Over the past eight to ten years many of us might have come across terms such as cryptocurrencies and bitcoin. However, it is quite obvious that a vast majority of us are still not very sure as to what exactly they are. Put in layman’s terms, cryptocurrency is a digital currency that is different from debit cards, credit cards and other online means of payments and receipts. These are conventional methods of payments and are linked to the respective currencies of the country. These include the USD, GPB, Euro, Yen, and a host of other currencies. On the other hand, cryptocurrencies are virtual currencies that are not related to any of the legal tender money that we are aware of. Bitcoin is the first cryptocurrency and today there are dozens of such cryptocurrencies. In this article, MGC Logic brings you all you need to know about Litecoin trading. This is similar to bitcoin but has some unique features associated with it.
What Is Litecoin?
This is a peer to peer currency that uses the power and reach of the internet. You can use this form of currency to make instant and zero-cost payments to almost anyone across the world. It is an open source mode of payment and it is fully decentralized and there are no central authorities like the central banks. The use of high tech mathematic makes sure that the individuals are able to control their own finances and gives them full power and authority to do so. The confirmation time of Litecoin is much faster and you also have improved storage efficiency. It compares extremely well with the various math-based currency and digital forms of payments that are now being used. It does have healthy industrial and business support. This does make it possible for Litecoin to generate the right kind of liquidity and trade volume. It certainly is becoming popular and compares well with Bitcoin and others.
What Is Litecoin Trading and How Does It Work?
Like other cryptocurrencies, Litecoin is also traded similarly. Basically there are three aspects to cover.
- Fiat to litecoin trading – If you have some excess funds in the form of dollars or other currencies, it is possible to invest the same in what is referred to as litecoin trading. There are many portals and they are referred to as exchanges. These exchanges accept dollar and other forms of currencies and in exchange you can buy litecoins. In the same way, if you have litecoins you can sell them at the applicable exchange rate and get it converted into your form of local currencies. This is fiat to litecoin trading.
- How to store litecoins – Cryptocurrencies like litecoin have to be stored safely to be used as and required. It is stored in digital wallets. The wallet is digitally protected with your private key and also public address. It is used for storing, receiving and sending litecoins. Public address is the place where buyers will send you money. Private key gives only you the right to access your cryptocurrency and send it to those you want. There are also other things that you should know. These include hot storage and cold storage through hot wallets and cold wallets. Any wallet that is connected to the internet is referred to as hot wallet and few examples are exchange wallets, mobile wallets and finally multi-signature wallets. Cold wallets are considered safe because it is totally cut off from the internet. A few examples of cold wallets and cold storages are paper wallet and hardware wallet.
- Trading litecoins with other cryptocurrencies – Finally we have what is known as crypto-to-crypto trading. You have to access the cryptocurrency exchange, sign up and have an account and the same can be used for receiving payments in litecoins and also making payments using the same cryptocurrencies. You should know when to buy and when to sell litecoins using the right graphs and other technical tools.
Why Buying Litecoin Better Than Buying Bitcoin
Both are the same In many ways. However, there are a few who believe that litecoin trading could be a better option when compared to bitcoin. Let us try and find out the various reasons as to why Litecoin could be a better option when compared to bitcoin.
- Litecoin is the newer when compared to Bitcoin. Bitcoin was founded on January 3, 2009 while Litecoin was founded on November 7, 2011.
- The average transaction time required for bitcoin is around 10 minutes. On the other hand, litecoin has been able to reduce the transaction time to just around 2.5 minutes and this indeed is a big takeaway as far as the latter is concerned.
- Further, when it comes to block reward per block, there are reasons to believe that Bitcoin could be a better option. This is because of an obvious reason. Bitcoin offers a block reward per block of 12.5 while this is double in case of Litecoin. It offers 25 as block reward per block.
- Then when it comes to supply limit, since Bitcoin is much older, the limit has been set at only 21 million cryptocurrencies. However, as far as Litecoin is concerned, the supply limit has been set at around 84 billion. However, when it comes to market capitalization, in case of Bitcoin it is around USD 154 billion and this compares favorably with around 10 billion for Litecoin. However, this has to be looked against the background of number of years for which Bitcoin has been around. As mentioned above, Bitcoin was launched in 2009 and Litecoin was launched in 2011.
- Bitcoin uses blockchain technology while Litecoin also uses the same. However, certain new technological advancements and changes have been for Litecoin and this could make it a safer and more robust cryptocurrency.
Hence when all the above attributes and factors are taken into account, there are reasons to believe that Litecoin could be a better option. However, these are early days and one has to wait and see as to which is the better option.
Trading Rules For Those Who Are Into Buying Litecoin
- You cannot have a win-win situation. Whenever a trading happens in Litecoin, one loses while the other gains. It is like a see-saw where one child move up while the other goes down and the roles get reversed soon. Better to start with small leverages. You should not put in big money in LItecoin trading and according to experts, 10X could be a good amount to start with, especially for beginners.
- Trade with amounts that you can afford to lose. Trading in cryptocurrency is of course uncertain. Therefore, it would always be better to start off with a fund that you can afford to lose.
- Limit orders should be realistic. You must know how to set your stop-loss limit effectively. Though it could vary from one session to session, ideally it should stay between 20 to 30% which according to experts is reasonable. If you are able to follow this limit order bandwidth, it is unlikely that you will suffer losses higher than $90. In some cases, the losses could be as low as $20 or even less. This certainly is a much better option when compared to losing everything to a catastrophic margin call.
- Always chose popular cryptocurrencies. With so many cryptocurrencies hitting the market, making the right choice could often be a problem. However, if you look at the credentials of cryptocurrencies like Litecoin, you will certainly understand that this is a much better choice. You should try and learn the lessons with regard to the manner in which values are generated, and the factor that could play a role in defining the price.
- Carefully opt for margins. Margin trading does make quite a bit of sense especially in a scenario where there is a rapid growth or downward movement in the asset value. Hence, you should try and open a position the moment you see that volatility is coming in a particular direction.
Finally, your Litecoin trading could be profitable and enjoyable if, as a trader, you are able to evaluate risks as accurately as you can. You should also know how to select the right time the quantity of Litecoins to be traded.
It is clear from the above that there are quite a few good reasons for investing in Litecoin. It is new, it is dynamic, it uses the best of mining and other technologies and it has around 84 million units as the upper limit.
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