Cryptocurrency Trading, Exchange Coins Strategy
Trading assets that include cryptocurrencies, foreign currency and commodities has become a source of livelihood for many people across the world. Despite the potential for generating high income from trading many people end up losing much money. They lack proper trading knowledge. Foreign currency trading is more straight forward and less riskier than trading cryptocurrencies and commodities such as crude oil and gold. However, for those with good knowledge of different assets, cryptocurrency provides unique trading opportunity. However, cryptocurrencies can be categorised differently. There are utility tokens, governance tokens and exchange coins, among others. These cryptocurrencies react differently to market conditions. Today, we focus on how to benefit the most from trading crypto exchange tokens/coins.
What are Crypto Exchange Coins?
A crypto exchange token or coin is a cryptocurrency that belongs to a crypto exchange. Most exchanges use them as the ecosystem’s native currency. These coins, also called crypto tokens, have several utility functions on the exchange. Examples of their functions is to enable the exchanges to provide discounts on transaction fees. The users can also stake the coins and earn rewards for that. In addition, the exchanges may issue out newly listed tokens to the users who have staked their native coins.
There are many crypto exchanges that have native coins. Leading exchange that have their native coins are Binance Exchange (BNB) Gate.io exchange (GT) and Huobi Exchange (HT). Other exchange coins and tokens that are in high demand are BGB, BYT, OKB, KCS, MX, CET, CRO and LBK.
The Importance of Exchange Coins
As already alluded to above, exchange coins serve many functions in their digital ecosystems. Generally, most of them offer application utility. For instance, they can be used as gas tokens, collateral assets and settlement tools for the networks. To illustrate, users who pay gas fees using GT at Gate.io or BYT on Bybit Exchange get discounts. This gives the users incentive to hold the exchange coins.
Many exchanges that have coin launch programs give new crypto assets to users who hold special cryptocurrencies such as USDT or their native coins. For example, Gate.io exchange, which has a launchpad, distributes free tokens to holders of its GT crypto asset. This results in client loyalty to the exchange.
Some exchange coins are also used as medium of exchange on different e-commerce platforms. As an example, several merchants accept OKB and BNB as means of payment for various products and services such as travel and hotel bookings.
Also, many users benefit from appreciation of the coins after token burning. There are various exchanges that burn their crypto assets to reduce circulation. That tends to increase the values of the coins in the future. If a token burn is followed by a rise in demand for the cryptocurrency its price will likely rise.
Some exchange coins are used in governance of the ecosystems. In other words, token holders have the right to participate in decision making through the voting system. As an example, holders of HT participate in decision making for Huobi exchange. Similarly, holders of UNI, from time to time, vote on decisions on future developments of UniSwap.
Key Reasons to Trade Exchange Coins - Relatively High Demand
By comparison crypto exchange coins command higher demand for longer periods than other cryptocurrencies. This is because they support most activities that occur on exchanges. If they are used as gas fees their prices will likely increasing when the trading volume rises. Therefore, it is wise to trade exchange coins that often have high trading volumes. Examples of leading crypto exchanges that have coins are Gate.io (GT), Binance (BNB), Bybit (BYT), Huobi (HT) and Lbank(LBK), to name a few. Trading these coins will likely result in higher returns than otherwise. Thus, exchange coins have better returns as compared to mere speculative crypto assets. It is also important to note that there are other utility cryptocurrencies like BTC and ETH that are not exchange coins.
Key Strategies for Trading Crypto Exchange Coins
There are several strategies to use when trading exchange coins. However, some trading strategies such as HODL may result in lower returns than otherwise. However, short-term trading of exchange coins may to lead to higher returns than long term hodling. Therefore, traders should be vigilant and actively assess existing opprotunities to trade the coins.
Buying when the market is highly active: With this strategy traders should buy exchange coins when the trading volume of the entire crypto market is rising. That means there will be active trading on most exchanges. In that case, the traders should keep their trades open as long as the total market volume is rising. This is also requires the traders to keep an eye on changes in the total market capitalisation. It is likely that as the market cap rises values of exchange coins will keep on rising. The traders should exit trades when the total market volume starts falling.
Buying when the market cap and volume of leading cryptocurrencies are rising: Before the entire market volume and capitalisation rises prices of major cryptocurrencies such as bitcoin and Ether will increase first. Once a trader sees a positive shift in the market structure of BTC and ETH he/she should look for buying opportunities of exchange coins.
Trade around Launchpool and Launchpads: Trading around a popular launch of a crypto asset on the exchange may lead to a sharp rise of the exchange coin. Therefore, it is important to scan the crypto environment for the launch of new coins on exchanges that have their own crypto assets. It is important to close the trades once the vibe of the coin launch has subsidised. Exchanges that have launch pads include :
· BNB Binance Launchpad (BNB)
· Bitget Launchpool(BGB)
· OKX Jumpstart (OKB)
· Gate Startup (GT)
If a trader keeps scanning the crypto market for launchpads he/she can find suitable opportunities to trade exchange coins.
Buying Exchange Coins before Token Burns: Some of these exchanges burn their coins from time to time. That gives traders the chance to buy the coins before the announced dates of token burning. Usually, the value of the coins rise after token burning. That gives traders the chance to earn good return.
Trading High Volume Coin Breakout: It is a normal thing for exchange coins to experience volume backed breakouts. With this strategy it is best to acquire the coin as soon as the breakout occurs. However, one should ensure that it is a real breakout not a bull trap.
This discussion has clearly shown the potential of trading exchange coins. Whereas others buy and hold these digital assets for long periods, short term trading may lead to high returns. However, this requires the traders or investors to have an appreciation of price action, moving averages and volume indicators such as on balance volume (OBV). A good understanding of these trading basics may enable traders to earn much from trading exchange coins.
