The world of cryptocurrencies is an exciting and rapidly changing one. It’s a new way of dealing with money and digital assets. If you’re just starting to get interested in this topic, here’s a step-by-step guide that will help you understand everything from the basics to some practical tips.
What are Cryptocurrencies?
Cryptocurrencies are digital currencies that use cryptography to ensure secure transactions. This means they have a complex system of coding that prevents fraud and ensures that no one can manipulate the data. Most cryptocurrencies operate on a technology called blockchain.
What is Blockchain?
Blockchain is like a giant digital ledger. Imagine a notebook where you write down all your transactions in a clear and transparent way. Each time a transaction happens, it is recorded in a “block”. These blocks are chained together, forming a “chain” (hence the name blockchain). The cool thing is that this information is shared with everyone on the network, which makes it difficult for anyone to cheat or alter the data.
Main Cryptocurrencies
- Bitcoin (BTC): Created in 2009, it is the first cryptocurrency and the most famous. Many people use it as an investment or a store of value, just like gold.
- Ethereum (ETH): In addition to being a currency, it is a platform that allows the creation of smart contracts and decentralized applications (dApps). This means that you can build programs that work automatically without the need for an intermediary, such as a bank.
- Altcoins: This is the term used to refer to any cryptocurrency other than Bitcoin. There are thousands of altcoins, each with their own characteristics and purposes. Examples include Ripple (XRP), Litecoin (LTC), and Cardano (ADA).
How Does the Cryptocurrency Market Work?
Exchanges
To trade cryptocurrencies, you use an exchange. Think of them as brokers that allow you to buy and sell digital currencies. Here are some of the most popular ones:
- Binance: One of the largest exchanges in the world, with a wide range of cryptocurrencies available.
- Coinbase: A beginner-friendly exchange that lets you buy Bitcoin and other cryptos with ease.
To get started, you create an account on the exchange, verify your identity (in many cases) and then you can deposit money (in reais, dollars, etc.) or exchange other cryptos. (you already know how it works, you're using one now hahaha)
Wallets
Once you’ve purchased cryptocurrencies, you need a safe place to store them. That’s where wallets come in.
- Hot wallets: These are connected to the internet. They are convenient because they allow you to access your crypto quickly and make transactions easily. However, because they are online, they have a higher risk of being hacked. Example: exchange wallets.
- Cold wallets: These are not connected to the internet, which makes them much more secure. They can be physical devices (like a pen drive) or even a piece of paper with your keys. However, accessing your crypto requires a little more work. Example: Ledger or Trezor.
Note: we normally use wallets to store a quantity of crypto that we accumulate over time, for example instead of accumulating bitcoin for 3 years on Binance I send the purchased bitcoin to my wallet, thus making it safer and accumulating more and more, when I decide to sell them I simply transfer them to Binance again and sell them.
Public and Private Keys
When using cryptocurrencies, two keys are essential:
- Public key: This is like your bank account number. You can share it with other people so they can send you cryptocurrencies.
- Private key: This is like your password. It should never be shared with anyone! If someone has access to your private key, they can steal your cryptocurrencies.
Technical Analysis in the Cryptocurrency Market
What is Technical Analysis?
Technical analysis is a way of predicting cryptocurrency price behavior by analyzing past data and charts. This technique is used by traders to make decisions about when to buy or sell. Let’s explore some important concepts:
Support and Resistance
- Support: This is a price level where demand is high enough to prevent the price from falling any further. Imagine a floor that holds the currency down. When the price reaches this level and cannot fall any further, it means that people are buying.
- Resistance: This is the opposite of support. Here, the supply is strong enough to prevent the price from moving higher. Think of it as a ceiling. When the price hits the resistance and can't break through, it indicates that people are selling.
Tendencies
Cryptocurrencies move in trends, and understanding this is key:
- Uptrend: The price is rising, with higher highs and higher lows. This is a good sign for those who are buying.
- Downtrend: The price is falling, with lower highs and lower lows. This may indicate a time for caution.
- Sideways trend: The price moves in a narrow range, without rising or falling significantly. It may be a time of waiting.
Technical Indicators
Traders use various indicators to help them decide what to do. Here are some common ones:
- Moving Averages: Show the average price of a currency over a specific period. If the price is above the average, it may be a bullish signal.
- Relative Strength Index (RSI): Measures whether a cryptocurrency is overbought or oversold. If the RSI is above 70, it could be a sign that it is overbought (may fall). If it is below 30, it could be oversold (may rise).
Final Considerations
The cryptocurrency market is dynamic and full of opportunities. For beginners, it is important to understand these basic concepts and familiarize yourself with how everything works. Technical analysis can help you make more informed decisions, and over time, you will feel more confident exploring this universe.
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Hi beginners, I think we've covered all the basic concepts here, over time I'll go into more depth, especially in technical analysis, if you have any questions about something specific you can leave them in the comments and I'll answer as quickly as possible.
Don't forget to like and share to spread knowledge 😁
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