Introduction to Cryptocurrency

A crypto currency is a coded string of data representing a currency unit. Peer to peer network called block chain monitor and organized crypto currency transition such as buying and selling and transferring and also serve as a secure ledger of transaction by utilizing encryption technologies

Keys

Keys: For crypto there are two keys: public and private keys. Cryptocurrency is controlled through a set of digital keys and addresses. Anyone can deposit a bitcoin or any other token in any public address. However, the recipient must have a private key to access the deposited crypto.

  • Public key: Public keys are created from a private key through an encryption algorithm. The same algorithm is used to create a receiving address from the public key.
  • Private key: A crypto private key is created when you first set up a cryptocurrency wallet. These keys are created and stored in a crypto wallet.

ICO: Initial Coin Offering

In the crypto industry, an ICO (Initial Coin Offering) is equivalent to an IPO (Initial Public Offering). A company can raise money to create a new block chain or service with crypto currency by launching a ICO as a way to raise funds. There are three different types of ICO:

  • Static supply and static price: Company can set a specific fund goal or limit which means that each token sold in ico has a present value/price and total number of token supply is fixed.
  • Static supply and dynamic price: An ICO can have a static supply of token and a dynamic funding goal this means that the amount of fund received in the ICO determines the overall price per token.
  • Dynamic supply and static price:Some ICO have a dynamic token supply and a static price meaning that the amount of funds received determines the supply

White Paper

Alongside structuring the ICO the crypto project usually creates a pitch book called white paper in crypto industry The white book is made available to potential investor through website or news website The promoters of the project uses the white book to show and explain the important information related to the ICO

  • Project description: What the project is about
  • Project need: The need that project will fulfill upon completion
  • Funding: How much money the project needs
  • Token allocation: How many virtual token the founder of the project will keep
  • ICO duration: How long the ICO campaign will last

Altcoins

Altcoins is a combination of two words "alt-coins" and "alternative coins" this is used for all coins other than bitcoin. Altcoin belongs to the block chain that they are explicitly designed for many of them are forks created from another block chain – Bitcoin or Ethereum. These forks are generally have more than one reason for occurring.

Many Altcoins are used within their respective block chain to accomplish something such as ether is used in ethereum to pay transaction fee. Some developers have created a fork of bitcoin in attempt to use it as a payment method like the fork that created BItcoin cash. Atlcoins are basically attempts to improve the perceived limitation of whatever cryptocurrency or block chain they are from.

Types of altcoin

  • Payment token: These are Altcoins that are developed to be used as payment methods
  • Stable coins: These are the Altcoins that reduce the volatility or price fluctuation by pegging its value to something like fait currency, precious metal and investment assets
  • Utility tokens: Utility token are use to provide service within the block chain network such as purchase fee and payment fee
  • Security tokens: Security tokens are represented by fund raising efforts or ownership. They also tokenization assets
  • Meme coins: As the name suggest they are inspired from meme but they quickly gain a short term gains example: Doge coin
  • Governance token: Governance token allow user to gain certain rights within the block chain such as voting rights for changes in protocol

Crypto Exchange and How to Choose

Crypto exchanges are platforms from which you can buy and sell crypto by creating wallets. Before choosing a crypto exchange, consider the following:

  • Security regulations: Look for exchanges that implement two-factor authentication, cold storage wallets, and encryption protocols to protect your funds.
  • Reputation and track record: Check the platform's previous records and user reviews to ensure it's trustworthy.
  • Supported crypto assets: Look for exchanges that support the crypto assets you intend to trade, such as crypto assets or investments.
  • Liquidity: Higher liquidity means simpler and smoother transactions with minimal risk of slippage.
  • Fees and charges: Compare the fee structures of different exchanges for various services like deposit, withdrawal, and trading activities.
  • Trading tools: Look for exchanges that have the necessary tools for your trading strategies.

Core Trading Concepts

The core concepts of trading are:

  • Ability to read and analyze charts and graphs: This includes reading and analyzing the charts and graphs as these are the integral part of a successful crypto trade
  • Identifying the market trends: This includes that the crypto trader should be able to identify the market trends trough charts and graphs following various indicator like SMA, EMA and MACD. It helps in making the trade profitable
  • Knowledge of when to enter and when to exit: The knowledge of when to enter and when to exit is most important part as it decide the trade being profitable
  • Knowledge of when to hold and sell: The knowledge of when to hold and when to sell as it play a key role in making each trade profitable holding for too long or too short can result in loss

Price Bar

A bar chart consists of multiple price bars, each of which shows how the prices of a crypto move over time. Each bar typically shows the opening, high, low, and closing prices of a crypto. Bar charts are similar to candlestick charts and show the same details, just in a different form. The range between the high price and low price of a crypto is represented by the vertical height of a bar chart. The bar uses a horizontal line to note the opening and closing prices of a crypto.

Candlestick Chart

Trading Gaps

Gap trading refers to the price movement that occurs when the prices of an asset opens significantly higher or lower than its closing resulting in a gap in the price chart

Candlestick Chart

Types of Gaps

Types of gap:

  • Up Gap (Bullish Gap): opens higher than closing
  • Down Gap (Bearish Gap): opens lower than previous closing

Trading Strategies for Gaps

  • Gap trading:
    • Buying during up gap
    • Sell during down gap
  • Gap fill strategy:
    • Sell when price fills the up gap
    • Buy when price fills the down gap
  • Breakout strategy:
    • Buy when the prices break the up gap’s high
    • Sell when prices break the down gap’s low

Creating a Trading Strategy

Creating a trading strategy involves analyzing market trends, setting goals, and deciding on specific trading methods. Various points to consider before making a trading strategy:

  • Never invest more than what you could afford to loose
  • Research and stick to fundamentals:
    • Crucial fundamental of research is to check the utility of token
    • Speed and scalability of transaction
    • Security of the network
    • Transparency
  • Stick to major crypto currencies: While the risk remains with major currencies too but it shows much resistance unlike newer currencies / coin
  • Use safe storage: Use a safe and secure storage for storing crypto pins and keys
  • Use indicators: Use crypto indicators to make uniform decisions
  • Use charts like candlestick and bar chart
  • Use indicators like SMA, EMA and MACD