Crypto Academy / Season 3 / Week 1- Homework Post for Professor @lenonmc21 - Topic: What is Cryptocurrency Trading and on what platforms can we do it.
The words Cryptocurrency and cryptotrading are no longer considered new vocabularies in our time. Although barely a decade old, this new financial system has taken the world by a storm, to the extent that words like "crypt" bring to mind currencies like Bitcoin, Ethereum and the rest, instead of what it actually represents.
This rapid growth can be attributed to the speed at which cryptocurrencies have made people wealthy over a short period of time. Right now, everyone seeks to be literate in matters concerning cryptocurrencies in addition to whatever area of life they find interesting, so as not to miss out from the several enriching opportunities cryptocurrencies and it's trading offers.
But does this excess interest in cryptocurrency imply that everyone who have ever engaged in it have became very prosperous without any loss? The answer is No. For cryptocurrency is just like every trade, the more the secrets of the trade you know, the more profit you make, and the higher your chances of avoiding losses. Therefore, it's important to learn the secrets of trading before engaging in cryptotrading.
Am very glad to be part of the Steemit Crypto Academy, am also grateful for being a part of Professor @lenonmc21 lesson today. In today's class, the professor taught on the lesson "What is Cryptocurrency Trading and on what platforms can we do it" and I truly learnt a lot from it. This post is my response to the assignment he gave after the class.
Question 1:- DEFINE IN YOUR OWN WORDS WHAT TRADING IS, WHAT ITS FUNCTION IS AND HOW IT RELATES TO THE CRYPTOCURRENCY MARKET.
Trading in general terms refers to the buying and selling of goods and services with the aim of making profit. These goods and services can be anything that ranges from Commodities (such as oil, gold and silver), Company shares ( e.g Facebook, Twitter, Lyft shares e.t.c), Fiats ( such as pound, dollars e.t.c) and Cryptocurrencies (e.g, Steem, SBD, Bitcoin, Ethereum etc). When a trade occurs, the seller recieves something he considers more valuable in return from the buyer for what he (the seller) offered him.
Any platform where a trade takes place is called a Market. A market can be physical (as we call a group of stores) or it can be online or virtual.
Crypto trading and crypto market means the same thing as trading and market respectively, the only distinguishing factor is that crypto trading refers to trade that involves buying and selling of cryptocurrencies and other related tokens only.
Crypto market on the other hand is the name given to the market where cryptocurrency trading takes place. Since cryptocurrencies are virtual and carried out online, it's not surprising that the crypto currency market is also an online market. Crypto markets are commonly referred to as exchanges.
What happens during a crypto currency trade in a crypto market
There are several cryptomarkets or exchanges. Some of the best includes Binance, Coinbase Exchange, Kraken, Huobi Global, Bitfinex and Kukoin. Each of these exchanges have different interface, but their mode of operation is the same. They all allow you to but cryptocurrencies using your Fiat currency, or using another cryptocurrency, and when you want to sell (after the cryptocurrency you bought earlier has increased in value), they can help you sell your cryptocurrency back to another cryptocurrency of your choice, or to your own local currency.
N/B:- Further down in this post, I will be explaining how to buy and sell cryptocurrencies using some of these exchanges
Question 2:- DEFINE AND EXPLAIN WHICH ARE THE TOOLS USED FOR TRADING (TECHNICAL ANALYSIS AND FUNDAMENTAL ANALYSIS) AND AT LEAST ONE EXAMPLE OF EACH. (A screenshot is required).
Crypto market and cryptotrading is very risky, as it involves lots of prediction. Although it has the potential of making the trader rich over night, it can also render the trader broke in a twinkle of an eye. It very necessary that the trader equips himself with tools that will help him make better analysis about a trade before deciding on what to do while trading. Majorly, we have two types of analysis:
Technical Analysis
Fundamental Analysis
Technical Analysis:-
Technical analysis involves using both historical and statistical data in predicting what the price of a crypto currency will be in the future. This analysis is based on the believe that the market behaves in a certain manner, and what happened in the past is likely to occur again.
The tools used during technical analysis includes chart patterns, candlesticks, supports, indicators, volumes e.t.c. These tools reveals the behavior of a cryptocurrency in the crypto market in the past. Based on what the technical analysis tools reveals, the trader can be able to predict what the market will be in the nearest future.
To better understand this, let's look at an example. When using technical analysis in making decisions concerning a trade, If a trader notices in the trade chart that the price of a cryptocurrency have come down twice in the recent market, and in the process forming a support level, he could easily predict that the price of the asset will experience an Uptrend, therefore it's wise that he buys as the asset begins to rise from the support level.
Below is a trade chart from my Tradingview app showing the trades BTC/USDT trade recorded in June 2021. As of today, BTC/USDT trade has already formed a support line, and the price is beginning to peak after the second return to the support level and it's expected to continue rising for some time before it drops again. It advisable that any trader who wishes to make a little profit for himself should buy now.
In addition to the support level indication, whenever a trader who uses technical analysis in making market predictions notices that a Bullish candle has formed at the support level, then he can say that (all things being equal) buying the asset at that time will be a good investment, as he will surely make profits.
Technical analysis is more simple to use than every other analytical method, this is why it's frequently used by crypto traders.
Fundamental Analysis:-
Unlike the technical analysis which involves using charts and candle sticks in making market decisions, In fundamental analysis, the trader pays attention to economic factors such as new government policies, demand and supply of a cryptocurrency, a certain company signings or new deal and so on in predicting the market.
The main theory behind fundamental analysis is that, the price of an asset (cryptocurrencies) goes up or down based on certain decisions or events.
Let take a look at an example. On December 2011, Miguel Torres, who was a the Bantamweight contender for UFC, with a fantastic fight record of 40-4 posted a tweet that reads:
If a rape van was called a surprise van more women wouldn't mind going for rides in them.
Few minutes later after he posted this tweet, he deleted it.
Although an ordinary mind won't put much thought to this tweet, this tweet caused so much trouble for UFC. Within the few minutes that he posted the tweet, the stock of UFC began to fall. The fall was too threatening to the extent that UFC had to make a quick decision, and immediately freed Torres from the contract he signed with them in other to save themselves.
Any trader who trade UFC who depends on fundamental analysis can tell immediately that the tweet is most likely to affect the UFC's market, therefore it's advisable to sell. If on the other hand, this trader depends only on technical analysis to make decisions, he would lose all his money, because he may predict wrongly based on past events that the price of UFC will rise at that moment, and may likely "buy" instead of "sell".
From the illustration above, we can clearly see that no analysis method is better than the other, therefore it's advisable that a trader makes uses of both analysis technique before deciding finally on what direction of the market he will be taking.
Question 3:- NAME AT LEAST 3 TRADING PLATFORMS WITH THE HIGHEST TRADING VOLUME WHERE WE CAN BUY OUR FIRST CRYPTOCURRENCIES AND EXPLAIN IN YOUR WORDS THE WAYS TO BUY CRYPTOCURRENCIES ON THAT PLATFORM (Do not use Binance).
Apart from Binance, the three others trading platforms with the highest trading volumes according to Coinmarketcap are:
- Houbi Global ($11,083,024,289.57 trade volume),
- Coinbase exchange ($2,722,743,231.10 trade volume), and
- Kraken ($1,468,290,737.93 trade volume),
as shown in the screenshot below.
I will be explaining how to buy cryptocurrencies from Houbi Global trading platform.
Houbi Global:-
As of the time of this post Houbi Global has a 24h trading Volume of $11,083,024,289.57. The following are the steps to take if you wish to buy coins from Houbi Global.
Step 1:- Visit the official website of Houbi Global by clicking on the link, or download the app on playstore.
Step 2:- Click on login as shown in the screenshot below.
You will be redirected to a page where you can login if you already have an account in the exchange. if you don't, you can do so by clicking on sign in.
Step 3:- After login into the app, on the home page you will see "Buy Crypto", click on it as shown in the screenshot below.
When you do you will be redirected to a page where you can select the coin you want to buy, which form of payment you are willing to make, and in which currency you are willing to pay for them, as shown in the screenshots below. I will be buying BTC in this example.
Step 4:- Up in the same page, you will see where you can change the currency to your local currency. Since I am from Nigeria, I will change it to Naira (NGN). as shown in the screenshot below.
Step 5:- In my country, the only way to buy cryptocurrency is through peer to peer (due to government policies) for that reason, the exchange will scan through to see if there is any seller who want to sell BTC and will be willing to collect my local currency in return. The exchange found one, as shown in the screenshot below.
Step 6:- To buy, I click on Buy as shown above.
When I did, I was told to specify which quantity I was willing to buy, as shown in the screenshot below.
After inputting the required details, I clicked on order.
Step 7:-
When I did, a payment page pops up, by clicking on pay, I will be requested to put in my details, and when the transaction is completed, and Houbi Global have confirmed that the person have actually recieved the money I sent, they will release the BTC I bought to me.
Conclusion
Cryptocurrency and it's trading is growing day to day, and by the way it's going, it has come to stay and it's too late for government policies to inhibit it's growth. Although Cryptocurrencies have made people reach, we will be making so much mistake if we fail to also attribute it's growth to the availability of an organized market for it. As of today, the total number of exchanges listed in Coinmarketcap is 380, and I believe this number will increase with time.
So what do we do as investors? All we need to do is to invest and trade cryptocurrency, but before we do so, we must make sure that we carry out both technical and fundamental analysis before engage in a trade so as to ensure that we are make the right financial decisions regarding every trade at all time.
Thank you so much Professor @lenonmc21 for the amazing lesson. I truly learnt a lot from it.
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