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Once you have decided to invest in cryptocurrencies, naturally the question arises: How do I do it?
It’s simple really. You first have to choose a cryptocurrency exchange to invest in cryptocurrencies. Without an exchange, you can’t trade. In simple terms, a cryptocurrency exchange is an online marketplace through which you can buy, sell, or trade cryptocurrencies.
A cryptocurrency exchange is quite similar to stock market exchange, except there are no brokers who will trade or invest on your behalf. You should trade directly through the exchange.
There are many exchanges online through which you can sell, buy, or exchange cryptocurrencies for other digital currencies. If you choose to do it professionally, you can make use of the various trading tools by opening an account on these exchanges. All you have to do is provide your ID for verification. But if you are interested in cryptocurrency trading on certain occasions, then you can opt for other exchanges that do not require you to open an account, but you might need to import your private and public keys.
There are two main types of cryptocurrency exchanges: (credit card gif. enter card, exit BTC)
Fiat Exchange
Fiat exchanges let you buy cryptocurrencies with fiat money like rupees, dollars, etc., using cash, credit card, or a bank account.
Altcoin Exchanges (Enter crypto, exchange crypto)
Altcoin exchanges don’t allow you to transact through credit cards or banks. Instead, they require you to make a cryptocurrency deposit first, which you can use to buy or sell other coins at a later time. So as you must have already figured out, first-timers go through fiat exchange first and buy cryptocurrencies. Followed by this, you can go to an altcoin exchange (or pure cryptocurrency exchange as it’s sometimes referred to) to purchase cryptocurrencies.
Here are a few more important types of exchanges and terms. (composite diagram)
Cryptocurrency Funds
These are groups of cryptocurrency assets, managed by professionals, which allow the public to buy or hold digital currency using the funds.
Traditional exchanges
Similar to a typical stock market exchange, these options let buyers and sellers to trade based on the current market cap of the digital currency. Since a middle man is involved in conventional trading exchanges, a fee is charged for every transaction. The best thing about trading cryptocurrencies is that they allow users to convert their fiat currency (Indian Rupees) into cryptocurrency (Bitcoin, Litecoin, etc.) at current market price.
Decentralized exchanges
These exchanges offer direct peer-to-peer trading between sellers and buyers, but in this case, the seller sets his own exchange rate. Hence the current market price is not drawn in.
Decentralized exchange is the future of cryptocurrencies. You might wonder why. This exchange does not require any third party service to hold the customer’s funds, but the trading between the buyer and the seller occurs through an automated process. This is also called peer-to-peer trading.
