Crypto trading and exchanges have taken on a new life since bitcoin’s market debut in 2009. Since then, the industry has transformed globally as more and more people seek to discover how they can get involved with cryptocurrencies.
Crypto trading is different from traditional forms of currency exchange in that it is decentralised and borderless – meaning you don’t need an intermediary such as a bank to transfer your money into crypto, nor do you need one when you’re ready to cash out.
Australia has some of the world’s most familiar brands in the crypto space, like Binance, CoinBase and Cointree. You can trade cryptocurrencies with Saxo Bank.
House trading
House trading is a popular way of holding multiple coins – similar to how you might hold shares in multiple companies. In this case, however, you are exchanging one coin for another. For example, if NEO has grown in value against BTC, but Litecoin has not, it may be ideal to sell your NEO (which is now worth more in BTC) and put the money into LTC, which isn’t doing as well at present. While there’s the option of selling your altcoins for fiat rather than house trading, doing the former is more beneficial.
Firstly, crypto can rise exponentially, which means that even small percentage gains can result in huge increases over time. Secondly, by holding, you’re essentially ensuring that you’re buying and holding coins that may become the next bitcoin; and thirdly, house trading extends your exposure to other coins which you might not otherwise be able to buy.
However, there are also potential risks with this strategy – for instance, it’s possible that both your altcoin choices (NEO and Litecoin) might drop in value against BTC, like what happened with Ripple earlier in 2018. If this were the case, you would incur a loss on the trade because you’d be selling them for less than what they were worth before.
Margin trading
Margin trading is essentially short-selling – borrowing coins from an exchange using your existing coins as collateral while promising to repay the loan with interest. The significant benefit of margin trading is that you’re able to access altcoins very cheaply because there’s little risk involved because the funds are backed by real coins that form part of your collateral. However, if successful, your profits can also be more significant than you would otherwise expect.
Futures trading
Futures trading is another form of short-selling but instead uses future contracts for difference (or ‘CFDs’ as they are more commonly known). This method allows you to take advantage of both rising and falling markets. Essentially, you’re speculating on which way the price of a coin will go – whether it will rise or fall – by ‘betting’ on this outcome.
If your prediction is correct, then there’s no real difference between this strategy and regular margin trading; however, if it isn’t then, you could lose more than just the initial investment (unlike regular margin trading). Whether futures trading is worth pursuing also depends upon how much risk you’re willing to accept and what your usual trading patterns are.
For instance, if you typically hold your coins for an extended period and only trade occasionally, then it might be worth using this strategy over others; whereas, if you’re usually looking to buy low and sell high quickly, margin trading is probably the better choice.
ICOs
So-called ICOs are an increasingly popular way to get involved with altcoins early. You buy coins when they are in their ICO stage – before the currency is listed on exchanges and has begun trading for real. It often works quite well because it’s possible to see which coins have done well during their ICO by looking at their market cap relative to other similar currencies.
You can then trade those that have done best for those that haven’t yet been listed on an exchange, which will likely lead to profits as demand increases once they’re available on an exchange. However, ICOs also carry risks – like the fact that some might not deliver what was promised or even be a scam designed to collect money from naive investors.