Cryptocurrency margin exchanges. Bitcoins and altcoins - margin trading for beginners
How to make money in the cryptocurrency market with a small deposit? The answer is simple - use cryptocurrencies with leverage and multiply your profit by 5!!
In this article, we will talk about what cryptocurrency margin trading is, analyze all its pros and cons, and also get acquainted with exchanges and brokers where you can trade cryptocurrencies with leverage.
What is margin trading and leveraged cryptocurrencies
Leverage is borrowed funds that exchanges and brokers provide to their clients for transactions in the financial market. In simple words– add to the transactions of traders their own equity, thanks to which the latter get the opportunity to significantly increase the volume of their trading operations and, accordingly, the amount of profit.
The need to use leverage is usually associated with the fact that many traders enter the financial market with small deposits, which are not quite enough to make deals and receive the expected percentage of income.
Margin trading instruments have long been successfully practiced in the stock, commodity and currency markets. And recently, leveraged cryptocurrencies have begun to appear, which greatly expands the opportunities for trading in the digital money market. After all, leverage gives traders the opportunity to use much more funds in trading than they actually have!
An example of trading cryptocurrencies with leverage
In order to correctly understand how it works, we will give examples of trading cryptocurrencies with and without leverage.
So, let's imagine that you have a deposit of $200 and decide to buy Ripple digital coins for the entire amount of funds. The current market price of 1 Ripple coin is $0.181369.
If you are trading without leverage– then, using your $200, you could buy 1102 Ripple coins.
Now, let's imagine that the price of Ripple has risen to $0.28000 per coin. By selling your 1102 Ripple coins back at the current price, you will receive $308.56 for them (of which $200 is the amount of the initial investment, and $108.56 is your profit).
If you are using leverage (1:5)- then the size of your transaction will no longer be $200, but $1000, since the leverage of 1:5 implies multiplying the volume of the trading operation by 5. In this case, you will not buy 1102 Ripple coins, but 5510 coins at once !!
Next, imagine that the price of Ripple has risen to $0.28000 per 1 coin. By selling the 5510 Ripple coins you have back at the current price, you will receive $1542.8 (of which $542.8 will be your profit, $200 will be the amount of the initial investment and $800 will be loan funds, which your broker or exchange will take back after the transaction is closed).
That is, trading cryptocurrency with leverage, you will receive $542 profit, and without leverage $108.56. The benefits are obvious!
As you can see, cryptocurrency margin trading can significantly increase your profits. However, there are also disadvantages: when using a leverage of 1:5, not only the amount of profit is multiplied by 5 times, but also the amount of a possible loss!
Thus, you must understand that there are pros and cons to trading cryptocurrencies with leverage! On the one hand, it is many times more profitable, as it allows you to trade much larger volumes, which means you can get much more profit. On the other hand, it is much more dangerous, since the size of the potential loss is many times greater.
As a rule, cryptocurrency margin trading tools are used by traders who speculate on short-term changes in the price of coins. This allows you to use the advantages of margin trading to a greater extent, that is, to increase the trading volumes of the transaction with a much lower risk of losing funds.
IMPORTANT TO KNOW about cryptocurrency margin trading
Cryptocurrency margin trading is a financial leverage that is suitable exclusively for trading, that is, for short-term speculation on minor changes in the price of cryptocurrencies. If you are an investor looking to buy cryptocurrencies for long term storage, then margin trading leverage is not for you!
The thing is that coins purchased using leverage cannot be withdrawn from a traditional digital money exchange to a wallet. They will be held by the exchange as margin support for the trading operation. Ultimately, you will only be able to use the profit that you will receive after selling the leveraged crypto coins in the market.
Where is the best place to trade cryptocurrencies with leverage?
As we noted above, the leverage mechanism for cryptocurrencies turns them from an investment tool into a pure trading tool. And given the significant shortcomings of traditional exchanges in terms of trading, we do not recommend margin trading in cryptocurrencies on the platforms of conventional digital coin exchanges.
Forex brokers are much better suited for trading cryptocurrencies with leverage. And that's why:
1. The traditional exchange provides primitive functionality for margin trading, which is inconvenient for making deals and managing money, while Forex brokers for trading cryptocurrencies with leverage offer a technically advanced Meta Trader 4 terminal (where, in addition to the convenience of manual trading, you can use trading robots for automated trading).
2. Forex brokers provide a rather interesting set of leveraged cryptocurrencies. For example, on the basis of a broker, you can trade cryptocurrencies such as: Ripple, Ethereum, Dash, Litecoin, Bitcoin. And these are the main of the popular coins of the digital money market.
3. Forex brokers have much better liquidity! If a traditional cryptocurrency exchange works only with its own liquidity and quotes, then forex brokers use quotes and liquidity from several exchanges at once. For example, the FXPRIMUS broker works with the liquidity and quotes of several major exchanges at once, such as Poloniex, Coinbase, Bitstamp and KRAKEN. Thus, on the platform of the broker, you can buy and sell cryptocurrencies at a much better price than on the basis of any traditional cryptocurrency exchange.
4. The forex broker uses a single deposit currency (for example, USD or EUR), in which trading is carried out and profit is fixed on the trader's transactions. That is, you do not need to convert the currency when withdrawing profits by paying extra commissions.
5. Depositing and withdrawing funds on the site of a traditional exchange is quite expensive, which costs around 1.5% -6% of the transaction size. At the same time, for example, a forex broker commission for depositing and withdrawing funds is 0%.
Thus, if you are a trader and are looking for the best platform for trading cryptocurrencies with leverage, then the best way This is a forex broker platform.
Conclusions about margin trading cryptocurrencies
Margin trading in cryptocurrencies is a really working financial lever, with the correct use of which, you can significantly increase your trading potential and opportunities. Like it or not, 1:5 leverage allows you to increase the profitability of cryptocurrency trading by 5 times!!! That's a pretty hefty risk premium!
For traders with a limited amount of crypto resources, i.e. bitcoins and altcoins, there is the possibility of margin trading. This method allows you to increase the amount invested in assets without actually owning them.
It is important to note that not everyone is recommended to resort to margin trading, since such investments are subject to great risk.
So let's get started: what is margin trading?
Margin trading allows a trader to make investments using borrowed funds. For example, we opened a margin position with 2X leverage. Our underlying assets grew by 10%. It turns out that the position gave 20% due to double leverage. Standard trades are made using 1:1 leverage.
Margin trading is possible thanks to the credit market. Lenders provide loans to traders so they can invest in more currencies, and lenders benefit from interest on loans.
On some exchanges, such as Poloniex, users provide loans for margin markets, while on others, they exchange directly. On Poloniex, anyone can lend their bitcoins or altcoins and benefit from interest on the loan.
The main disadvantage of such services is that coins must be stored in wallets on exchangers, which is less secure than storing them in a cold wallet.
Costs and risks of margin trading
As mentioned above, the cost of a margin position includes payment of interest on loans (to exchangers or other users) and commissions for opening a position on the exchange.
As the chances of earning increase, so do the risks. The maximum you can lose is the amount you have invested to open a position. This level is called liquidation value.
The liquidation value is the value at which the exchange automatically closes the position so that you do not lose any of the borrowed coins - only your own money.
Example: if we are talking about classic trading with 1:1 leverage, then the liquidation level will be reached when the position is equal to zero. As leverage increases, the liquidity value will approach our buying price.
For example, if the value of a bitcoin is 1000 USD, we bought one bitcoin (long) with a leverage of 2:1. Our position is valued at $1,000, and we have borrowed another $1,000. The liquidation value of our position will be just over $500 because at this level we lose our original $1,000 plus interest and fees.
Margin trading is possible against the market, we can also use leveraged short positions.
Manage Risk - When trading on margin, it is important that you have clear risk management rules in place. Beware of excessive greed. Calculate the amount you are willing to risk.
Remember that you can lose all invested money. Set clear levels to close positions, take profit or stop loss.
Watch closely – cryptocurrencies are considered highly volatile assets. And trading on margin doubles the risk. Therefore, try to open short-term trading positions with leverage.
Keep in mind that the daily fees or margin position are negligible, but in the long run these fees add up to a decent amount.
Extreme moves. Cryptocurrency trading is associated with extreme fluctuations occurring in both directions (“Depths”).
The risk is that the depth may touch our liquidation value. This is especially dangerous for traders with large leverage and low level own investments.
But you can take advantage of these depths and try to set a limit to close the position - perhaps the depth will go the other way and you will make a good profit.
Exchanges for margin trading
Now margin trading is possible on almost all exchangers. Its advantages are obvious, but it is important for each user to be sure that their finances are safe. Traders strive to minimize the number of coins listed on exchanges.
Exchangers are considered ideal targets for hackers, in last years there have been several major hacks, with the last significant victim being Bitfinix (in 2016). Then the attackers stole a third of the bitcoins of the exchange.
Margin trading allows us to open larger positions without having to buy bitcoins, so we can store fewer coins on the exchange.
For example, if our portfolio consists of five bitcoins, and we want to hedge the risks of a fall in the price, we can open a 10X leveraged position - it will be equivalent to 40% of our portfolio.
Only a tenth of the position (10x leverage) is required to open a position. It turns out that we need only 0.2 bitcoin. And the rest of the money is stored in secure cold wallets.
Bitmex– Bitmex in a short time has gained a reputation as one of the best exchanges, most traders (including us) trade on it. The exchange supports margin trading with 100X leverage, you can choose either long or short.
The service is very easy to use, it has good support. Follow this link and get a 10% discount for the first six months of work.
Plus500 is a world famous Forex trading company. The site supports the use of bitcoin and all major altcoins for margin trading (Ethereum, Ripple, Litecoin, bitcoin cash and others).
The main advantage of the exchange is that this service is fully regulated by the company, there is 24/7 support and commitment to millions of customers.
Right now you can't invest bitcoins, but once you sign up, you'll be able to start margin trading right away with a deposit or bank transfer.
Leverage can be set up to 1:20, and the exchange facilitates a smooth entry into trading with a free demo account. To get started with Plus500, you can study the video guides.
Bitfinex coordinates the largest bitcoin-dollar trading flow, with margins up to 3.3X leverage. The site has a very user-friendly interface, all actions are performed intuitively.
Poloniex is the largest cryptocurrency exchange. There is support for eleven altcoins, but there is no possibility of BTC-USD margin trading. Leverage is only available up to 2.5X. Relatively high interest rates when shorting.
AVAtrade is another world-famous CFD exchanger that allows you to trade on Bitcoin CFDs, as well as other cryptocurrencies. The company is fully regulated, and Plus500 also has a free demo account. Link to the official site:
Today we will talk about the topic of margin trading, the pros and cons.
Margin trading is trading within a day/week/month/year. That is, for any time period. The crypto trading market is quite young, but some exchanges (GDAX, Bitstamp, CEX.io, Bitfinex, Bitmex) are actively offering such a trading tool to market participants.
How to use signals for cryptocurrency trading, read Top Forecasts
Margin trading on the Bitmex exchange
The first advantage of margin trading is the ability to hedge your funds in case the market falls. This is the so-called short opportunity.
Consider the chart of one of the exchanges (Bitmex).
Go to the exchange, you see the following window in front of you:
Bitmex how to short cryptocurrency
You choose the number of contracts and the price (Bitmex is described in detail in one of our articles).
Overview of the Bitmex exchange, how to fund an account and trade with leverage
You press the button - sell (this is short). Circled in green. After that, you will see the following window (order confirmation):
Bitmex short with 100x leverage
Click Sell, and the order is placed according to the specified parameters.
Bitmex, short position
When the price reaches your order, the exchange will execute it and your position will be sold, according to the conditions of the order.
Exchange LocalBitcoins, how to profitably buy and sell bitcoins without commissions
To close this position - to get a profit, you need to perform the reverse operation - to buy. For example, the price reached the level of $17,420 (open short), then dropped to the level of $16,500 (buy/long). Enter the mirror number of contracts (if you sold 100, then you buy 100; if you sold 1000, then you buy 1000) and the current price at which you want to close the order.
Bitmex, closing a short position
Click buy according to the specified parameters, and the system closes your position.
Bitmex, margin trading calculator
Your margin is easily calculated on the calculator. Click on the icon (circled in green) and the calculator window pops up.
In the calculator you can estimate how many contracts you can buy/sell and what margin is possible as a result of your trades.
Margin on the Bitmex exchange is calculated in BTC, symbol XBT. That is, if you earn 0.0003 XBT, your margin is 0.0003 BTC. If you trade 10,000 contracts, then your potential margin could be 0.0320 BTC. With 100,000 contracts - 0.320 BTC, etc.
Potential and risks of Bitcoin-ETF
An important point. On the Bitmex exchange, it is possible to use a very large leverage - 100x. Leverage is the ability to take many times more contracts than your deposit allows without leverage. Leverage 100x is a very effective and risky tool!
Bitmex, 100x leverage
It is risky due to the fact that at the time of using the leverage, the exchange indicates the liquidation price, which is usually very close to the order opening price.
For example, with 1,000 contracts and a price of $17,420, the liquidation price with a leverage of 100x would be $17,503.5. The contract amount will be 0.0006 BTC, and losses - 0.0574 (column - order amount).
The contract amount is 0.0006 BTC - this is a part of the deposit, which is withdrawn from you immediately upon execution of the contract. It is returned if you close the position with a profit. If the liquidation price is reached, then no. To minimize losses, always place stop orders.
Market stop tab. Choose the same number of 1,000 contracts and a price of $17,430 (i.e. above $17,420). If you were selling, that is, shorting, then you put a stop at reverse side- buy. If you bought, then the stop is also in the opposite direction - Stop sell.
And confirm:
Bitmex market stop
Thus, you minimize your risks on a trade with a large leverage.
Goldman Sachs admitted that Bitcoin can become a real currency
A big plus of leverage is the ability to earn more with a small deposit. For beginners, I do not recommend using leverage over 3-5x. The liquidation price will be much less than the entry price, but it is better to get your hands on the low volumes and risk levels.
One of the disadvantages of the Bitmex exchange is that if you do not want to short, and the market is in correction and there is a desire to sit out the drawdown in fiat, then, unfortunately, there is no such function on the exchange. Then you need to use: Bitfinex, GDAX, CEX.io or Bitstamp. On these exchanges, you can sell bitcoin without entering margin trading.
Margin trading on the Bitfinex exchange
Let's look at the functionality of another exchange. For example, you want to short 1 BTC at 13697 on Bitfinex. Choose margin trading (Margin tab, not Exchange!). Set the data and click Margin Sell (the price is circled in green).
Bitfinex how to short
Accordingly, the reverse operation is to buy Margin Buy. For example, for $13,200.
Bitfinex how to close a short
As a result, your earnings will be: $13,697 – $13,200. That is $497 on one BTC. If your balance allows you to take, say, 10 BTC, then you will earn $4,970 on a falling market.
An important point. The Bitfinex exchange allows you to use leverage up to 3.3x. At the same time, if you use leverage, the system immediately blocks 15% of the order amount for your current order. The exchange calculates the liquidation price based on its data and automatically displays it when placing an order.
Top 3 cryptocurrencies to invest in 2018 other than Bitcoin by Montley Fool
Stop orders
I highly recommend placing stop orders on the Bitfinex exchange, as the exchange has high liquidity and is often seen in price manipulation and sharp price breakouts. So that your order does not endure with one candle due to a trading failure of some kind of bot or panic selling / euphoric buying.
What happened to Coinmarketcap prices? How to avoid panic selling?
OCO order
Practical enough for setting stops is the OCO order type.
For example, you opened a position on bitcoin in the amount of 1 BTC. Short position - sell. The entry price is $13,697. That is, they did Margin Sell, as in the first example.
Next, go to the OCO order. In the order window, set the following values: PRICE USD - $13,200 (this is the exit price, that is, your take profit!), OCO STOP USD - $13,700 (this is the price of your stop order). The OCO order allows you to automatically place an order to close a position and a stop order in one window. After entering the necessary data, click Margin Buy and the exchange will place your order.
Bitfinex, OCO order
If the market is growing, then you can open a long position - that is, buy. Then all operations will be mirrored, as well as on the position of shorts.
Limit and Market orders
I always advise you to open positions with limit orders (if the market allows).
There are also market orders. That is, your long/short order will be executed at the market price (current), but the commission will be higher than with limit orders. For commissions – read the exchange guide and our exchange reviews for more details.
Bitfinex, Limit order
It comes first in the list - a limit order.
Trailing Stop order
An interesting tool is Trailing Stop.
This is an order that works like a stop (closing) but follows the price.
Bitfinex, Trailing Stop order
For example, you have a long position of 1 BTC at $13,200. Trailing stop allows you to set the distance between the current price and the closing price in USD. In this order, you set $50 of the price movement difference. This means that when the price hits $13,300, the trailing stop will pull up to $13,250. And if the price will fall up to $13,250, then it will not move and the exchange will close your position with a plus of $50.
If you bought, that is, a long was opened, then you put Margin Sell. And vice versa.
As for the Bitmex exchange, there is one peculiarity for this stop order. If you bought a position, then in order to set a trailing stop, you must put a “-” sign in the value column.
Bitmex, Trailing Stop order
For example, you want this stop to follow the price up with a difference of 10 USD. Set the value to "-10" and the exchange exposes it.
If you have a sell order open and want to place a trailing stop, then in the value column, simply write the desired number without signs.
Trailing Stop also has its drawbacks. If the price drops sharply against your trailing stop, then the exchange will execute it, but not at the current price, but at the market price at the time the order was executed in the order in which it was placed. This can lead to the fact that the order closes your position not to zero or plus, but to minus. The Trailing Stop order can only be used in a smoothly rising market to collect the maximum movement. But it is better to close the position with a limit order (short / long based on your open position), and the trailing stop is simply canceled and used as a small insurance.
How to trade bitcoins, cryptocurrency earning strategy
The article shows only small examples from margin trading. This topic is not one article / lecture / lesson.
Margin trading is a very risky and profitable type of trading. It takes time to study it. I hope that the article will be useful for readers, and everyone will find new and effective trading tools for themselves.
The easiest and fastest way to invest in Bitcoin cryptocurrency is to buy Bitcoin futures through a broker, especially since it can be done with leverage up to 1:200. After registering on the Libertex platform, you will be able to trade not only Bitcoin, but also other popular cryptocurrencies (Ethereum, Ripple, Dash, etc.).
All ways to buy Bitcoin
Consider all options for investing in Bitcoin cryptocurrency
Method number 1. Bitcoin brokers
Here you do not buy and sell cryptocurrencies as such, you trade bitcoin futures, and your money is in the broker's account all this time.
Forex Club works on financial markets since 1997 and has a lot of clients from all over the world, I think this company can be trusted.
Pros: you can trade with leverage from 1:5 to 1:200, profitable account replenishment, all known methods of replenishment are available.
Minuses: increased risk when trading with large leverage.
Method number 2. CEX.IO
You can link your debit or credit card(Visa, MasterCard) to the CEX.IO service and buy Bitcoin and Ethereum for rubles, dollars, euros and pounds. You can also buy Bitcoin by bank transfer.
The service requires verification (you need to send them 2 selfies, with your card in hand and with a passport, or with a driver's one and upload a scan of the card with an identity document).
Pros: Convenience, relatively low commission for transactions.
Minuses: Mandatory verification, deposit and withdrawal limits (depending on the verification level).
Method number 3. Crypto exchanges
The boom of cryptocurrencies has led to a boom of cryptocurrency exchanges and they are now "bred" immeasurably, so it makes no sense to list the entire list, Bittrex and Poloniex are the largest cryptocurrency exchanges in terms of trading volume today.
Pros: a rich selection of coins for trading, Depth of Market, API for writing trading robots.
Minuses: only the exchange has information about your private keys, and some of these exchanges tend to disappear along with the money of their clients (MtGox, BTC-E have sunk into oblivion, who's next?).
Method number 4. cold wallet
The safest option is to generate the public and private bitcoin keys on the bitaddress.org service (turn off the Internet before generating). Next, you save the generated keys on a flash drive and on paper, transfer money to the public key address and check the balance. Remember the loss of a private key means the irretrievable loss of your funds!
To be able to make transfers, you need to download a bitcoin wallet from the official Bitcoin website and generate a public key already in the client (you can import a previously generated private key). Be sure to back up the wallet.dat file as it contains the private key information!
Pros: security (only the owner of the private key can manage your money).
Minuses: The loss of a private key means an irretrievable loss of your money, less potential profit (compared to margin trading).
If you choose method number 3 or method number 4, you will need to use the services of exchangers.
BestChange is a monitoring of exchangers, where you can choose the exchanger with the best exchange rate.
When someone talks about the stock exchange, people who are far from financial markets immediately have pictures in their heads of a lot of people calling on the phone, negotiating deals, multi-million dollar contracts and other “cinematic” attributes.
Once it was really so, people traded in the halls, shouted out prices, called up their clients. But now everything has moved to the Internet, and it has become much more convenient.
The exchange is a trading terminal on a computer, with a huge set of data and tools for analysis. Exchanges differ in the goods that are sold and bought on them: securities, raw materials, currency, contracts, etc. Cryptocurrency, as a new phenomenon in the financial world, also required exchanges to regulate trading. This is how the first cryptocurrency exchanges appeared.
Now there are only two options for withdrawing cryptocurrencies: the exchange and exchangers. Their main difference is that when trading on the stock exchange, you make a deal with the same other person or company that stands behind him. When working with exchangers, you work directly with the company, and it provides you with an exchange in return for some fee - a commission.
The commission when working with the exchange is much less than in exchangers. And also the advantage of the exchange is that it instantly reacts to any changes in the price of the cryptocurrency, constantly updating information about the rates.
In fact, cryptocurrency exchange is a huge online platform where users from all over the world exchange virtual cryptocurrencies for virtual currencies around the world.
Now let's move on to an overview of the exchanges that are the most popular around the world.
Ranking Top 7 Best Cryptocurrency Exchanges
Here we have collected 7 official exchanges for you.
Bittrex
Bitrix - one of the largest exchanges on which cryptocurrency is traded. It has been operating since 2015 and since then has firmly occupied one of the leading positions. Stability in the operation of sites, the absence of overloads, relative reliability - this is what you will deal with on Bitrix.
Concerning currency pairs, then there are 260 of them. Not as many as it could be, but all popular cryptocurrencies and fiat money are collected there.
Pros:
- Commission for completed transactions 0.25%.
- A large number of trading pairs.
- Convenient tools for trading.
- Site stability.
The downside is that there is no Russian language, which can be critical for Russian-speaking users.
Exmo
An interesting exchange that is good for its security and support service. The conditions for the whole world are stable, but the presence of the Russian language makes it attractive specifically for an audience from the CIS.
Pros:
- Security.
- Excellent support service.
- Constant expansion of currency pairs.
- Commission 0.2%.
Exmo also has the ability to work with the ruble and popular Russian payment systems like Webmoney and Yandex.Money. This is one of the best exchanges in Russian.
Poloniex
Polonix is the second largest cryptocurrency exchange. Now they occupy the first line in terms of popularity among ordinary traders and are not going to lose ground.
Pros:
- Over 60 tokens that appear almost instantly after entering the market.
- Great popularity.
- Small difference between the buy and sell price.
Polonix is one of the most interesting and attractive platforms for beginners and experienced traders. It is best to engage in either margin trading or work with altcoins.
Yobit
Exchange with a simple interface and minimalist design. You won't find anything extra. But this does not prevent the company from taking a leading position in the provided tools for analyzing the behavior of charts.
Pros:
- 400 cryptocurrency pairs.
- Little commission.
- Instant withdrawal.
This is another exchange for the Russian-speaking audience. The Russian language and support for payment systems popular in the CIS make it a good place to sell cryptocurrencies.
Bitfinex
An exchange that is ideal for those who do not want to go through identification and withdraw a huge amount of cryptocurrency without restrictions. Ranked in the TOP 5 trade turnover. 35 currency pairs are traded.
Pros:
- No withdrawal restrictions.
- Commission less than 0.20%.
- Reliability and nice interface.
Kraken
An interesting exchange, with one of the highest protection systems. This is one of those old and reliable comrades who have been in the game almost from the very beginning of the founding of the cryptocurrency.
Pros:
- Reliability.
- High degree of protection.
- Possibility to receive funds by direct bank transfer.
Nova
Nova was once one of the most interesting cryptocurrency exchanges. Reliability, a large number of currency pairs and favor to beginners were valued in the first place. But since this fall, the exchange has been gradually shutting down, planning to stop trading in February 2018. Therefore, if you still have savings in BTC or Ethereum, then it is better to withdraw them.
Which exchange to trade cryptocurrencies on
In order to choose the exchange on which you will trade, it is enough to decide on your tasks. What currency do you have? Why do you want to buy/sell your assets?
Money does not need to be stored in one basket, this is a well-known fact. Choose the main trading platform where you will keep 65-70% of your capital. Then choose 2-3 spares and distribute the leftovers among them.
As practice says, such a precaution will not be superfluous. In 2011, it began to rise and gain momentum, and if not for one unpleasant circumstance, now it cost, perhaps, all 20-30 thousand dollars.
We are talking about hacking one of the largest exchanges in 2011. Mt Gox was cyberattacked, hacked, and hundreds of thousands of bitcoins were stolen from user accounts, which the company was unable to recover. The exchange's rating was lost and it went bankrupt.
And also, relatively recently, in 2016, the giant BitFinex suffered a cyber attack when attackers stole more than 100,000 bitcoins. These events show that the distribution of assets between cryptocurrency exchanges is now one of the most important ways to protect. After all, currency and raw material exchanges have protection that far exceeds the successes of current hackers, but this cannot be said about cryptocurrencies and their trading platforms.
Now let's move on to more specific information. Let's try to figure out what tasks exchanges are suitable for.
If you are going to invest large amounts in popular cryptocurrencies like Bitcoin, Ethereum, Litecoin and others, Bitfinex, Polonix, Bitrix will help you. If you just want to sell mined assets with minimal losses - Bitrix. If you work with altcoins and try to snatch a “tasty” coin that will grow in price over time, pay attention to Polonix, Bitrix.
If you have other needs, ask questions in the comments and we will find the right exchange for you.
What operations take place on the cryptocurrency exchange
In addition to the standard purchase and sale, most exchanges allow bidders to perform the following operations:
- Futures contracts.
- Options contracts.
- Margin trading of cryptocurrencies on the stock exchange.
There is not yet the variety of operations that are on real exchanges. But maybe it's not necessary. Let's talk more about contracts and margin trading.
Futures – contract for the future. That is, today you conclude a contract that the day after tomorrow you will buy a thousand rubles at a price of $ 20. Regardless of how much a dollar is worth the day after tomorrow, you must buy 1,000 rubles at a price of $20.
Option - the same contract. Only at the conclusion of it is indicated that the trader can EXERCISE the RIGHT to buy an asset at such a price. That is, it may or may not be used.
Margin trading - combination of own and borrowed money in order to maximize profits. That is, roughly speaking, this is a small loan that is given to a trader to complete a transaction. The trader makes a profit, takes it for himself, and returns the loan with interest. Everything is simple.
This small list of operations opens up access to a truly diverse approach to making money on the stock exchange.
How to make money on the cryptocurrency exchange
You can earn on the cryptocurrency exchange not only by selling cryptocurrencies obtained as a result of mining.
Intraday cryptocurrency trading on the stock exchange is the most promising way to make money. Your job is to buy low and sell high. Or borrow a cryptocurrency while it is expensive, sell it and return it when it gets cheaper. But this is only in words simple, in reality you will have to face a large number of pitfalls.
The easiest and most conservative way is. You are an asset, transfer it to your wallet and wait for it to grow. You can see for yourself how fast the value of the entire crypto is growing, so it would be foolish not to invest in it.
Some exchanges also offer their members to be lenders. Since exchanges rarely want to invest own funds for the trading of their clients, they provide the opportunity to invest in margin trading for ordinary users. By lending money, you can not earn so much, but as a way of earning, you can never “sweep” this option.
What you need to know before you start making money on the cryptocurrency exchange
Making money on the stock exchange as a whole is a very difficult task. You will need good knowledge in analytics, a mathematical mindset and decent experience in financial markets. But before you learn how to trade on the stock exchange, it will take more than one or two years.
One of the bank employees shared information on how he learned to trade on the stock exchange: “I spent 3 years studying the material, about two thousand dollars and several hundred hours of trading in order to learn how to go to 0 on the simplest trading instrument - options. Perhaps someone will succeed faster, but the dreams that you can sit down and start earning without knowledge and experience should definitely be abandoned.
His words just say that before speculating and trading on the stock exchange, you will need to study a lot of manuals, spend hundreds of hours for trading terminal either on a demo account or on a regular A4 sheet. It will also be useful to “pump” your emotional stability.
Watching over an experienced trader, you will never know if he made $2,000 or lost it. They control their emotions at the level of poker players. That is why it is so difficult to play on the stock exchange.
But all this was true only for trade. But what about two more areas: investing and issuing money for margin trading? With these areas of earnings, everything is much easier. Investors do not need to have special knowledge in technical analysis. Their main task is to assess the prospects of assets.
And with cryptocurrencies, everything is extremely simple. Does it have real value for? So it will grow. Doesn't have or is there a better analogue? So it will stay at the bottom.
And the issuance of money for margin trading is somewhat similar to lending. With one “but”: the exchange acts as a guarantor of receiving funds.
It all happens like this:
A person has 1 dollar. He takes 9 more in order to make a profit of 10 times more. When the asset rises by 10%, instead of 10 cents, the person will receive $ 1 minus interest for using the amount. But if the asset falls by 10%, the deal will automatically close, since he lost his dollar, and the system will not allow you to go into debt.
This principle is similar to the work of Forex brokers, who simply close transactions as soon as her account sinks for the full amount + interest for using borrowed funds.
That is, if you lend money for margin trading, the return guarantee is provided by the exchange itself. Your task is to have the right amount of funds to earn.
How much can you earn on the cryptocurrency exchange
This is a very interesting and important question that every bidder should ask himself sooner or later. Let's try to roughly predict the yield based on the bitcoin chart.
If you look at the bitcoin chart, you can see that daily ups and downs often exceed 1,000 - 1,500 thousand dollars. That is, by investing 8,000, you can get 9,500. In the most favorable scenario, you will receive from 5 to 8% for each transaction when using margin trading. But on average, the yield will be somewhere around 30 - 40% per month.
If you invest in bitcoin now, then against the background of its rise, you can earn 100-200% per annum at the current rise rate. This is the most optimistic option.
If you give money to those who are engaged in margin trading, during periods of hype, you can raise up to 50% per month. But during periods of recession, few people will buy your assets, so assets can often stand idle and up to 3 - 4% per month. On average, you will receive 50 - 60% per annum with an average investment style, not following the market trends very much.
As you can see, with the increase in profitability, the risks also increase. The safest is lending to those who want to engage in margin trading, with a yield of about 50% per annum. The most profitable intraday trading at great risk.
A small forecast regarding the price of cryptocurrency in 2018
Everyone is wondering how the cryptocurrency will behave in 2018. Especially after the recent rise and breaking through the psychologically important mark of $10,000 at the end of 2017.
Let's try to figure out whether bitcoin will grow, and with it the whole cryptocurrency. First, let's talk about why it's so popular. Due to the fact that crypto implies the anonymity of transactions, most people will use it to hide their payments from the state. The shadow sector of the economy, despite the fact that the world is actively fighting it, was, is and will be.
Plus, among other things, cryptocurrencies are being created that will be really useful for business. The same ether and its system of smart contracts, which guarantees the execution of each transaction recorded in its protocols. This makes the crypto now one of the most interesting, and most importantly, sought-after assets on the market. Large companies are interested in blockchain, and in order to use the services of the same smart contracts, you need to buy ether.
That is why in the long run, the cryptocurrency will always grow. And bitcoin, as a flagship, will go forward until its very idea is a thing of the past. But until the resource for bitcoins is completely exhausted, it will grow.
In the short term, everything is shaky. Many economists understand that bitcoin is still an overvalued asset, even though in previous years it has shown growth of 1000% every 12 months. Some traders agree that the market is now artificially overheated.
But most still agree that the growth prospects for bitcoin and the entire cryptocurrency are very bright. This is also shown by the fact that even after being declared illegal in China with a population of more than 1 billion people, they quickly recovered, rose and are still breaking through new historical highs.
That is why it is worth investing in bitcoin and new altcoins. And do not assume that bitcoin is a bubble that is about to burst. Yes, to some extent it may turn out to be an overheated asset, and most likely it is. But it will not burst like many say. It can only roll back in value, but will invariably return to its positions after some time.
Conclusion
Cryptocurrency exchanges are an excellent tool for not only selling mined assets, but also making money on them. And given that this is a relatively young market, there are not so many participants in it, and therefore, indeed good specialists still catastrophically small. It is still very easy to become a “specialist” in the field of cryptocurrencies now. Seize the moment and earn.