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What is cryptocurrency trading?

Trading Guides

6 set 2022

What is a cryptocurrency?

A cryptocurrency is a digital currency (non-physical) that can be used to make transactions. The virtual currency uses cryptography instead of a centralized authority to secure transactions. Cryptocurrency trading is executed via dedicated exchanges and brokers.

The birth of cryptocurrency trading?

Although Bitcoin (BTCUSD) was the first mainstream cryptocurrency, David Cahum, an American cryptographer, looked to develop eCash in 1983. He proposed a token currency that could be transferred privately, securely and digitally between parties. The transactions would be encrypted and untraceable.

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Figure 1 Bitcoin

How can I invest in cryptocurrency?

Cryptocurrencies and cryptocurrency trading have come a long way since then. Now it is possible to quickly buy and sell various cryptocurrencies. This is either on a dedicated exchange or through a spread betting or CFD broker.

What are the top cryptos available to trade?

Deciding which cryptocurrencies to trade can be a minefield. As of the 20^{th of} July 2022, there are over 20,000 cryptocurrencies in circulation.

However, there are some major considerations to make when deciding which product to trade.

Liquidity

You will often hear traders talk about liquidity. As a rule, the more popular and traded the product, the more ‘liquid’ it will be. This means that there will be more traders participating, leaving orders in the market to fill their positions. This high liquidity means that it is easier for a trader like you to buy or sell an asset at their preferred price.

The high liquidity also results in a lower spread, reducing the difference between the price you can buy (offer) and sell (bid) an asset. This reduces your cost to trade.

In cryptocurrency trading the newer and less known cryptocurrencies are like AIM listed companies of the FTSE exchange. There are fewer participants, and the spreads tend to be much larger than their FTSE100 peers.

Top 5 cryptocurrencies

It is difficult to list the top 5 most popular cryptocurrencies as this can vary depending on breaking news or the volume of chat on forums like Reddit.

According to data from ConMarketCap.com, as of the 25^th of August 2022 the largest cryptocurrencies by market capitalisation are:

Bitcoin Market Cap $413 billion
Ethereum Market Cap $208 billion
Tether Market Cap $67 billion
USD Coin (USDC) Market Cap $52 billion
Binance Coin Market Cap $49 billion

Can I trade cryptocurrencies through Pepperstone?

Yes. Cryptocurrency trading is available at Pepperstone. Pepperstone currently offers twenty different contracts to give you exposure within the cryptocurrency market.

Most of these products are available to trade 24 hours a day, 7 days a week. For a full list of cryptocurrency products, click here.

*It should be noted that higher leverage can work for you as well as against you. For more information, please click on the link.

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