Often referred to as the new form of money, cryptocurrencies have had a massive boom in price and popularity in recent years. People started to trade cryptocurrencies in 2009 when Bitcoin appeared as the first of its kind, and since then, people have been using these digital assets for various purposes. On this Page:Contents [show] Aside from short and long-term investments, people also use cryptocurrencies as a means of exchange. It’s possible to buy goods and services with Bitcoin and other popular altcoins from such giant companies as Microsoft, Paypal, Starbucks, etc. However, unlike traditional money, cryptocurrencies exist only in digital form, and what is most important is that they are decentralized and remove the necessity of central banks. By many opinions, the decentralized essence of cryptocurrencies is what makes them so popular. And it’s fairly possible that in the future, cryptocurrencies can become as crucial as traditional money. While for beginners, it may seem quite a complicated and mystical topic that is accessible only for techies, we believe that cryptocurrencies should and can be understandable for ordinary people. This guide will give you a detailed overview of cryptocurrency, what it is designed for, how to trade cryptocurrencies, the best trading platforms for buying cryptocurrencies, and everything related to it. eToro - Our Recommended Crypto Platform OUR RATING CySEC, FCA and ASIC regulated US, UK and EU signups accepted Buy and Sell 20+ Cryptocurrency assets or trade CFDs Deposit via Debit or Credit card, Bank wire, Paypal, Skrill, Neteller Visit eToro 67% of retail investor accounts lose money when trading CFDs with this provider. Best Brokers for Cryptocurrency Trading Before we continue with explaining the merits of Bitcoin and other crypto coins, here is a list of the most reliable and well-designed cryptocurrency trading brokers. The list includes trading platforms recommended by both experienced and new traders in the crypto market: eToro Capital Libertex Plus500 Coinbase Binance AvaTrade Revolut CryptoRocket Changelly 1. eToro eToro is one of the best social trading platforms to use for cryptocurrency trading. It does not charge any trading fees other than small spreads for crypto trading. The platform offers good educational content and trading tools for beginners. eToro also has a strong regulatory system and it accepts multiple payment methods, including credit and debit cards, wire transfers, PayPal, and other e-wallets. The minimum deposit eToro requires to allow trading is $200. 2. Capital.com Capital.com is a relatively new CFD trading platform that stands out with its innovative approach to trading. It has an AI-powered trading platform and offers powerful tools for trading. The platform does not charge commissions but instead, it only charges the buy and ask spread. In terms of the range of assets, Capital.com offers a huge range of over 80 cryptocurrencies CFDs. The broker is regulated by FCA and allows different payment methods – credit/debit cards, bank transfer, e-wallets (excluding Paypal). The minimum deposit starts from $20 and varies for different accounts. 3. Libertex Libertex is one of the oldest trading platforms that provides cost-effective trading to its millions of users. This Russian-based broker enables users to trade over 50 cryptocurrencies through the MetaTrader 4 trading platform or its successor, the MetaTrader5. The minimum deposit to start trading on Libertex is $10. 4. Plus500 Plus500 is a good trading platform to start with for beginners. It offers low fees, an easy-to-use platform, and the account creation process is very simple and straightforward. The platform still lacks serious tools for more advanced traders and does not provide third-party trading platforms but if you are looking for a simple-to-use trading app, then Plus500 could be a great choice. To start trading on Plus500, you need to have a minimum deposit of $100. 5. Coinbase Coinbase is one of the largest and most famous cryptocurrency exchange platforms in the world. This US-based digital asset exchange is highly liquid and provides 25 cryptocurrencies to invest and trade on. While the fees may be higher on Coinbase, you do get access to a pure crypto exchange where you physically own digital coins and store the coins on Coinbase’s wallet. The exchange platform is very easy to use, and you can sign up for an account and buy cryptos within minutes. 6. Binance Binance is one of the best-known cryptocurrency platforms that stands out with extremely low trading fees and huge selection of over 150 cryptocurrencies. Binance charges a fee of 0.1% or lower for cryptocurrency transactions, which is lower than the majority of other exchanges that typically range between 0.2%-0.5%. Binance is also ideal for those who wish to make a one-time purchase with a credit or debit card. 7. AvaTrade AvaTrade is a strongly regulated and legit trading platform that provides a huge selection of trading platforms and trading tools. The broker, which was founded in 2006, is regulated by three tier-1 authorities and ranks as one of the best trading platforms of 2021 in terms of pricing. AvaTrade provides rich educational content, a well-designed mobile app, and an easy-to-use interface. 8. Revolut Revolut is a financial service platform that offers banking services as well as the trading of digital assets and stocks. Overall, you’ll get access to over 30 cryptocurrencies with relatively low fees. Additionally, the Revolut platform has a good mobile app that competes with Coinbase’s mobile app. And, unlike other crypto trading apps that require a long and complicated account creation process, it’s a very quick and easy process to register for an online account with Revolut. 9. Cryptorocket Though Cryptorocket is not as famous as Binance or Coinbase, it has a lot to offer its users. Founded in 2018, this platform supports trading of over 35 cryptocurrencies and requires just $10 of minimum deposit to allow trading on its platform. Cryptorcoker also shines with a high leverage ratio of a maximum of 100:1. 10. Changelly Changelly is a cryptocurrency trading platform that is best suited both for beginners and experienced traders – It has a standard account for new traders and a pro account for more advanced traders. So, if you are looking for the best instant cryptocurrency exchange platform, then Changelly might be the place of choice. Overall, Changelly allows trading over 170 cryptocurrencies and has good customer support and a great reputation in the crypto industry. To sum up this section of our guide, we have chosen these trading platforms to buy cryptocurrencies according to some criteria. First and foremost, they charge reasonable and low trading and non-trading fees based on the services they provide. The second crucial factor we paid attention to is reliability. These brokers have strong regulatory systems, so the safety of your trades is guaranteed. The vast majority of the platforms on our list also accept multiple payment methods to fund your account, including credit and debit card, wire transfer and e-wallets. Plus, the platforms that we have chosen provide a huge selection of crypto assets to trade. Finally, the platforms are well-designed for both beginning and experienced traders. They provide a vast selection of trading tools, offer educational resources, are simple to use, and enable you to trade cryptocurrencies quickly and easily. What are Cryptocurrencies? Pretty much similar to traditional money, a cryptocurrency is a means of exchange. It can be used for trading as well as to buy and sell goods or services. Still, there are some fundamental differences between traditional money and cryptocurrencies as a means of exchange. Unlike traditional money, cryptocurrencies are not ‘physical’ and thus can be printed; they exist only in digital form. Whereas traditional money is issued by the government or any other central authority, cryptocurrencies are decentralized. But before we get to know how they work, let’s firstly dive into the history to understand how this unique form of the digital asset is created. A Brief History of Cryptocurrencies When you think about cryptocurrencies, the first thing that will probably come to your mind is Bitcoin. Bitcoin is just the beginning, and even though it still remains the leader in the market, there are many other interesting crypto projects too. Many and many others emerge continually, while lots of them bring unique and breakthrough ideas into the field of Decentralized Finance. But how and why people came up with the idea of creating a decentralized market? To understand how cryptocurrencies appeared, let’s get an idea of how money works. Fiat money is defined as a means of exchange that is licensed by the government or central authority to be used as a payment for goods and services. It also exists in the digital form that makes the buy-and-sell processes much easier. When we want to buy something from a company that operates in another city or country, we usually use credit cards, wire transfers, or e-wallets to pay for these goods. One main problem with this kind of payment system is that all our money is centralized. To prevent double-spending or other forms of maliciousness, we trust the government to hold control over all our money. It means that all the transactions we make are controlled and verified by the central bank or other central authority. So, our bank acts as the third party between any two sides that make a fiat currency transaction. The second problem of fiat money, which is much more crucial for the creation of digital assets – is that central banks can control the supply and demand of money. And, even though the idea of decentralized money originated in the early 90s, the 2008 global financial crisis triggered this form of money. Decentralization mainly aimed to solve these two problems; here is why blockchain technology was imported. Firstly, there is no third party between seller and buyer, which means you can buy almost everything from everyone around the world without the permission of the government. And secondly, it prevents the intervention of central banks and thus, creates an equal economic system. While Bitcoin was the first successful cryptocurrency project, people started to think of having decentralized money earlier than that. Such terms as cryptography or cryptocurrency appeared much earlier than Bitcoin was created. Still, the first attempts to have a decentralized payment system did not gain any popularity. The first cryptographic system was created in 1983, called eCash. The first types of decentralized money were made by Wei Dai in 1998. Then in 2009, a man under the pseudonym Satoshi Nakamoto succeeded in creating the first cryptocurrency project – Bitcoin. Satoshi published in 2008 the technical description of Bitcoin, known as Bitcoin’s whitepaper. One fascinating thing is that Bitcoin’s code is open-source, which means that everyone can use it to create their own cryptocurrencies. At first, there was not too much trust in this project, as Bitcoin was a new project. Gradually, it gained much more prominence with more and more people investing in it. A bunch of new cryptocurrencies emerged and continue to be created even nowadays. All the other cryptos that are created after Bitcoin are combined under the term altcoins. It stands for alternative coins as the new currencies are alternatives to Bitcoin. Most of the new crypto projects are basically copies of Bitcoin or other cryptos. However, lots of others are unique, have their own blockchain, and offer some new technologies other than just being a means of exchange. One of those revolutionary projects is the Ethereum cryptocurrency project – the second-largest crypto at the moment. It was created by Russian-Canadian programmer Vitalik Buterin who first became known as the founder of Bitcoin Magazine and later, in 2015, launched the Ethereum project. Ethereum is not a cryptocurrency; it’s a platform with a native cryptocurrency called Ether. But, first and foremost, Ethereum is a platform for building decentralized apps, better known among techies as dApps. The next revolutionary thing that happened in cryptocurrency history and made it more practical in everyday use is the invention of stablecoins. They are intended to solve one of the greatest problems of cryptocurrencies – volatility. As Bitcoin, Ether, and other cryptocurrencies can lose or increase their value in a matter of minutes, they are not too practical in everyday life to use for buying and selling products. Stablecoins are a type of cryptocurrency that doesn’t increase or decrease in value and are always equal to the asset they are backed by. Stablecoins can be pegged by fiat currencies, commodities, other cryptocurrencies or belong to the other group called seigniorage style. The most famous stablecoins include Tether, Binance USD, USD Coin, Terra, etc. So, all the above-described are just some of the main functions of cryptocurrencies. There are lots of other different fields they can be used for – to buy mobile data, to buy hard disk space, and not only. And what is most essential – you can do all of these without the involvement of a third party. As long as they have entered into our daily life in such a fierce way, it’s crucial to know how cryptocurrencies work. So, let’s jump into the next section to find out what blockchain is and how cryptocurrencies use it to control coin ownership. How do Cryptocurrencies Work? Cryptocurrencies are a special form of digital money, as they aim to put control in the hands of the people and replace the traditional fiat currencies (US dollar, Euro, British Pounds, Japanese Yens, etc). Generally, when you make a transaction with Bitcoin or another blockchain-based cryptocurrency, it is encoded in a cryptographic code and registered on the blockchain. This means all your transactions are controlled or verified not by a single authority, which can be your bank, but by all the computers participating in the system. And this network of computers is called a blockchain, which is essentially a digital ledger. All the transactions made by users are registered on this ledger and are accessible for all of the computers. It means that you can see all the transactions that are happening; however, you cannot see who is making those transactions. This characteristic is the second core principle of blockchain – it’s transparent and anonymous. It allows everyone, even those who cannot have bank accounts, to transfer and receive cryptocurrency without the involvement of a third party. In other words, it’s a peer-to-peer transaction system. The Economy of Cryptocurrencies In general, some crypto analysts and investors believe that cryptocurrencies have the ability to change the global economy, especially in developing countries. These digital assets can improve the financial system and provide a better mechanism to transfer funds across the world. Further, the fact that it is not possible to print money nor control the supply of money is a major factor for the progress of cryptocurrencies. In terms of security, the decentralized nature of digital assets also helps to keep your transactions more secure and avoid double-spending. The process is controlled by the huge database of all the records stored on the ledger. Each computer participating in the ledger has a copy of these transactions and when someone tries to hack a copy of the blockchain, the system automatically compares the records with all the other copies of it. The transaction gets rejected by the system when it’s not verified by the majority of copies. But besides keeping the records of all the transactions, blockchain also needs constant updates in order to create new blocks and add them to the network. This process is controlled by a special consensus mechanism which can differ depending on the cryptocurrency. One of the most famous consensus mechanisms used by cryptocurrencies is called the Proof of Work protocol, which is used by Bitcoin and other coins to add new blocks to the blockchain. The process of adding a new block to the blockchain is called mining. Users who are responsible for adding that new block are called miners, and they get rewarded some portion of cryptocurrency every time they add a new block to the network. Cryptocurrency Mining Proof of Work (PoW) consensus mechanism is used by such famous cryptocurrency projects as Bitcoin and Litecoin to run their blockchain. It requires miners to show some proof of work so that they are able to add a new block and be rewarded for that service. However, this type of mining requires huge computing power and massive amounts of electricity to win in the long run. Miners should solve complicated puzzles to be rewarded with a new block. These puzzles are solved not literally by the miners but by their computers, so they need to run their computers 24/7 hours to be the first who will find the solution. This is one of the reasons why you see huge cryptocurrency farms and why some people like Elon Musk believe that Bitcoin is bad for the environment. In its turn, this requires huge computational power and special hardware to succeed. And most importantly, it consumes vast amounts of electricity, so mining processes usually are done in the areas where the electricity bill is relatively low. The second most famous cryptocurrency mining mechanism is called Proof of Stake. It requires miners to allocate a special amount of coins into the network to get the responsibility of adding a new block to the blockchain. However, this method requires that you must have coins in order to be able to mine more coins. Plus, it doesn’t boost crypto spending but rather encourages users to store cryptos via a process known as Staking. Another well-known consensus protocol is Proof of Space. In this case, you are required to allocate spare hard disk space into the network to be rewarded with new coins. What people do to work with this mechanism is that they buy HDDs to have more space to allocate, and consequently, another competition emerges here. The more HDDs you have, the more coins you will get. As you may see, all these mining mechanisms are rather slow methods of mining cryptocurrencies. While in the case of Bitcoin, it’s even more difficult, as you must spend lots of money to get the special equipment, not to mention the electricity bill. So, lots of resources and time are needed to mine Bitcoins. So cryptocurrency mining might not be the best solution for the average Joe. Instead, a more simple and quicker method of making money with cryptocurrencies is investing in them or trading cryptos. Cryptocurrencies are highly volatile, so there is a huge possibility of making a profit from their price fluctuations. To be sincere, it involves high risks, but these risks can be reduced if you invest in them responsibly. Buying Cryptocurrencies Buying cryptocurrencies is a very simple and quick process. All you need to do is to decide what coin or coins you want to invest in or trade and then pick a broker platform that supports these cryptos. While this process is mainly a combination of technical steps, there is lots of research to do before it. This includes the technical and market analyses of the cryptocurrency you want to trade, as well as a comparison of online broker platforms to find out what is the most suitable platform for you. To help you buy cryptocurrencies in the most simple way, in our guide, we have collected all the information you will need during the process. It includes trading platforms, the best cryptocurrencies to invest in, some other important tips regarding how and when to buy cryptocurrencies, when to sell your coins, how to store them, etc. Buying Bitcoin People buy Bitcoin for various purposes. First of all, it’s the leading and one of the most well-established cryptocurrencies in the world. Other reasons to buy Bitcoin are to use it as a means of exchange, to speculate on its price fluctuations, or to swap it with other coins. As Bitcoin is the most famous cryptocurrency, several trading platforms support it, so you need to do a lot of research to find the broker with the most competitive fees and a wider selection of trading tools. Buying Ethereum Ethereum is the second-largest cryptocurrency in terms of market capitalization. It’s not only famous for just being a means of exchange but as the first platform for building decentralized apps. People buy Ethereum not only for trading but also to use it as a gas to deploy smart contracts when they build a decentralized app through Ethereum’s coding language. The cryptocurrency is supported by various platforms, so do careful research before you decide where to buy Ethereum. Buying Dogecoin Dogecoin belongs to the group of so-called meme cryptocurrencies that are created just for fun. Dogecoin itself was created in almost 2 hours to break the seriousness existing in the cryptocurrency market. In 2021, Dogecoin became one of the hottest cryptocurrencies, after it was promoted by entrepreneurs and celebrities, including also Tesla CEO Elon Musk. Those with low capital can take advantage of the coin’s low prices and buy Dogecoin now at $0.25. Buying Libra Libra coin is intended to be the digital cryptocurrency of the blockchain-based payment system Diem launched by American giant company Facebook Inc. The coin is not released yet, but you can buy it on some exchanges. The best platform to buy Libra outside the US is Libra Method. While these are the most popular cryptocurrencies, there are several other coins that can be an excellent short-term or long-term investment. To get a detailed understanding of how to trade cryptocurrencies, visit our guide, where you can find all the necessary information from selecting a broker to setting a buy order. The Price of Cryptocurrencies Like any other financial instrument, there are diverse factors influencing cryptocurrency prices. The most important factor that affects it is the supply and demand. In other words, how popular and trustworthy it is among society. If there is a limited number of coins, and it has a high demand in the population, the price will seemingly rise. For example, Bitcoin has a limited supply – only 21 million coins can be mined, 18 million of which are already circulating. There is a high demand in the market for Bitcoin, but it becomes harder and harder to mine it. This result is that Bitcoin’s price increases. The second factor that can have a crucial role in determining the price of cryptocurrency is a scandal related to it that can harm its reputation as well as the regulatory development towards digital assets. One example is the 2021 cryptocurrency market crisis, during which Bitcoins significantly lost their value, while altcoins also suffered from it. The problem was that the Tesla car-producing company announced that it wouldn’t accept transactions with Bitcoin as its mining damages the environment. This was followed by the Chinese bank expanding the financial bans on cryptocurrencies. These two factors aroused panic among BTC and other cryptocurrency holders, who started to sell them. Consequently, the prices dropped. When exchange platforms list a particular cryptocurrency on their platform, this also affects the price of cryptocurrency positively. Finally, another factor is the competition in the market. When there are two or more cryptocurrency projects with the same objectives (like Bitcoin and Litecoin, for example), people will invest either in the first one or in the second one. So, the demand will be split. The Legality of Cryptocurrencies Presently, the legality of cryptocurrencies varies from country to country. While in some territories, it is declared as wholly legal, in other countries, it’s partially accepted, while in many of them, it’s completely illegal. For example, in some countries, cryptocurrency trading is considered legal; however, it’s not accepted as a payment tool. Several countries completely ban using, buying, or holding such digital assets. Still, almost in all the developed countries, including in the US, cryptocurrencies are legal. In one of their 2013 statements, the United States Department of Treasury defined bitcoin as an example of a decentralized virtual currency. In a 2015 report, Commodity Futures Trading Commission classified virtual currencies as commodities and published a quick guide on how they can be purchased and why they are considered commodities. The topic was touched upon by a federal judge too when US District Judge Alison Nathan classified it as money “within the plain meaning of that term”. Taxation of Cryptocurrencies As of 2021, the Internal Revenue Service of the United States government applies taxes for cryptocurrency transactions. The federal body, which defines cryptocurrency as a virtual currency, considers it as a property. Hence, the same tax principles which are applied for property transactions apply to transactions with virtual currencies too. The taxes differ depending on the capital gains or losses when you trade cryptocurrencies. The tax rates also depend on the amount of time you hold your cryptos. If you hold your virtual currencies for less than a year, it is classified as a short-term capital gain. Consequently, if there is more than a year between the buy and sell processes of your virtual currency, the capital is classified as a long-term gain. You can find more information about the taxes on virtual currencies in the section of “Frequently asked questions” of the Internal Revenue Service. Choosing a Cryptocurrency Broker As we mentioned previously, there are several cryptocurrency exchange platforms and online brokers today, which makes it harder to select the platform that suits you best. While all these platforms do the same thing – cryptocurrency trading – they differ in many factors, including trading and non-trading fees, tools they offer, regulations, customer support, etc. The factors you need to consider before the final decisions are your budget and intentions. If you have a low budget to start cryptocurrency trading, you had better choose platforms with competitive fees. Some brokers charge commission fees; others make money from non-trading fees, including account fees, management fees, etc. eToro is one of the best platforms in terms of fee policy. It charges neither commissions nor account fees but has only small spreads for cryptocurrencies. eToro is also great in terms of educational content and social trading tools if you are a beginner in trading. Among its fascinating social trading tools is CopyTrader, which allows you to follow expert traders and copy their trades automatically if you don’t have too much time for market research. In that matter, CopyTrader and other similar tools are completely free on eToro. Another thing to consider when you select a brokerage platform is how you want to trade. If you have plans for short-term trading, choose a platform that provides all the necessary tools and research resources. Here you should also take into account what type of commissions the platform charges. If you are making a long-term investment, pay attention if there are any account fees, or inactivity fees, etc. What to Consider When Choosing a Cryptocurrency Broker Here are all the factors that you should take into account to find the most appropriate cryptocurrency platform for you. Trading fees Non-trading fees (such as account fees, inactivity fees, etc.) Minimum deposit Trading tools Research resources Regulations Educational content Cryptocurrency selection Customer support Payment methods Easily operable interface Finding a Crypto Wallet – How to Store Your Crypto Funds Cryptocurrencies are a digital form of money, however, you still need to find a digital wallet in order to store your crypto funds. There are basically free types of cryptocurrency wallets – exchange, hardware, and software. Exchange Wallet When you purchase Bitcoin or altcoins on a cryptocurrency exchange platform, it is usually stored on your account. This is your exchange wallet. One of the widespread mistakes that people make is keeping their coins on the exchange wallet. If you intend to do short-term trading, it’s okay to keep your coins on it, as you will often go through these buy and sell processes. Hardware/Software Wallet In the case you make a long-term investment and you need to store your coins for a long time, it’s strongly recommended that you transfer your coins into a personal hardware wallet. Personal wallets can be of two kinds – hardware and software. A hardware wallet is an external device that you buy and store your cryptos offline. Hardware wallets are considered the most reliable way of storing your coins. In contrast, a software wallet is an application that you can install on your device. Below are some cryptocurrency wallets for safe storing your coins. Bitcoin Wallet Bitcoin Wallet is a safe way of storing your BTC. There are different ways of creating your bitcoin wallet and installing it on your phone or computer, just as there are different hardware devices to keep your bitcoin. These wallets allow you to see how much bitcoin you own and allow you to use it for different purposes. Ethereum Wallet Whether you want to buy Ethereum for smart contracts or for long-term investment, you will need an Ethereum wallet to store it. There are several options to open an Ethereum wallet. You can find the best methods of creating it on our guide dedicated to Ethereum wallets. Ripple Wallet Ripple is a well-established cryptocurrency that has already revolutionized fintech. It’s one of the best cryptocurrencies to own nowadays. Again, like in the case of Ethereum and Bitcoins, to store your XRP, you will need a Ripple Wallet. Ripple Wallet allows you to use your XRP in a safer way – to send, receive, trade it, etc. Litecoin Wallet Litecoin emerged as a fork of Bitcoin in 2011 and was initially introduced just as an experiment. Now it’s one of the most popular cryptocurrencies with millions of users around the world. You can choose among different versions how to create your Litecoin Wallet and make your Litecoin ownership easy. Pros and Cons of Cryptocurrency Trading Here are some advantages and disadvantages of cryptocurrency trading compared to other types of asset trading. Cryptocurrency Trading vs. Stock Trading Genuinely, all types of investments involve some risk. But if we compare risks between different assets, cryptocurrency is a riskier investment as this asset is relatively new and volatile. The giant companies, such as Facebook, Apple, Microsoft, Tesla, have more trust in society than cryptocurrencies, so buying their stocks is less risky. Another advantage of stocks over cryptocurrencies is that some stocks pay dividends to their shareholders. It means that you can buy stocks of a company and quarterly or annually be rewarded with some earnings for just holding these stocks. In contrast to stocks, cryptocurrencies are easier to buy, as you can always buy a small quantity of crypto. However, in the case of stocks, not all platforms allow you to buy fractional shares, in other words, to get less than one share of a company. One big advantage in cryptocurrency trading is that they have high volatility, so it’s easier to gain capital when trading cryptocurrencies in a short period. Cryptocurrency Trading vs. Forex Trading Comparing these two assets, again, we can mention that foreign exchange is more reliable. After all, foreign currencies are issued by governments, and there is less possibility that they will crash in the future. Cryptocurrencies are less stable, and they can be banned in a particular state or just fail the project. Two other advantages of foreign exchange trading are that it has the largest trading volume, and it’s easier to predict their future. It’s easier to make a diversified portfolio in forex trading, while in cryptocurrencies, it’s difficult as the market can be driven by Bitcoin drop and increase. However, cryptocurrency trading has its powerful advantages too. Their volatility helps you make high profits from trading, and what is most important, the fees applied to cryptocurrency trading are usually lower. Cryptocurrency Trading vs. Commodities Trading Commodity trading includes trading raw materials or the primary products of the economic sector. Commodities can be of two kinds – hard and soft. Soft commodities are agricultural products or livestock, including corn, wheat, sugar, cocoa, etc. Hard commodities include natural resources that can be mined, for example, gold, silver, oil, and so on. In fact, cryptocurrencies are also classified as digital commodities under the Commodity Exchange Act. In any case, there are some differences between common commodities and digital commodities. The commodity is one of the oldest tradable assets; hence it’s more reliable. Another difference is commodity trading requires much more research than cryptocurrency trading actually involves. How to Responsibly Invest in the Crypto Market Here are some tips that will help you to invest in cryptocurrencies responsibly. First and foremost, be very careful with your money. Don’t put your capital at risk if you will need it in the future. Cryptocurrency trading involves high risks, so you should be ready to lose your money as well. Carefully pick cryptocurrencies you want to invest in or trade. Before making the final decision, do a lot of technical and market research to be sure about the perspective of that asset. You can find lots of educational content, brokerage platform reviews, cryptocurrency reviews on our platform. Diversification is a great tool in trading, in which you don’t invest all your capital in just one crypto but choose different cryptocurrencies. You had better choose the competing pairs. Besides this, develop a trading strategy. You can select one from diverse active or passive strategies or create your own strategy, but always plan how you will trade. Finally and most importantly, carefully research the trading platforms, consider all the advantages and trading tools they offer. Be sure if you can afford the trading and non-trading fees that the platform requires. In addition, choose a heavily regulated platform such as one of the platforms on our list. And last but not least, keep your coins secure and transfer them to a hardware or software wallet if you won’t use them for a long time. Automated Trading and Bitcoin Robots Automated trading, also known as an algorithmic trading system, is usually an application that follows a defined set of instructions to make trades. Automated trading platforms are usually developed in a way to make profits so frequently and quickly that humans cannot do. Bitcoin robot is a type of automated trading platform that uses special algorithms to research the Bitcoin market and place orders in such a way that brings consistent profit. Bitcoin robots are more effective than humans in the sense that they can do quick market research and analyze all the available information just in seconds. However, not all Bitcoin robots are reliable; some of them are scams that are made to steal people’s money. You can find the best Bitcoin robots of 2021 in our guide and get a step-by-step explanation on how to use them. Conclusion In conclusion, cryptocurrency is a digital currency that has all the potential to revolutionize the way we buy and sell products and services. The greatest advantage of cryptocurrencies is that they are decentralized. They are not controlled by a single authority but use reliable blockchain networks to approve or reject transactions. The high volatility of cryptocurrencies makes them often profitable assets if you invest reasonably. To invest in cryptocurrencies, you need to select a reputable brokerage platform such as eToro, sign up for an account and start trading. In our guide, we presented all the necessary information you need to take into account before investing in cryptocurrency. eToro - Our Recommended Crypto Platform OUR RATING CySEC, FCA and ASIC regulated US, UK and EU signups accepted Buy and Sell 20+ Cryptocurrency assets or trade CFDs Deposit via Debit or Credit card, Bank wire, Paypal, Skrill, Neteller Visit eToro 67% of retail investor accounts lose money when trading CFDs with this provider. FAQ What are cryptocurrencies? Cryptocurrency is a means of exchange, like traditional money. But unlike the latter, it cannot be printed and exists only in the digital form. Notably, two main characteristics that make cryptocurrency distinctive from traditional money are decentralization and transparency. How many cryptocurrencies are there in the market? The cryptocurrency market is very flexible in the sense that there are more and more crypto projects launching over time. Right now, there are more than 4000 cryptocurrencies in existence, but this number is growing rapidly. While most of them are copies of other cryptocurrencies and have little trading volume, some of them are unique and introduce lots of revolutionary ideas into the field. How do cryptocurrencies work? Cryptocurrencies are decentralized, which means that they are not controlled by a central body such as your bank or other authority. Cryptocurrencies leverage a special technology called blockchain to secure coin ownership records and to issue new coins. All the transactions with cryptos are verified by blockchain; and, there is no third party involved in the process. What are the best cryptocurrencies to invest in? There are thousands of cryptocurrencies in the market which makes it rather complicated to select the ones that are worth investing in. Before picking crypto to invest in, it’s recommended to make your own market and technical analysis of that cryptocurrency. Market analysis requires taking a look at its price history and predictions. While in the case of technical analyses, you must research the project, see if it has room to grow, how it can be established in the field, what the project’s long-term goals are, and if it can bring any new ideas in the field of DeFi. Currently, some good cryptocurrencies to invest in include Bitcoin, Terra LUNA, Dent, Filecoin, Uniswap, Chia coin, Polkadot, etc. What is cryptocurrency mining? Apart from investing in cryptocurrency, there is another way of getting it – mining. Mining is a more difficult process, and it requires special equipment and more time. To do that, you need to use a certain electronic device to do some work for the blockchain, and in return, you get rewarded with new coins. People who are engaged with this process are called miners. One of the most popular crypto mining mechanisms is the Proof of Work protocol used by Bitcoin, Litecoin, and many other cryptos. PoW requires you to use a great amount of power and electricity to run your computer and solve hard equations to get rewarded with a new block. There are several other mining protocols, including Proof of Stake, Proof of Importance, Proof of Space, etc. What is the best way to invest in cryptocurrencies? The best way to invest in cryptocurrencies is to find a trusted and easy-to-use crypto exchange platform, register for an online account, and start buying cryptocurrencies. The crucial tip is to invest responsibly and not to put all the money that you will need in the future at risk. Another important tip to use in trading is to make your portfolio diversified. That is to say, not to invest all your capital in just one asset, but buy different cryptocurrencies so that when one of them loses its value, you can profit from the other. How to store cryptocurrencies? There are two ways to store your coins. Firstly, you can keep them on your broker or exchange wallet. This is recommended when you buy them for short-trading or you do not own a large number of digital coins. But never keep them in your exchange wallet when you invest with long-term intentions. Trading platforms are more vulnerable to hackers, so there is some risk of losing your money. Instead, you can store your coins in a personal hardware wallet, also known as a cold wallet. Personal wallets, in their turn, are of two kinds – hardware and software. A hardware wallet is a physical device that you can buy and use to store your coins online. This is the safest way of keeping your crypto. A software wallet is an app that you can download and install on your computer or mobile phone and transfer your coins on it. How is the price of cryptocurrencies determined? Like any other asset, supply and demand are one of the big factors that determine the value of any tradable asset. A cryptocurrency price will rise if there is more demand in public for that digital asset and vice versa – if a significant amount of people sell it, the prices will drop. So, when a particular cryptocurrency is accepted by a giant company or government or listed on a large crypto exchange, this makes it an attractive asset. The demand for this crypto increases, and thus the value increases too. In contrast, scandals around that cryptocurrency will decrease its value. For example, when electric car-producing company Tesla announced that it would suspend bitcoin because its mining damages the environment, investors panicked, and several people sold their cryptos. This resulted in a BTC price drop of almost 50%. Other factors include the scarcity and accessibility of the crypto asset, its regulation, PR, etc. What are the safest cryptocurrencies to invest in? The safest cryptocurrencies include those crypto projects which have a successful project, established strong goals for the future, and are popular among investors. These cryptocurrencies are already well-established, and they will hardly crash in the future. Investing your money in such a project, you can be almost sure you won’t lose it in the long term. At the time of writing, Bitcoin, Ethereum, Litecoin, Polkadot, Chainlink are among the safest cryptocurrencies. How do cryptocurrencies make money/turn a profit? The mechanism that is used to profit from cryptocurrencies is the same as in the case of other tradable assets. Cryptocurrencies are very volatile, so you can buy them for short-term trading and make a profit from price fluctuations. Meanwhile, well-established cryptocurrencies can be an excellent long-term investment. You can buy and hold them until their value increases. When the prices rise, you can sell them and make money. For the company that issues the coin – the process is similar to an Initial Public Offering (IPO) in stocks. Essentially, the company or the team behind the coin raises funds by issuing a digital asset that provides some benefits for users of the coin. What are the most popular cryptocurrencies in the market as of 2021? In terms of market capitalization and trading volume, the most popular cryptocurrencies include Bitcoin, Ethereum, Tether, Chainlink, Uniswap, Solana, Dogecoin, Bitcoin Cash, XRP, Cardano, Binance USD, etc. Where can I buy cryptocurrencies? You can buy cryptocurrencies on online brokerage platforms or crypto exchange platforms. In some cases, you cannot get all the cryptos with fiat currency. Firstly, you need to buy a stablecoin, such as Tether, or another crypto, such as BTC or ETH, and then swap it with the cryptos you want to buy. Some of the most recommended platforms to buy cryptocurrencies include eToro, Binance, Coinbase, Changelly, Capital.com, etc. What are the best brokers for cryptocurrency trading? Considering trading and non-trading fees that brokers charge, and some other functions too, our research indicates that the best platforms to buy cryptocurrencies are eToro, Capital.com, Plus500, Libertex, Cryptorocket, AvaTrade, and Revolut. Is cryptocurrency trading legal? The legality of cryptocurrencies depends on the country or the territory. While in most of the developed countries trading bitcoin is illegal, there are some countries that declared it illegal either for trading or as a means of exchange. In Bolivia, Morocco, Egypt, Algeria, it’s illegal. In Indonesia, Vietnam, and other countries around the world – trading is legal, but it’s illegal as a payment method. In countries like China, Russia, Taiwan, Qatar, Canada, it’s legal, but there is a banking ban. In the US, however, cryptocurrencies are legal. Are cryptocurrencies regulated? Cryptocurrency trading platforms can be regulated by tier-1 authorities or so, but it’s impossible to regulate cryptocurrencies or the blockchain they are based on. Cryptocurrencies are decentralized in nature, so there is no central body to have control over these processes. All the transactions get verified or rejected by the technology – blockchain. Nonetheless, cryptocurrency exchanges are regulated in the same way as other financial firms and entities are regulated and authorized. These exchanges fall under the regulatory framework of the Bank Secrecy Act (BSA). Are crypto trades anonymous? When we make transactions with cryptocurrencies, it’s anonymous. It’s peer-to-peer, there is no third party, and everything is secured by blockchain. But when it comes to cryptocurrency trading, it’s a bit of a different process. You buy and sell coins on crypto exchanges which mainly require you not only to register for an online account but also to verify it with a copy of your passport. So, in this case, you make trades on centralized exchanges that are controlled by a single party. However, there are also some exchanges that don’t require you to go through the KYC process, so you can trade on them anonymously. One such platform is Changelly.