CryptoCurrency Trading. A Beginner's Guide [CryptoTrading Series] - Ep.2 - Exchanges and Traps

miserableoracle (53)in #steemit • 8 years ago

Hello Dear Steemians,

It's me, @MiserableOracle, up with the second article in the series"CryptoTrading Series". Today we are going to look at some basic words commonly used among the investors and traders.

Ok. So first we need to understand what is Crypto, or shall I say digital, Currency Exchange.

Image Credit + Edited by ME

Crypto Currency Exchanges

Crypto currency exchanges are basically businesses, allowing their customers to trade crypto currencies. You can buy, sell or exchange your crypto currency with any other crypto currency or money. For example, Poloniex. A well known crypto currency exchange which allows us to trade bitcoin and other crypto currencies. These exchanges provide you with all the details you need about the current market trends about any crypto currencies. You see, trading in crypto currencies has many advantages, among them, one is that trading fees is MUCH lower than those exchanges of traditional stock markets or commodities.

According to various sources, below are a few well known crypto currency exchanges:

1. Kraken - (It's a tie) - Founded in 2011, this is one of most famous exchange of all time. Beginner User Friendly as well, and trust valuation is shot through the roof, man.

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1. CoinBase - This is a beginner friendly exchange where you can buy your first slot of crypto currency through the payment from credit or debit card. Also the trust value is much higher among the investors and trading regarding this exchange.

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2. Poloniex - This is another popular exchange, but less beginner friendly. They do not accept credit card to buy your first slot. Instead, you have to use your crypto currency wallet to transfer the funds into Poloniex account and then you can trade using that. I suppose it's not that big of a problem. And customer trust valuation is also high with this exchange.

Image Credit + Edit -> Me

Poloniex, if you're watching this, please don't kill me if I made any mistakes here, I'm just showing my research. We're cool, right !?

3. BTC-e (A Tie According to me)

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3. LocalBitcoins - This exchange is again beginner friendly and supports buying your first slot of bitcoin using cash transfer. Customer trust valuation - High.

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4. VirWox - To be honest, I didn't hear about this exchange up until researching for this article. It's not that beginner friendly as compared to CoinBase and LocalBitcoins, but after looking at various crypto currency exchanges, you'll find it easy. You can buy crypto currencies using paypal + credit or debit cards + OKPay. But customer trust valuation is little less compared to all of above.

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5. CEX.IO- Again, a new exchange for me. But the customer trust value and reputation are high, also they support cards to make your purchases or you can opt in for bank transfers as well, so that's a plus.

Image Credit + Edit -> ME

You can click on any of the above exchanges to visit their website, to check out and get a basic feel about how it all works. Probably looking at weird charts and ginormous buy sell orders, you'll come back here with a shock. But don't worry, once you start understanding, it's not that hard to keep up with what's going on with this world, moving at light speed. Here's a complete list of crypto currency exchanges from where I got my basic idea about them:

Best Bitcoin Exchanges

Bitcoin Exchange Guide

Crypto Currency Bubbles

Yup, you guessed it quite right from the name.

Image Credit + Edit -> ME

No, No, Not that bubbles.

Here's the basic understanding, when people start up buying one crypto currency, it's price value starts rising, giving a notation to the investors that the currency's trending.

And when people start selling that crypto currency, the price starts to fall down.

People Start Buying -> Demand Increasing -> Price Rises

People Start Selling -> Demand Decreases -> Price takes a fall

In normal economics, this is called Demand Relationship. There's also Supply Relationship.

Higher the price -> Supply is likely to be higher

Lower the price -> Suppliers will reduce the supply as well

Now, if what I understood is correct, then in case of crypto currency, it should be happening something like this:

If demand is high, and supply is limited -> prices are likely to be higher.

If demand is high, and supply is high as well -> prices are likely to be high, but not as high as it could be with less supply

If demand is low -> regardless of supply it surely means that prices are falling down.

Image Credit + Edit -> ME

Market bubble is a phenomenon which takes place when the traders start buying specific crypto currency and eventually driving the price well above the actual valuation of that crypto currency. The biggest example is Bitcoin bubble which took place somewhere in 2015 taking bitcoin value to well above 1000$ and preparing for the biggest crash landing reaching as low as 200$. Below image explains it clearly why and how bubble takes place.

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But there is another similar scheme, which sometimes, looks like a bubble, called "Pump and Dump" scheme. Let's learn about that as well.

Pump and Dump Scheme

Big players are familiar with this scheme as they've familiarized themselves with their coffee.

In this scheme, a certain investor buys a large pile of crypto currencies at the lowest price (pumping) to make sure they have a healthy profit at the end of the game. This pile of crypto currency transaction is enough to let other traders think that crypto currency is trending and we should buy up. And here comes the catch, when the price reaches at a certain level, our player sells (dumping) all his crypto currencies and shows off a sinister laugh, he's been preparing for ages.

So, eventually there are "bear" traps as well as "bull" traps.

Bear trap is - When the investor convince a large group of traders to sell their share of crypto currency, leading the price fall, and when the prices reach low enough, he buys up a large amount of pile for himself, as the beginning of another trap.

Bull trap is - When the investor buys a large pile of crypto currency leading other traders into thinking that this might be their glorious night they've been waiting for, and once the prices reach high enough, DUMP EM' ALL..!!

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Basically, this is a market manipulation technique based on spreading a false information or rumor, which - as you guessed it - is illegal.

So now you have a little more knowledge about trading in crypto currency markets. I'll be posting more information as I learn along the way. So stay tuned.