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Strategical Trading & Investment in Cryptocurrency |
Cryptocurrency markets are open 24/7; many people say they are the game-changer in finance. However, when you hear blockchain, Decentralized Finance, and crypto derivatives, you feel it sounds like martian language. It can be confusing at first. However, being introduced to the crypto world shouldn't be a puzzle.
If you are rushed to start, or you already know how cryptocurrencies work, you may want to go ahead and pick one of the 4 platforms displayed below. They are some of the top apps available to local investors. But, if you want to know about the basics of the crypto market, keep on reading. Let's start.
There are two ways of investing in cryptos. On the one hand, you can acquire the token with a wallet. On the other hand, you can invest in it through CFDs, which are financial derivatives.
The main difference between these options is that in the first case, cryptocurrency ownership is effective. In the second case, you do not own it. You are instead using financial derivatives to speculate on the price variation in the short term. If you just want to profit with cryptos, perhaps the second option is the best one, if you just want to buy and hold, try a wallet instead.
Therefore, analyze the differences between the available trading platforms and choose the one that best fits your trading objective by analyzing the commissions and security that each one of them provides.
How to Invest in Cryptocurrencies from Nepal in 5 steps
In the case that you have already decided upon which cryptocurrency you will buy but are unsure of how to do it, the following is a summary with five steps:
Open a Trading Account. Register with an App that will allow you to buy cryptos. These platforms are called Crypto Platforms or Trading Apps, among many other names. They are neither more nor less than intermediaries between buyers and sellers.
Upload an ID or Passport. Opening an online account requires uploading a few personal documents through their App.
Once the App approves and opens your trading account, it's time to deposit cash or cryptos if you already hold some. The depositing and withdrawing money methods are usually Credit Cards, Bank Transfers or eWallets (PayPal, PaySafe, Skrill, SafetyPay, and Neteller, among many others). The available options will depend on each platform. You can open a Demo account, try the platform, and then decide whether to deposit money or not.
Choose the right moment to buy the Crypto you will trade, open the App, look for the cryptocurrency you want to acquire, select the amount, and click on "Buy".
Ready! Once the transaction completes, the App will display your holding in your account's main view. In addition, you will see the price and holding value.
Top Cryptocurrencies by Market Cap
When you're just starting in the world of cryptocurrency, you might feel intimidated. There are dozens of different cryptocurrencies to choose from. We listed below the top 5 (+ 1) tokens by market capitalization (the total value in circulation, calculated by multiplying the total number of coins by market price).
Although Bitcoin is still the first and largest digital currency, Bitcoin's success paved the way for the rest. Following, we brief the details of the five so-called major Cryptos coins (with the highest market capitalization) and one extra piece of cake:
Bitcoin (BTC): The first and largest decentralized cryptocurrency. Bitcoin is the first cryptocurrency; it is the most traded one with the highest market value. Its native unit of account serves to transfer value, so it is classified as a digital currency.
Ethereum (ETH): One of the smartest cryptocurrencies in terms of the blockchain technology it uses. Ether allows containing smart contracts between peers based on blockchain technology. In plain English: Any developer can create and publish distributed applications that perform P2P transactions.
Cardano (ADA): Cardano is an open-source project with smart contract functionality. It seeks to run financial apps and provide users with greater flexibility than other blockchain protocols through a layered architecture. Cardano aims to achieve a "style of regulated computing that guarantees greater financial inclusion, providing free access to fair financial services for all.
Solana (SOL): Solana is one of Ethereum's most formidable rivals. Solana was developed for Decentralized finance (DeFi), decentralized apps (DApps), and smart contracts, the evolution of the blockchain industry. Currently, Solana's most convincing features are its programmer-friendly compatibility with the simple-to-code. As a result, Solana is also a strong candidate to become one of the most popular blockchain-based gaming networks. However, as the new network grapples with rapid expansion, price volatility, and bots, it has seen significant outages recently.
Ripple (XRP): Designed as a P2P interbank transfer method, it is one of the Cryptos that are not based on Bitcoin. Ripple is a project based on free software that pursues developing a credit system based on the end-to-end paradigm. Each Ripple node functions as a local exchange platform so that the entire system forms a decentralized mutual bank. Several front-line banks have started using XRP to improve international currency transfers.
Litecoin (LTC): One of the first cryptocurrencies to use Scrypt as an algorithm. Litecoin is a Cryptocurrency supported by its P2P network and an open-source software project published by an MIT (Massachusetts Institute of Technology) license, which provides an extra layer of credibility.
FAQs Related to Cryptocurrency
What is the minimum amount to buy and trade Cryptocurrencies?
Many people ask about the minimum amount to invest in Cryptocurrencies. The answer is that it does not require a large amount of capital to start.
When you are just starting and hear that the price of Bitcoin soars through the roof, you might be compelled to think that the minimum to invest is the equivalent of one Bitcoin: in other words, $ 40,000 to $50,000. However, that claim is wrong: With Crypto platforms, you may buy a fraction of a coin, for example, 0.0001 Bitcoins (a few Dollars)..
Is Crypto trading a safe investment?
Cryptocurrency, like any other investment, has risks and benefits. However, in particular, trading cryptocurrencies is one of the riskier activities in the financial world.
Pros:
Cryptocurrencies are global, which means they have the same worth in all countries and are not subject to exchange rates.
Investing in cryptocurrency assets seems to have the potential to be incredibly lucrative.
The growing rate of adoption indicates that the sector is maturing.
Cons:
Cryptocurrencies are risky since they are highly volatile and vulnerable to runs and market collapses.
Authorities may potentially tackle the whole crypto business, particularly if countries consider cryptocurrency a danger rather than a cutting-edge technology. Examples of this can be found worldwide.
Cryptocurrency exchanges are more vulnerable to hacking than stock exchanges.
How can I spend my cryptos in the real world?
Although highly popular, cryptos may now be spent in a broad range of online and offline venues still. While not many establishments accept them, their adoption as a money transfer mechanism is growing each year, which will push more businesses to allow them. For example, think about Tesla's proposal to enable payment in cryptos for their EVs.
You can use it to top up your Microsoft account, buy gift cards online for retailers like Amazon, or even pay for your Starbucks coffee. Still, you can always withdraw your money: Just convert your Bitcoin holding to cash at a Bitcoin ATM or through a Bitcoin exchange.
Tips for New Crypto Traders
People who are successful in buying and selling Cryptocurrencies use security measures to increase the probability of making a profit when trading. These revolve around minimizing the trading platforms' commissions and operating expenses. However, other trading good practices are a mere matter of attitude, self-control, and common sense. Following are some essential tips for trading cryptos.
Use Stop Loss Orders: Rule # 1: Use Stop Loss orders. Rule # 2: Use Stop Loss orders. Rule # 3: Use Stop Loss orders. This is the best recommendation that any Crypto investor can get, which means that you should limit the potential to lose money using this type of order.
Get started with the DEMO Platform: Use a DEMO platform, which most of the trading platforms offer.
Learn about the cryptocurrency you want to buy and trade and how and why its price fluctuates: Understand trading transactions, learn, study both the basic concepts of Blockchain and Cryptocurrencies; in other words, do not start investing without knowing what you are about to invest in.
Analyze the price swings: Carry out your analysis. Some of your acquaintances will tell you about the amount of money they have made buying Bitcoins (or investing in any other financial instrument). However, if a trader made money once, it does not imply that repeating the past performance is possible.
Develop your Investment Strategy: For example, when will you open a buy order? When to close it? Design a scenario chart, invest based on it, and adjust it as the strategy gets tested.
Do not Run After the Money: It is essential to make sure you do not close (or open) your trades early. Staying put with your investment strategy is critical. When investors let their emotions take over their trading activity, they usually make a profit or a loss slightly higher than the costs per transaction. Trading frequently in this way, a method also known as scalping, will tend to lead to a loss of your total performance. At the opposite extreme, swing trading attempts to profit in a market over a period that ranges from one overnight hold to several weeks, which minimizes the number of times you pay the spread.
Leverage in Cryptocurrencies Should Work For You: Using a higher level of leverage allows the investor to invest more than the actual cash deposit. So leverage is an exciting capacity that platforms provide. Yet, the investor must take it responsibly because leverage multiplies profits and losses and might result in losing your account's total balance.
There will be 'Not so happy' days: When a person starts trading financial instruments, there will be days when making money will seem easy. However, the important thing is to keep in mind that there will be days when the investment strategy will not work, and you will lose money. Therefore, it is necessary to maintain capital in the account to sustain your trades over time. Never trade cryptos with the cash you need and whether you can afford to take a high risk of losing money.
Choose an App that explicitly specifies the transaction costs: Consider the expenses and costs of overnight financing, as well as the spread when choosing a provider. Some trading apps sing their praises about tight spreads, but they charge incredibly high overnight financing commissions, for example.
Choose a Crypto App that offers you a proper trading execution: By 'trading execution', we mean the time spent between the moment that you click on "Buy" and the moment where your order is executed. From an investing point of view, a poor trading execution is equivalent, economically, to an additional commission. For example, suppose your trading app offers low commissions but cannot fill your order fast and securely. In that case, you should consider choosing another one.
Choose a trading style that reduces the costs you pay: No need to explain further, right?
Be disciplined: When you want to carry out a trade, you must be clear on: Why are you opening a position? What level of profit do you expect to get? (be realistic) And most importantly: When will you accept the losses if the coin's price goes the other way (Remember Tip # 1)?
Buying Bitcoin and Cryptocurrencies in Nepal
Buying bitcoin and other cryptocurrencies in Nepal is a simple process and usually takes less than 10 minutes to get fully set up.
The first step is to register with a platform, app or exchange and complete a Know Your Customer (KYC) process. The exchange you choose will be interoperable with most devices, desktop and mobile, and will allow you to withdraw to your own personal hardware wallet. There are also several options available for buying and selling without verification on P2P exchanges, although they are much less user-friendly and are recommended for more advanced users.
Requirements to buy Cryptocurrency in Nepal
Before purchasing, there are a couple of important things you'll need to prepare:
A passport, national identity card, or driver’s to complete the KYC process.
A private and secure internet connection and public WiFi are not recommended as they may pose security problems.
A mobile phone to verify your identity using two-factor authentication (2FA).
A bank account or credit card you can use to make fiat currency deposits to purchase cryptocurrencies.
A crypto wallet to store your assets. Almost all exchanges will offer built-in wallets, but it is important to withdraw your crypto to your own personal cold wallet for optimal security.
Steps to Buy Cryptocurrency in Nepal
Create an account with an exchange
Nepal has 6 trusted exchanges available for you to sign up for, with the most popular being Kraken and FTX, which account for a combined 7,200,000 active users. Both exchanges are considered to be beginner-friendly and offer multiple deposit methods and a variety of cryptocurrencies. Exchanges will differ by fees, security, payment methods, and other features, so explore the "info" tab on the exchanges listed above to find which one is the right fit for you.
The platform you end up choosing will depend on your preferences and the cryptocurrencies and payment methods they support. Also, it's important to note that you can always sign up for other exchanges later.
Complete the KYC Verification Process
After signing up for an exchange you will need to verify your identity and address, which is part of the Know Your Customer (KYC) process. This is an unavoidable legal requirement for almost all exchanges in Nepal.
To complete this step you will need your photo ID readily available to take pictures of both the front and back sides of the document. In most cases, your verification will be approved instantly and at most can take 1-2 days.
Make a Fiat Deposit
To begin buying bitcoin and other cryptocurrencies you will need to link a bank account or credit card to the exchange. Some of the payment methods provided by Kraken and FTX are- Electronic Funds Transfer, Bank Transfer (SEPA), and Wire Transfer. Depending on the payment method, it could take anywhere from a couple of minutes to days for the funds to arrive at the exchange.
Buy Cryptocurrency
Once your account has been funded, you are ready to buy your first bitcoin. It's important to note that you do not need to buy a full bitcoin. Most exchanges will let you buy as little as a few dollars worth of bitcoin or any other cryptocurrency.
Send Your Bitcoin to a Personal Wallet
Once you've purchased bitcoin or your cryptocurrency of choice it's important to withdraw it to your own secure personal wallet. Leaving your coins on an exchange poses a security risk as many exchanges are targets for hackers to steal user funds. Storing your own coins on your personal hardware wallet mitigates that risk.
Major Risks of Cryptocurrencies
Are you considering adding cryptocurrency to your traditional portfolio? Here are a few critical risks to examine.
Price volatility & manipulation
Cryptocurrencies have been on a wild ride. Epic booms, busts, wild swings, and scams have amazed and baffled investors who have witnessed unexplainable and unprecedented gains and losses over the last decade.
For example, here’s a coin metrics chart on the volatility of daily returns (14-day average) comparing BTC (Red) to S&P 500 (Teal). Volatility swings in Bitcoin (BTC) and other crypto assets make it hard for investors (especially retail investors) to build confidence and secure gains.
Volatility in crypto prices generally stems from three primary sources; sentiment, speculation, and market manipulation. It’s the unregulated and anonymous nature of digital asset markets combined with the susceptibility of cryptocurrencies and other crypto assets to sentiment, emotion, and publicity that make prices volatile. Crypto exchanges, media owners, and influential investors can manipulate prices. This manipulation seems to be widespread — albeit not widely proven yet. The most used manipulation strategies include wash trading, dark pool trading, pump and dumps, and shilling.
Lack of Regulations
A lack of regulatory frameworks means there is a high degree of uncertainty like price volatility and manipulation. Investors and entrepreneurs are also concerned about the possibility of future restrictions, which may have a significant impact on the value of cryptocurrencies or end up, ultimately banning them altogether.
Crypto regulations are complex, disorganized, and haphazard. One area of particular concern for investors is tax treatment. A lack of regulation or what some term as regulatory greyness means some investors are scared off investing because they don’t have a clear understanding of what tax obligations require consideration or what records must be kept.
The good news is that regulators are catching up. Authorities in many jurisdictions are taking steps, producing research papers, and standards and introducing new regulations. Switzerland is one of the first countries to begin building a robust regulatory framework. The country has proposed an idea for minimizing rules while still keeping companies in line with legislation through ‘sandboxes,’ allowing startups to experiment and innovate within controlled conditions.
Britain and Singapore have been exploring their blockchain and crypto regulatory environment as well, providing platforms that enable companies to experiment under relaxed regulation and licensing requirements. In the US, the New York Attorney General’s Office recently launched the most comprehensive study on exchanges.
Market Adoption
Market adoption remains low for a host of reasons, from regulatory concerns and technology shortfalls to market volatility, public misunderstandings, and the fact that cryptocurrencies and the underlying blockchain technology that powers them are still emerging and in their infancy. This means there’s a chance that this new asset class, impeded by many different factors, regulations being one of them, will never be broadly adopted, leading to a complete loss of value. There is a clear need for more laws, technology improvements, and institutionalization to help drive trust and scale.
Security, Custody & Consumer Rights
Storing cryptocurrencies and other crypto assets can be risky business. There have been significant incidents of theft of personal wallets but also exchanges. Hacking remains a constant threat if cryptocurrencies are not correctly stored and protected.
To make things worse, investors cannot recover assets that get lost or stolen, and mistaken transactions cannot be reversed. Also, unlike traditional investing through a bank or brokerage, cryptos don’t have official safeguards or insurances. Rebates on lost investments depend on the whim of the organization you’re dealing with.
The good news. Custody solutions that give financial institutions the ability to hold cryptocurrencies on behalf of trading clients are beginning to emerge. These solutions are expected to catalyze the entry of institutional capital into the industry, and in-turn provide a trusted stamp of approval for retail investors as well.
Coinbase has announced its custody product upon completion of their first successful deposit. The multinational investment bank, Citigroup, has announced that it will offer crypto custody solutions to institutional investors. Citigroup launched a product called Digital Asset Receipt, intended for institutional investors to invest in cryptocurrencies in a regulated and secure manner. There is also Fidelity, which has announced a new and separate company called Fidelity Digital Asset Services. The Wall Street incumbent will handle custody for major cryptocurrencies such as bitcoin and execute trades for investors such as hedge funds and family offices.
Exiting the Market
The crypto market’s off-ramps are a real problem for many investors. Many exchanges allow withdrawals in USD only, some also allow EUR, GBP, and JPY, but the choice is minimal, and exchanges frequently require high minimum withdrawals when withdrawing to fiat. Many exchanges that support fiat withdrawals also only accept a few leading cryptocurrencies, and to withdraw fiat money, investors need to go through a tedious verification process that can take months. Some exchanges are accused of withholding funds for unclear reasons, and many banks are still very wary of accepting money from the sale of cryptocurrency. All this exposes investors to exchange rates, fees, and risks associated with dealing with opaque exchanges. The situation is improving, but it’s far from ideal.