How to trade cryptocurrency

Crypto Trading Across Africa  

In February 2019, HootSuite a global social media company, along with Wearesocial, came out with a report ranking South Africa as a leading country for owing digital currencies.  According to their survey, some 10.7% of Internet users in South Africa owned crypto. In second place was Thailand at 9.9%, and Indonesia at 9.5%. The worldwide average at the time was just 5.5%. According to the 2019 Global Digital Report, other countries across Africa are increasingly adopting cryptocurrency as a medium of exchange, a store of value, and as a tradable financial instrument. Many entrepreneurs have taken to crypto to fund business ventures, thereby skirting the rigid exchange rate controls on forex. This is particularly true in countries like Nigeria where forward-thinking business owners have dispensed with traditional means of acquiring forex. In Nigeria, business owners can use crypto to pay for goods and services without having to exchange Nigerian naira for US dollars.

This saves tremendous commission and fees which would otherwise be charged by middlemen, including banks and forex intermediaries. Bitcoin in particular has had an outsized impact on new business ventures at a time where depreciating EMEA currencies are struggling to compete against developed country currencies such as the USD, GBP, EUR, JPY, and CAD. By funding business-related activity in BTC, business owners are finding it easier to avoid unnecessary expenses. Yet, the volatility of pricing with crypto can be problematic, with steep appreciation and depreciation possible at any time.

In September 2020, Reuters ran a story about, ‘How Bitcoin met the real world in Africa’ by Alexis Akwagyiram and Tom Wilson. In their interviews with Bitcoin users in Nigeria, traders attested to the cost effectiveness of using BTC over fiat currency, and the cost savings they enjoyed. By late 2020, Bitcoin had reversed its adopted role as a speculative financial instrument to a medium of exchange.

The adoption of Bitcoin has been much easier in African countries where embattled currencies struggle to maintain value against the USD. Yet, despite the ease with which Bitcoin and other cryptocurrency trading can be facilitated, challenges remain. Another issue to contend with is regulatory constraints with gray status across most of Africa. Plus, if private keys are lost to cryptocurrency wallets, or if crypto exchanges are hacked, there is no recourse for business owners. The degree of technical proficiency required for using BTC, ETH, LTC, and XRP for trading purposes also limits the market to a select few with the requisite skills.

Fortunately, traders seeking to benefit from the volatility of crypto trading across Africa, including South Africa, have crypto CFD options available. In SA, the value of blockchain spending is expected to hit a CAGR of 41.5% from 2019 – 2025.  Analysts predicted it would  reach a total of $2,056.1M by 2025. AvaTrade facilitates the buying and selling of crypto CFDs on a fully regulated platform in South Africa. Going long, short selling, and auto trading options are readily available to traders.

What is Cryptocurrency

Cryptocurrencies are encrypted decentralised digital currencies that are transferred between individuals. These currencies are not tangible and exist only in the electronic from, it is a digital asset that exists and remains as data.  They allow a person to send money just like sending an email, much lower transaction times compared to using a bank, minimal fees, no credit cards and no middleman. The joint bookkeeping process is called a “Blockchain”, it is public and is distributed across the network of all the people that have the same coin, for example everybody that has Bitcoin has a copy of the ledger and its transactions, which creates a community of trust. Each cryptocurrency is individually identifiable and programable based on a very complex digital code.

While Bitcoin is not the only digital currency on the market, it is indeed the first and most popular one, and stands as the digital “gold” within the industry. The technology behind cryptocurrency holds a large part of its value. The secure way to identify a transaction and the way to transfer funds. If more and more people use digital currency, then this could save billions in transactions but this idea is still new and people are in fact just learning about it. However, there are a range of altcoins, which are alternatives to Bitcoin and growing in market share and value, and therefore are worth taking note of. Some of the top ranking  altcoins include Litecoin, Ethereum, Bitcoin Cash and Bitcoin Gold to name a few.

How to Trade Cryptocurrencies?

The original way to trade cryptocurrencies would be setting up a bitcoin wallet, buying some bitcoins with tangible currency, and then exchanging these bitcoins on a cryptocurrency exchange site to the altcoins of choice. This way the trader has to securely maintain one or more digital wallets to store and exchange the purchased coins, and is more prone to cyber theft and hacker attacks that target the exchange sites. When trading with AvaTrade a wallet is not required, since the trades are performed though our SSL secured online trading platform, this proves to be a big advantage in avoiding potential hackers and theft.

The new and revolutionary way that AvaTrade is proud to offer its clients is a to trade cryptocurrencies via CFD’s (read more on CFD trading advantages).

Factors to Watch While Trading Cryptocurrencies

The cryptocurrency market changes very fast, new cryptocurrencies are born and others disappear. What draws people to the world of cryptocurrency is the idea of protecting themselves against the devaluation of their own national currency. More retail stores have started accepting Bitcoin and other digital currency as a form of payment, and in countries like Japan, people have started using it more frequently thanks to the government officially approving the currency.

Initially bitcoin was accepted mostly by the darknet marketplace but gradually it has gained acceptance and was adopted by legitimate brick and mortar and online businesses. With more businesses accepting it as a form of payment, banks are starting to realize that this new product has the potential to change the financial world, and draw away partial financial control from governments and banks. There are different factors that push the price of cryptocurrencies up or down. To start with, just like with Forex trading online, the higher the demand the higher the price will be. Also, the purchase of the coin by traders purchasing on speculation can affect the demand and therefore the price.

Media reports by the news discussing the growing currency have an effect on the price of digital currency and Bitcoin in particular. For example, there have been a variety of negative remarks from national regulators in China over the past few years. In 2013 China announced that financial institutions should stay away from the famous Bitcoin, this resulted in a major drop of the coin by as much as $300. Their initial concern was that it could interfere with normal currency policy information.  In 2014 the Bitcoin price dropped once again as Bitcoin exchanges stopped receiving deposits from Banks, and in 2017 China’s central bank was rumoured to implement regulatory action regarding the digital coin exchanges which would have accounted for most of the Bitcoin trading volume.

In 2014 there was a major hack attack rumoured to clear the screen and put the complete Bitcoin exchange offline. During this time and until things returned to normal there was a 23% drop in Bitcoin price. Various influencers over time have and can dramatically influence the price of digital currency swiftly. Overall, the crypto market cap is at an all-time high of over $60 Billion, this is partially due to people learning what cryptocurrencies are and considering them as an investment vehicle to add to their investment portfolio.

General Tips For Cryptocurrency Trading

The rule of “buy low, sell high” is the basic formula in trading, it applies to a pattern of cryptocurrencies price that shifts between certain price points. Whatever the size of your capital, you can find a digital currency that matches your needs to trade. Following news on digital currency is very important, and can help direct you to choosing the best cryptocurrency for you.

There are two major factors to consider before trading your crypto currency of choice.  The first is, fundamental analysis and the second is technical analysis.  Technical analysis includes the same research that is done with any, and all other financial assets. Fundamental analysis should take into account the susceptibility of the cryptocurrency markets, and the fact they can be manipulated by thought leaders of the industry for their own advantage.

Start Trading Crypto with AvaTrade

Cryptocurrencies are a form of money for the future, and have the potential to transform the global financial system. Regardless of the negative issues surrounding cryptocurrency trading, more people are using it, increasing the demand, and for this reason the price is rising. Its volatility makes for an excellent addition to any financial trading portfolio.

If you are looking to trade, remember that in addition to the Bitcoin, there are several other altcoins also reaching a high-level market share such as Ether, Bitcoin Cash and Litecoin.  But it should be noted that cryptocurrencies have crashed before, and like other investment vehicles could happen once again. Moving forward there are discussions on how to manage the currencies and that could adjust the price. The long-term ramifications are still unknown but cryptocurrency is not going anywhere.

Why trade crypto currencies with AvaTrade?
To start with, we offer trading benefits that regular cryptocurrency exchanges’ platforms don’t.

• Short Selling, which is the process of being able to continue trading during falling markets and being able to profit from the price decrease.
• High leverage, which refers to the process of borrowing funds from the broker in order to trade a much larger position with minimal investment.
• And finally, the availability of auto trading – either algorithmic via using pre-programmed trading bots, or social via copy trading (Zulutrade) the positions of experienced traders with a proven success record.

How to trade Crypto main FAQs

• Is Bitcoin really a digital form of gold?

  For some time now Bitcoin has been referred to as the “digital gold”, but in truth it has no direct relationship with gold. It was given that name because proponents of cryptocurrencies see them as a good hedge against inflation and against weakness in traditional fiat currencies brought on by central banks printing money non-stop. In truth Bitcoin and gold do not move in tandem and as of 2020 Bitcoin has been tied more closely to the movements in the S&P 500.
• Do I need a cryptocurrency wallet to trade cryptocurrencies?

  At AvaTrade we are not offering the actual cryptocurrencies, but instead are offering CFDs tied to the cryptocurrency as the underlying asset. This saves traders the trouble of learning how to set up a wallet and how to transact with cryptocurrencies. Instead you can spend your time focused on trading. Plus, by using CFDs rather than the actual cryptocurrencies we can offer our clients the ability to use leverage.
• Why should I trade cryptos at AvaTrade?

  There are many very good reasons for trading cryptos with us. These include the ability to use margin, the wide variety of cryptocurrencies we offer as CFDs, and the lack of any commissions, bank fees, or transaction fees. In addition, we allow trading cryptos against a variety of fiat currencies, and unlike the cryptocurrency exchanges we are regulated by six different regulatory authorities, ensuring your funds are always protected.