Cryptocurrency is a virtual or digital currency. It can be exchanged digitally for services and goods. It uses a digital ledger with cryptography for secure transactions. These currencies use blockchain technology. Blockchain is a decentralized technology spread across many CPUs that records and manages transactions. It is a highly secured technology.

Market cap of crypto is more than 2 trillion dollars. More than ten thousand cryptocurrencies are available in the market, but a significant portion of the total market cap is occupied by a cryptocurrency called Bitcoin. Cryptocurrency is footwork toward a decentralized world.

Trading of Cryptocurrencies

Cryptocurrencies are traded through exchanges like stocks, but the crypto community governs and controls all the operations and transactions themselves, unlike stocks. To trade crypto, first, you have to choose a crypto exchange. Make an account on that exchange. Do your KYC ( know your customer).

After doing verification of the account, the exchange allows funding your account. After funding the account, you can buysell the cryptocurrencies offered by that exchange, or you may have an option to buy crypto and save it to your wallet. There are several types of wallets. Some common types are :
1- Digital wallet
2- Paper wallet
3- Hardware wallet
In using these wallets, one necessary thing is that you have to save your private keys and passwords yourself. In case of losing your passwords or keys, your funds are non-refundable. This is a significant drawback of cryptocurrencies.

What are The Significant Types of Crypto Exchanges?

Crypto exchanges have major three types :

❖ Centralized exchanges (CEX)

These exchanges have a centralized system run by some companies or people. Now, as we discussed, cryptocurrencies are “decentralized” themselves. What is meaning these centralized exchanges? These exchanges work as a standard bank where buyers and sellers trust the third party and hand over their money for trading purposes. They offer fiat to crypto trading and also crypto to crypto trading. Binance and coinbase (pro) are major examples of centralized exchanges.

❖ Decentralized exchanges (DEX)

DEXs or decentralized crypto exchanges are an alternative to traditional centralized exchanges. This plate form does not depend on any company, person, or service; instead of that all transactions or trading are controlled through an automated process without any central hub.

Decentralized cryptocurrencies use blockchain technology to ensure highly secured transactions without any central influence. But you have to secure your private key to access your account in decentralized exchanges. Major decentralized exchanges are pancake swap, uni swap, and dYdX 3.

❖ Hybrid exchanges (HEX)

Hybrid exchanges, as the name shows, are a combination of centralized and decentralized exchanges. All positive features of centralized and decentralized exchanges are combined in it to give a better service. It has an edge on the other two exchanges.

Top 10 Crypto Exchanges

For trading, liquidity matters a lot. Big exchanges provide good liquidity. So it is necessary to Know about good exchanges. Here is a list of top exchanges according to their market cap at the writing :

1. Binance
2. KuCoin
3. Huobi Global
4. Kraken
5. Coinbase exchange
6. Bitfinex
7. FTX
8. Bithumb
9. Gate.io
10. Bitstamp  

Types of Trading

• Spot trading
• Margin trading
• Future trading
• P2P trading

Spot Trading

Spot trading is the trading or method of buying and selling crypto at the current market rate to immediate delivery. Due to instant transactions, spot markets are also called “liquid” or “cash” markets. In the crypto market, spot trading transactions are done within a few seconds or minutes.
The running price of the market is considered as a spot price. By bidding on price, traders build a market price as any order fils new order enters in market. An example of spot trading is that if you are doing spot trading of BTCUSDT, you must have USDT to buy BTC, and after trading, you will get the amount of BTC according to the current market price.

Margin Trading

Margin trading is a type of trading using funds borrowed by exchanges to gain a good position in the market. Usually, big traders provide these funds to exchanges and earn interest based on the market demands. Exchanges have their funds and have a good proportion of interest in funds provided by other traders. Margins traders use leverage in simple words.
The calculation of loss or profit is according to the total amount borrowed+ initial margin. For example, if you are doing margin trading with a leverage of 10:1, you can take a position of 100$ with your 10$ margin, and profit loss will be according to 100$.

Future Trading

Future trading is a commitment between buyer and seller to a predetermined date and price transaction. A trader must have to sell or buy an asset at a price fixed earlier regardless of the market price of that time.
In future trading, a trader may take a short or sell position if he predicts the price going down. Future exchanges also offer leverage trading. Future trading is subjected to high risk. There is a chance of getting wiped out in future trading.

P2P Trading

P2P or peer-to-peer trading is decentralized trading where two individuals interact without involving any third party. It is one of the best ways to buy and sell crypto. In most exchanges, the seller gives an add-on exchange, and the buyer comes and fixes a deal with the seller.

Is Crypto Trading Profitable?

Nowadays, crypto s one of the most booming markets. Crypto is highly profitable if you trade it with proper research and methodology. It is a highly volatile market which means there are vast chances of profitability. But as everyone knows, where there is a chance of profit, there is also high risk. Crypto can be your life changer if you trade carefully, but still, a wise saying is there :
“invest what you can afford to lose.”