On October 31st, Bitcoin, the first digital asset, turned ten years old. During this time, the cryptocurrency market has grown from zero to over $200 billion, and about 15,500 exchanges have appeared. These figures are regularly increasing, and interest is not fading, despite the ever-changing moods. One of the reasons for this is that cryptocurrencies remain an effective method of earning. Trading on digital assets exchanges attracts fiat traders and other users who are overwhelmed with the idea of making quick profits.
Many users, especially if they have not previously experienced trading, have questions about entering the cryptocurrency market. To clarify the actions on the digital assets exchange, we spoke with Maria Stankevich, the head of the communications department of the EXMO crypto platform, about what you need to start trading and how to cope with all the difficulties that volatile coins bear in store.
Before you discuss trading, tell us about your exchange. What is new in your company?
As you know, today, to stay in place, you need to run and to develop actively, you need to sprint, especially in the cryptocurrency industry. We try to constantly change, test new services and products, launch new promotions, and enter new markets. Over the summer of 2018, we added 13 new cryptocurrencies and 34 currency pairs, added the Turkish lira in addition to the five other fiat currencies, launched the TradingView charts, a new cashback system, in which the refund occurs daily, connected the new payment system Mistertango, WebMoney, SWIFT transfers, launched in the Turkish market.
How will the new cooperation of the cryptocurrency exchange, in particular, entering the Turkish market, help the ordinary trader earn more? After all, at the moment, the lira, the national currency of Turkey, is not in the best condition.
We analyzed and noted that entry into the Turkish market was primarily since, over the past six months, the number of new users from Turkey increased by three times compared with the same period last year. Seeing such a demand, our exchange decided to fully launch in a new region, adding the Turkish lira and making a version of the site and customer support in Turkish. Now, we have started a promo—0% in fees for depositing and withdrawing the Turkish lira, which, of course, encourages traders to use our exchange. Various partnership offers (including zero-fee payment systems), the addition of popular and interesting cryptocurrencies, a 100-percent cashback, regular airdrops, and coin contests allow not only to keep existing traders but also attract a massive number of new ones. Despite the market correction, registrations are going up, which means that the exchange is on the right track.
The industry is constantly evolving. What changes in cryptocurrency trading have happened lately?
The most important trend of 2018 is the arrival of whales in the crypto market, or very smart professional investors, fiat investment funds, who used to bypass the exchange. We tried to work with major players in the industry, sent them requests for cooperation, made them special conditions with reduced commissions because the volumes of their transactions are large. Russian and Asian funds came to us, and it is very interesting to work with them. In addition, their arrival affects the trading volume of the exchange: it has increased. This is a big plus for users.
The second trend of cryptocurrency exchanges concerns ICOs. Now, there are more than 250 coins in the listing line, and this is too much. Such a large number can be attributed to the row of 2017 when the ICOs boomed, and everyone designed their tokens and wanted to add them to the listing of some exchange. Now there is not so much scam around, because the euphoria has passed, and users began to understand the cryptocurrency industry better. Projects have become much better.
How is the listing of coins taking place?
Initially, we, like all cryptocurrency exchanges, ask them to fill out a form. Consideration of the application takes from three days to several weeks. It is imperative for us to be utterly confident in the project.
There are five main criteria, according to which the conclusion is made when we decide whether to accept some coin on the exchange or not.
Evaluation of the project based on the work done: whether the idea is interesting and promising, whether there is a working MVP (minimum viable product), what the roadmap looks like, how the work is taking place, and whether deadlines are being met.
Evaluation of the project community: the common information field around the project, the threads on specialized forums.
Evaluation of the team: who drives the project, whether there were successful projects in the professional history of the team. Most often, we prefer to talk personally with the project’s CEO to understand the motivation and plans of the team.
Evaluation of the project regarding market value: whether the business is really beneficial and necessary for the market.
Evaluation of the project in terms of readiness to work on joint marketing and PR: it is vital for us that we can create an interesting information guide and bring clients to our exchange, and our clients must be interested in a new coin.
What, in your opinion, is the most crucial difference between fiat and cryptocurrency trading?
Generally, let us first define what an exchange is. You need to understand that this is not a place where you can just passively monitor your contributions when you have invested in an asset and are waiting for its growth. For profit, you need to participate in trade. Besides, it is very interesting. It is gratifying that people are beginning to understand that the process of trading requires knowledge and understanding of the main trends and existing analytics.
Fiat trading was formed many years ago. The first stock exchanges opened in the 16th century, and cryptocurrency markets in the modern world are a new phenomenon.
The strengths of cryptocurrency trading include:
A sudden increase in supply is impossible. The total amount of a particular currency is known in advance, and no one is able to “turn on the machine and print a few more millions” for some of their own purposes;
You can use the money directly without the participation of intermediaries, such as a bank or exchanger;
The cryptocurrency world is distributed by default. There is no single center or system organizer, as operability is ensured by a vast number of ordinary user nodes, each of which independently makes a decision about (not) the validity of transactions;
High speeds. Transactions often take minutes;
The cost of transactions is fixed and does not depend on the amount of the transfer. This is especially true for large transfers, as, in a bank, one would have to pay a percentage of the amount;
Logs of all transactions are public. Therefore, all movements of money can be traced: for example, with (hypothetical) payment of taxes using Bitcoins, you can check exactly where each Satoshi went. This is very relevant for the fight against corruption;
Creating a new wallet takes a couple of minutes;
Security. Bitcoins, like other cryptocurrencies, cannot be blocked, cannot be seized through the courts or with the help of pressure on banks;
Freedom. Cryptocurrencies work wherever there is the Internet, ignoring any boundaries.
But there are also weaknesses. These include:
The supply of each specific currency is limited and can only decrease, money out of circulation as a result of data loss is not replaced by new money;
The absence (at the moment) of collateral. National currencies are backed by goods and services produced in the country; taxes and fees are paid in national currencies. This makes national currencies secure. The cryptocurrency world, in turn, is provided exclusively by the demand for it;
High liquidity risk;
It’s hard enough to explain to users who have never come across the world of cryptocurrencies what it is and how it all works. Because of this, cryptocurrencies have not yet become an object of wide use.
Therefore, we are trying to talk about cryptocurrency and technology in an accessible and understandable form for all. With what capital do you think a crypto trader needs to start?
To understand the basics of trade, minimum capital would be enough. Much depends on the chosen strategy, on preferred currency pairs, on your own expectations. For example, in the XRPRUB pair, the minimum size of the limit order for entry is 15 Ripple today, and that is 360 rubles or about $5.5 at the current rate. Of course, with such a low deposit, it is unlikely to rely on substantial profits in the short term. If you have a desire to take up the world of trading seriously, you should increase the initial deposit; there is no upper limit. Any business, however, should be approached systematically, in stages.
Then how best is it to distribute assets up to $1,000, up to $10,000, or more?
There is no fundamental difference. If your trading strategy/technique can double your capital in three to four months, it doesn’t matter in what particular currency the increase will take place. In general, diversification is desirable, but it is not a cornerstone in trading.
At what point is it best to enter the cryptocurrency market, given its inconstancy? Is it too late to join the industry now?
Jonathan Swift, an Anglo-Irish publicist and social activist, said that there was nothing more permanent in the world than temporary. Therefore, one should not expect constancy and calmness from the world of money, including cryptocurrencies. It is worth looking for ways to make money on this volatility, on this dynamic. In general, the moment of entry into the market is determined precisely by your beliefs, your trading strategy, your character. For example, if you prefer medium-term trading, then you will be primarily interested in the long-protracted movements that are present on the market with striking regularity. If you prefer intraday trading (starting from scalping, ending with trading from distribution levels or other methods), then the volatility of the market and the balances you encounter will only be on hand.
How is it more rational (if possible) to behave in a bear market? And how should one act in a bull market?
Here, the strategy is quite simple: sell when the exchange rate drops, and buy when the exchange rate rises. You should not try to change the rate with your asset—it simply will not be enough.
In a bear market, each next transaction should be priced lower than the previous one; in a bull market, the opposite situation. In this way, a line of bears or a line of bulls is formed, with an average of the price of entry.
At what points and how can you take risks?
Every trader determines risk management themselves, independently. Despite the overall diversity of strategies, in general, there are several common features:
Do not sit all day trading. Over time, attentiveness and concentration decreases, and the possibility of error increases;
Do not put all your eggs in one basket. Enter into a transaction with an amount of not more than 30% of your deposit. This is a basic rule for many investors and traders;
The size of the risk in each strategy should be within 3: 1.
What tests should be relied upon when calculating the dynamics of a crypto asset?
The same as those used in the forex market: fundamental and technical analysis. Fundamental to a greater degree is based on studying the financial and macroeconomic situation in the world; with its help, it is possible to decide which currency you need to buy or sell to get long-term profit. Technical analysis is designed to provide you with an idea of when you need to buy or sell certain assets. It is based on the analysis of various graphs, and mathematical methods are widely used in it.
Is it worth it in cryptocurrency trading to rely on intuition and thoughts like “I have a premonition that . . ?”
Premonitions are usually based on extensive experience in one area or another. When a person is engaged in something specific for a long time, then at their subconscious level, their understanding and skills are postponed, which manifest themselves later in the form of forebodings. This is the type of forebodings that you should trust under your complete responsibility. Another type of judgments includes thoughts like “but I heard, and I was told.” Making a decision based on someone else’s opinion is a common mistake, first of all, among novice traders. You should always think with your head and take personal responsibility for your actions and your choices.
What, in your opinion, will be the rate?
Cryptocurrencies are a long-term investment. Today, the situation in the industry is much more healthy than during last year’s rush. In early 2018, we saw the crypto bubble burst, and only healthy projects remained. The fact that people today are losing interest in a large number of altcoins that have no real use and real community is true. And this is excellent news! This means that the focus of the investor and users has shifted toward quality projects and products. And taking into account other healthy trends (active movement toward regulation and integration into the world of traditional finance), I believe that we are on the right track.
That is why it is necessary to take advantage of every possible situation the crypto market gives: to earn both in a falling and a growing market, to look closely at interesting projects, and to buy interesting coins and tokens.