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Four Things to Consider Before Starting Cryptocurrency Trading
Are you planning to add cryptocurrencies to your investment portfolio? Here is our guide to discovering the volatile world of cryptocurrencies.
Disclaimer: This article is an educational guide to trading CFDs and the financial markets and should not be considered investment advice. Trading CFDs involves high levels of risk. Always ensure you understand all the potential risks and rewards associated with trading before placing any trade.

The global cryptocurrency market was valued at $1.3 billion in 2021 and is expected to grow to $2.8 billion by 2028, representing a compound annual growth rate of over 12%. These figures, published by market research firm Blue Wave Consulting, highlight the growing popularity of cryptocurrencies. If you’re interested in cryptocurrency trading, now is a great time to start. But before that, here are some things you need to know about this exciting market.
1. How to start trading cryptocurrencies
There are generally two ways to trade cryptocurrencies. They are:
Cryptocurrency Exchanges
Cryptocurrency exchanges allow traders to open accounts and link them to their cryptocurrency wallets. Some wallets store your digital assets, while others simply record all your cryptocurrency transactions. The wallet owner is ultimately responsible for the security and ownership of the assets. Typically, a public key or address is used to send cryptocurrency, while a private key is used as proof of ownership of the cryptocurrency in your wallet.
Opening a cryptocurrency wallet and protecting it from hacks and malware can seem daunting and confusing to beginners.
Cryptocurrency trading with CFDs
Cryptocurrency beginners turn to CFDs to overcome the weaknesses of portfolios. By using CFDs, traders can speculate on price movements in the cryptocurrency market without having to own and secure the cryptocurrency. Furthermore, CFDs allow for leveraged trading, meaning traders can open a trade with just a fraction of the total trade value. While this greatly increases the potential for profit, it also increases the risks involved and should be used with caution. Check out the Cryptocurrency section of our website for more information on the cryptocurrency CFDs we offer and how to manage risk.
You can also speculate on both rising and falling cryptocurrency markets since CFDs do not involve owning the underlying asset. Another advantage is that the cost of trading via CFDs is much lower than trading through exchanges.
Did you know?
The cryptocurrency market is always open and never closes during holidays or weekends!
2. Factors affecting the digital currency market
Below are the various factors affecting the cryptocurrency market:
Demand and supply
As with any other asset, cryptocurrency prices are influenced by the market forces of supply and demand. An increase in demand pushes cryptocurrency prices up, while an increase in supply pushes them down.
Market risk appetite
Cryptocurrencies, like stocks, are also seen as risky assets. Any news about investors’ risk appetite has an impact on cryptocurrency prices. The higher the risk appetite, the higher the demand, and therefore the higher the price of cryptocurrencies.
Regulations
Increased government regulations may be viewed negatively, especially when some countries ban cryptocurrencies. However, government regulations can also have a positive effect as they protect the interests of traders. This encourages more traders to enter the market, which in turn boosts the demand for cryptocurrencies.
Economic factors
Economic data releases, especially those reflected in fiat currencies, have a significant impact on cryptocurrency prices. For example, rising inflation and slower GDP growth in major economies can have a negative impact on major currencies and increase demand for cryptocurrencies. On the other hand, rising inflation or a significant slowdown in economic expansion can impact the market’s risk appetite and put pressure on demand for cryptocurrencies.
Geopolitical events
Geopolitical events that negatively impact demand for traditional assets are likely to have a positive impact on the cryptocurrency market. However, ongoing geopolitical tensions may negatively impact investor sentiment, leading to a decline in the cryptocurrency market.
Asset drivers
Increase in supply, change in the underlying business model, and change in mining costs or mining rewards are all factors that affect the demand for cryptocurrency.
Social Media
Cryptocurrencies are very popular among the younger generation, which is why prices are affected by the social media buzz.
Did you know?
In January 2021, Elon Musk changed his Twitter bio to “#Bitcoin,” which caused the price of the cryptocurrency to rise by nearly 20% within a few hours.

3. How to choose a cryptocurrency to trade?
There are two very important aspects to consider when choosing a cryptocurrency to trade:
Market capitalization
This is the total market capitalization of a cryptocurrency and is usually expressed in US dollars. It indicates the level of investor and trader interest in the cryptocurrency. New traders often start with the larger cryptocurrencies. Bitcoin is the cryptocurrency with the highest market capitalization ($378.57 billion as of September 16, 2022) and dominates about 40% of the market.
Did you know?
All cryptocurrencies except Bitcoin are known as altcoins. This is because Bitcoin has the lion’s share of the cryptocurrency market.
Price gains
Traders prefer to start trading cryptocurrencies with coins that have a good history rather than trading relatively new ones. The increase in the price of a cryptocurrency over a period of time is a good indicator of its future growth potential. For example, Bitcoin was officially launched in 2009. The value of one bitcoin has risen from less than $400 in 2015 to nearly $20,000 in 2022. Although trading time frames are much shorter, long-term growth is an indicator of the strength of a cryptocurrency.