players in the game, but it has already proved to be a force to be reckoned with in the cryptocurrency markets. Compare it to older platforms, and you’ll find that it is just as, if not more, secure, fast and user-friendly. Using its mobile and desktop apps, you can trade anytime and anywhere you want. One of the benefits of using Binance is its global trading community. You can head off to the discussion boards to learn the latest trading secrets and share your own.
Another leading global platform for trading cryptocurrency is ZebPay. It’s a mobile-focused platform that offers many intuitive trading experiences for its users. It doesn’t charge fees for fiat deposit and withdrawal. While it claims to have no trading fees, it does list a 0.4% trading fee for trust fund holders and corporate customers. Here, you can trade all six major cryptocurrencies: Bitcoin, Bitcoin Cash, XRP, Litecoin, Ethereum and EOS. Much like its crypto selection, it only supports a few fiat currencies.
Trading Bitcoin isn’t the only thing you can do on Digital Surge. Designed specifically for Australian traders, this platform lets you pay your bills with your Bitcoin holdings. To enjoy that convenience, you have to give up a few features that other platforms offer, including wide crypto and fiat currency selections. They have a 0.1–0.75% trading fee. If you deposit funds through bank transfers, you won’t be charged. But you will have to pay $2 to $3.30 for POLi payments.
For beginners, Bitcoin Australia is a platform worth considering as its simple, user-friendly interface makes cryptocurrency trading so much easier and quicker. Through this trading platform, you can buy Bitcoin and Ethereum for AUD. You may even process payments at hundreds of physical locations across the country. Since the platform is a non-custodial broker, you can’t keep your cryptocurrency on the platform for extended periods of time, limiting its exposure to potential threats.
Ideal for beginners, Cointree was designed to make cryptocurrency accessible to anyone. It supports around 99 digital coins, including Bitcoin, Bitcoin Cash, EOS and Ripple. On the other hand, it only supports one fiat currency. Although it has limited trading features, that’s what makes it appealing to first-time traders. Perhaps one of the only inconveniences is its slow verification and transfer process. Sometimes, it takes quite a few days to verify users and deposits. If you’re willing to put up with that to enjoy competitive buy and sell fees, this platform is worth considering.
Kraken was founded in 2011 and is recognised as one of the oldest cryptocurrency exchanges. It’s one of the first crypto exchanges to offer features such as spot trading with margin and regulated derivatives. The exchange has two platforms: Kraken and Kraken Pro. The former is ideal for beginners, thanks to its user-friendly interface and the addition of the “Instant Buy” feature. The latter is suitable for experienced traders and has a suite of advanced trading tools such as futures trading and margin trading. Using Kraken, Australian traders can buy and sell over 200 cryptocurrencies including valuable cryptocurrencies such as Bitcoin, Ethereum (including other cryptocurrencies on the Ethereum blockchain), Cardano, and USD Coin. Kraken is also easy to use. Enjoy instant funding with bank transfers through PayID and Osko. It’s also registered with AUSTRAC as its digital currency exchange provider.
When it comes to price, nothing compares to Swyftx. It arguably offers the best value among the rest of the trading platforms on this list. Its beginner-friendly features make trading quick and hassle-free. Swyftx supports around 65 cryptocurrencies and a single fiat currency. Traders on the platform have to pay deposit and withdrawal fees to transfer fiat currency under $300. But if you compare it to other platform’s fees, it’s not a significant amount.