Cryptocurrency, or crypto for short, is a trendy buzz word among investors and speculators. This section explains the basic strategy and how to trade cryptocurrency for beginners.
DIGITAL CURRENCY: Cryptocurrency is a digital currency. Bitcoin was the first of all cryptocurrencies and it entered the market in 2009.
The original creator of the Bitcoin software, Satoshi Nakamoto, remains anonymous. But, now you can trade online in over a thousand alternatives to Bitcoin, called altcoins.
Cryptocurrencies are in the news and making the headlines every day - not always for good reasons. The majority of the public know very little about them and understand less.
Even so, a huge curiosity and interest in cryptocurrency trading exists.
In simple terms, trading in cryptocurrency is a digital or a virtual trade. A process called cryptography creates new coins and completes any transactions between them.
Blockchain technology is a complex ledger that stores all the movements and transactions. A blockchain is a list of records that continues to grow by adding extra blocks. Cryptography links the blockchain together using a secure structure. Any computer can access a copy of this data encryption. But, it is 'insulated' from hackers.
Traders can use a cryptocurrency wallet to interact with the blockchain. A wallet is a special software program that stores a set of private and public keys. Crypto wallets enable users to send and receive their digital currency.
Research suggests more than 3 million unique active cryptocurrency traders use wallets. Estimates suggest the cryptocurrency industry has over 2,000 full time workers. Most of them operate in large 'mining' organizations.
There are several reasons why cryptocurrencies are becoming very popular with investors and crypto traders:
The original idea behind the Bitcoin has become even more versatile and secure. So much so, that an increasing number of altcoins also use the same blockchain technology.
They include a range of Bitcoin clones and other digital currencies like Ethereum and Ripple. As a rule, designing a new coin or token will have a very specific utility in mind.
It is difficult to find a higher risk investment than trading in cryptocurrencies. The daily price of digital currency fluctuates - a lot! It is a volatile and a very unpredictable market.
The market can move for you and it can move against you. The risk of that happening could mean you lose your money. As a rule, most experts will advise against cryptocurrency trading for beginners. Instead, it may be best suited for traders looking for a high reward from a high risk investment.
Bitcoin is by far the most popular cryptocurrency out there and many traders start here.
Check if you should be paying Capital Gains Tax when selling crypto currency or giving it away as a gift (e.g. to a spouse or civil partner).
HMRC classifies cryptoasset exchange tokens received through employment or mining as earnings. So, you should check if you need to pay tax when you receive cryptoassets and what records you need to keep.
Disclaimer: This is a basic guide on cryptocurrency trading for beginners. Wide price fluctuations mean it may not be appropriate for all traders. No regulatory framework supervises trading cryptocurrencies in the United Kingdom (at the time of writing this article).
Cryptocurrency Rules and Regulations in United Kingdom