Once we have acquired our first virtual currency, usually Bitcoin, the next step is the configuration of our cryptocurrency portfolio with the aim of diversifying our investment portfolio, in order to achieve this we will employ the trading with cryptocurrencies technique.
What is trading with cryptocurrencies?
Cryptocurrency trading consists of the study of markets with different techniques in order to determine the future value of an asset and make the corresponding purchases and sales to obtain benefits.
The most common way to trade is through an Exchange (a cryptocurrency exchange platform), because not only can we make purchases and sales, but they offer historical quotation data, which we can use to make our analysis with the finality of determining which asset is the most appropriate for your investment. Later we will detail the best and most reliable exchanges that can be used to trade with cryptocurrencies.
In the trading with cryptocurrencies there are 3 different options of exchange:
- Fiat (dollar-euro ..) for a cryptocurrency.
- Change from one cryptocurrency to another.
- Change of a cryptocurrency for Fiat money.
What is a cryptocurrency exchange platform and what is it for?
A cryptocurrency exchange platform allows cryptocurrency holders to exchange (buy or sell) cryptocurrencies with other users.
The first steps to be able to trade with cryptocurrencies would be:
1. Own a cryptocurrency
2. Find an Exchange that allows trading with that cryptocurrency.
3. Register in the Exchange
4. Transfer your cryptocurrency from your wallet to the Exchange wallet
5. Trade your cryptocurrency for another or for fiat money.
6. Once you get to point 5, there are two options: withdraw the new cryptocurrency to a trusted wallet or keep repeating point 5 again and again.
Each currency needs a “pair” to be traded since we can not change the cryptocurrency that we want for another. It is the Exchange who decides which pair each cryptocurrency has. If, for example, we want to change Ethereum to Ripple, we need the Exchange to have the pair ETH / XRP.
Usually the currency that has the most pairs is Bitcoin, this is why many times we must use Bitcoin as a gateway to acquire another cryptocurrency. If we wanted to exchange Ether for Nem but the Exchange in which we are does not have that pair, we must first change Ether for Bitcoin and later Bitcoin to Nem.
The only problem of having to make two exchanges instead of one to acquire a cryptocurrency is the costs, since the Exchanges charge a fee (commission) for each cryptocurrencies change we make.
That is why sometimes the following happens:
We do a Bitcoin trading to acquire 1 Ethereum, but at the end of the transaction we see that in our Ethereum wallet we only have 0.99ETH. The reason for this is that the Exchange would be charging 0.01ETH for the operation.
What types of trading exchange platforms with cryptocurrencies exist?
When we do a trading with cryptocurrencies we can find 3 different ways, either a direct negotiation with another person, where the seller will set a price regardless of the value it has in the market. In this type of exchanges we must be sure of who we are trading with since we do not have the backup or security of an Exchange, although as a result you can get better prices.
Trading through an Exchange such and as we have already explained or a trade through a cryptocurrency sales platform in which said platform sets a price and is purchased directly without making any type of negotiations.
This last option would be the most expensive way to get cryptocurrencies since these platforms will always sell at a higher price than the market price to obtain a profit and additionally we must add the fees they charge when we want to take our cryptocurrencies from their platform.
What are the best cryptocurrencies trading exchange platforms?
It is a Cryptocurrency Exchange born in China in 2017 (they are currently moving to Malta) and, despite its young age, has become one of the most important cryptocurrency exchanges.
Binance has a large portfolio of cryptocurrencies and also has its own token: Binance Coin (BNB). This token can be traded as a cryptocurrency, but it also has another benefit which is that we can use it to pay the transactions fees made on this platform. With this we will no longer have the problem that we mentioned before about buying 1 ETH and finding 0.99ETH in the wallet.
According to recent report, Binance is working on the development of a decentralized Exchange, which could avoid the regulatory problems that occur in some countries.
Founded in the USA in 2014, Bittrex is one of the best-known exchange houses, with a great variety of cryptocurrencies.
Bill Shihara: Ex-manager of Security Engineering at Amazon, the security department of Blackberry and 11 years at Microsoft.
Richie Lai: Leader in the Amazon Information Security Team and 12 years in the security engineering department.
Rami Kawach: Senior Security Engineer at Amazon, director of engineering at Qualys, and 10 years at Microsoft.
This is part of the employment history of the co-founders of Bittrex.
An easy-to-use platform that also has a great experience in terms of security by its creators.
Kucoin is another recently created Exchange (it started operating in 2017), which has gained a good position.
This platform was created by a group of blockchain enthusiasts who, since 2011, have been researching this technology. This exchange house offers a great professional team, security and a wide portfolio of cryptocurrencies.
Founded in 2011 (San Francisco), Kraken is a secure Exchange and, although its variety of cryptocurrencies to trade is rather small (it does not reach 20), it has a feature that makes it a very interesting platform: it allows trading with Euros and withdrawing these Euros to our bank account applying only a small fee of a few cents.
Headquartered in the United States and created in 2014, this Exchange has a wide variety of cryptocurrencies and offers a secure environment, which is essential for this type of platform. Poloniex only allows crypto-to-crypto trading, there is no possibility of switching to Fiat money and the proccess of trading with cryptocurrencies is quite simple.
In addition to these exchanges there are others that we can highlight, such as: Huobi, Bitfinex, Okex, HitBitc … they have a large volume of transactions and undoubtedly the trust of its users.
Are you interested in cryptocurrency trading? Is your favorite Exchange not on this list or do you think there is something important that we can add to this guide? Comment or get in touch with us through our home page, we will be happy to add your proposals.