How To Trade Crypoto Currency with Deriv by Vince Stanzione - Crypto CFDs

How to Trade Cryptocurrency with Deriv

CONTENTS

Chapter 01.

Introduction 06

Chapter 02.

Types of cryptocurrency

Bitcoin Altcoins Etherium

08

09 10 11

Chapter 03.

The basics of trading cryptocurrency

Trading cryptocurrency with Deriv What is a CFD? Example of a CFD trade on cryptocurrency Swap charges

12 13 14 14 16

Chapter 04.

CFD trading: order types

Market ordersPending orders

181919

Chapter 05.

How to evaluate a cryptocurrency

Fundamental analysisTechnical analysis

212525

Final note

Appendices

39

41

Glossary

53

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How to Trade Cryptocurrency with Deriv | Introduction

INTRODUCTION

What is cryptocurrency?

Cryptocurrency is a secure digital or virtual currency protected by cryptography, which almost prohibits users from counterfeiting or double-spending it. Decentralised networks such as bitcoin and many other cryptocurrencies are built on blockchain technology — a distributed ledger enforced by a large number of computers all around the world. Cryptocurrencies are identified by the fact that they are generally not issued by a central power, and for that reason, they are theoretically immune to government control or manipulation of their value. Central banks are able to print fiat currency that is based on faith and not backed by commodities, such as the US dollar, the euro, and the British pound, in unlimited quantities. Throughout history, all fiat currencies have eventually failed, as governments tend to overprint them. Since cryptocurrencies are not controlled by authorities, they do not suffer from this problem.

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How to Trade Cryptocurrency with Deriv | Types of cryptocurrency

TYPES OF CRYPTOCURRENCY

Bitcoin

Bitcoin is the best-known cryptocurrency and the largest by market capitalisation (i.e. total equivalent value in USD). It was launched in 2009 by an individual or group known by the pseudonym Satoshi Nakamoto. The original Bitcoin white paper is available in open access.

Although it is not legal tender, Bitcoin is extremely popular and has sparked hundreds of other cryptocurrencies, collectively called altcoins. “BTC” is the symbol used for Bitcoin.

There have also been spinoffs or forks from the original Bitcoin, such as Bitcoin Cash. However, whilst the names are similar, they are priced very differently and should not be confused.

At the time of writing this book, Bitcoin is trading at over $40,000, making owning 1 Bitcoin unaffordable for many. Fortunately, Bitcoin is divisible into Satoshis, and you can buy as little as

$5 worth of Satoshis with many online brokers.

What makes Bitcoin unique is that only 21 million Bitcoins will ever be available. Each Bitcoin is divisible into 100 million units, or Satoshis, and one Satoshi is worth $0.0004 as I am writing.

Bitcoin can be transferred using a private key which is a series of numbers and letters. If you lose this key, you lose access to that amount of Bitcoin.

Whilst still relatively new, Bitcoin is building up momentum with more and more financial institutions seeing the potential and a growing number of companies and respected investors announcing that they have large holdings in Bitcoin. Compared to other financial markets, the cryptocurrency market is still in its infancy, which opens up many opportunities. However, you will also notice that these markets can be very volatile.

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How to Trade Cryptocurrency with Deriv | Types of cryptocurrency

Altcoins

Cryptocurrencies other than Bitcoin are collectively called altcoins. Most of these digital coins use a technology called blockchain that allows secure peer-to-peer transactions. Altcoins can provide massive gains if you get the right project; however, they are also subject to high risk since many fail and become worthless. The smaller altcoins can also be quickly manipulated (similar to smaller cap companies or penny shares). Buyers push the price up to attract more buyers. Then, the initial buyers cash out at a profit, leaving the new investors holding worthless cryptocurrencies.

Deriv currently offers the more established cryptocurrency pairs, and they are all traded against the US Dollar. It is expected more digital currencies will be added to the trading platform in due course, including cryptocurrencies paired together, as explained in more detail in the next chapter.

Table 1 shows cryptocurrency pairs that are currently available for trading on the Deriv MT5 platform. MT5 can be downloaded free of charge from the Deriv website to a computer or as a mobile app and is accessible round the clock.

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Figure 1 . Cryptocurrencies you can trade on Deriv

The largest altcoin by market capitalisation is Ethereum, so let’s discuss it in more detail.

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How to Trade Cryptocurrency with Deriv | Types of cryptocurrency

Ethereum

Another popular cryptocurrency is based on the Ethereum blockchain system, a decentralised open-source ledger. Originally named Ether, this digital coin is popularly known as Ethereum, which is the name we’re going to use for it here. Ethereum is commonly abbreviated as ETH. At the moment, Ethereum is the second-largest cryptocurrency after Bitcoin. It was first described

in a 2013 white paper by Vitalik Buterin.

The Ethereum platform, first described in a 2013 white paper by Vitalk, has been a launchpad for many other cryptocurrencies. It is currently working on ETH 2.0, which is aiming to make processing faster and less power-intensive. More information about ETH 2.0 is available in detail.

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