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How To Start Trading On A Crypto-exchange
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“If you guys want proof that bitcoins are real, send them to me, I’ll cash them out and feed homeless people”. – Jason King
Types of crypto-exchanges
Crypto Exchange or DCE (Digital Currency Exchange) is a platform that allows customers to trade cryptocurrencies for other assets like different digital currencies or fiat money. After the launch of bitcoin in 2009 and the introduction of other cryptocurrencies, platforms were created for the exchange of the digital currency. Crypto exchanges take place through a trading fair. A trading pair is a market between two assets, like Ethereum and Bitcoin, allowing you to trade one for the other. Many exchanges support only crypto pairs, but a few also support fiat-crypto pairs like the U.S Dollar and Bitcoin. A centralized exchange takes custody of your funds to trade. These exchanges may sometimes be unregulated, so you should carefully research an exchange before handing them your assets. A new wave of decentralized exchanges called DEXes are emerging that let you trade directly from your wallet, but are early in development and technically limited.
How to start crypto-trading
In order to start trading, you need to buy some cryptocurrency first. To start your own account on any crypto exchange, you need to transfer an initial amount of money into the account. It’s very common that crypto exchanges don’t accept USD or any other fiat money as the regional currency is the first deposit you put into the account. So, you should buy some crypto on the cryptocurrency exchange or on your crypto wallet app and transfer them to the address that the crypto exchange provides you. You may also find some platforms that accept USD and credit cards. If you don’t have enough money to trade, you may also borrow it from the crypto exchange. This is called Margin trading. In this case, it’s important to remember that there may be a leverage factor, which could either increase your profits and your losses as well.
Cases of hacks on crypto-exchanges
The market in 2018 is insanely volatile. You can make a fortune in a moment and lose it the next. Around 2014, Mt. Gox, the largest exchange platform at the time, suspended its training, shut down its website and exchange services and filed for bankruptcy protection in Japan from creditors. In April the company started its liquidation proceedings and this resulted in a huge theft of bitcoins that were stolen out of the Mt. Gox wallet. Similarly, last week Coinsecure which is a centralized crypto exchange put a notice claiming to have lost 438 bitcoins. Though the investigation is still ongoing, the Chief Scientific Officer claims that his computer may have been compromised. The safety of the assets depends largely on the crypto exchange that you use to transact. These are primarily of two types - Centralized and decentralized.
A centralized crypto exchange, like Coinsecure, is like a third party that facilitates crypto to crypto or crypto to fiat transactions between entities or individuals. While doing so, it stores crucial information like private keys to crypto assets and funds. A Private Key is like a complex password that is required to spend the cryptocurrency you own. The decentralized exchanges are mostly used for crypto to crypto transactions, though newer models are also emerging that assist in crypto to fiat trades also. The key difference between the two exchanges is that the latter does not store private keys of customers making hacking attempts largely futile. However, decentralized exchanges may not be user-friendly for beginners as there are a lot of technicalities. A consumer willing to go through with this should be well versed with the technical aspects of a decentralized exchange. But Of course, security is an obvious advantage.
Cryptocurrency exchanges are a powerful tool that enables crypto investors to gain access to liquid markets and a large number of digital assets and are a necessary component of a rapidly growing cryptocurrency ecosystem.
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