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Cryptocurrencies can be a tricky thing to wrap your head around, while the potential applications of this new technology are almost limitless, understanding how they work is another story.
For now, all you need to know is that this technology is called cryptography, they are a type of digital currency that uses encryption techniques for security and control.
This is a guide for absolute beginners so this article won’t be covering the basics of how cryptocurrencies work or their potential uses, if you want to learn more about that, check out our in-depth guide on the subject.
How Do Cryptocurrencies Work?
Before we get into how to use cryptocurrencies and trade them, you first need to understand how they work they are simply digital assets that exist on the internet, these assets, or coins as they’re often called can be created and used in transactions between people without any intermediary or third party and you can send cryptocurrencies to anyone, anywhere at any time.
In order for your transaction to take place, two people or institutions will need to agree that the ownership of an asset has been transferred from one individual or institution to another, this agreement is validated by cryptography in the form of blockchain technology, which creates a permanent record of every transaction ever made with a particular cryptocurrency.
Cryptocurrency transactions are largely anonymous, but every single transaction is publicly recorded in a permanent ledger called the blockchain.
The information stored on these ledgers is unchangeable and can only be accessed by specific individuals with cryptographic keys who have a certain level of access rights, what this means is that nobody else can make changes to your account except for you and nobody else can see your account balance except for you.
How to Trade Cryptocurrencies
Perhaps the most exciting thing about cryptocurrency trading is that it has only been available for a few years, as such, there are no set rules to how the markets behave and what could happen in the next few years.
That said, there are some clear general guidelines you can follow when it comes to fantom coin price, investing, and trading cryptocurrencies so that you don’t end up losing your shirt.
One of the most important things to remember about cryptocurrency investing is that it is not for the faint of heart.
The volatility of this market means that you can win big, but you can also lose everything overnight if you make one wrong decision, that’s why it’s important to have an investment strategy in place before you start buying coins.
The first step in any investment strategy should be deciding how much risk you’re willing to take on and following through on those decisions, for example, if you decide that 100% of your investments need to stay safe, then don’t buy a coin with a high-risk rating regardless of what its estimated return maybe even if it does sound tempting.
This goes back to diversification low-risk investments like cash or bonds typically perform better than high-risk ones like stocks or cryptocurrencies.
Investing in cryptocurrencies requires a lot more research than traditional stocks because they are so new and volatile and you’ll need to do your research before buying anything just like with any other type of investment except maybe even more.
