The cryptocurrency market has shown considerable growth, increased in capitalization, attracted big investors and interested many traders. You can make a profit with a smaller initial deposit and in a shorter time, than in blue chips and other traditional financial assets. If you like this perspective – welcome to the world of crypto!
The advent of a new decade has meant that cryptocurrency is becoming more and more discussed and is generating a lot of interest in various markets. Miners, like treasure hunters, are trying to mine more and more virtual coins, and investors are developing plans and strategies on how to effectively invest capital to preserve and multiply their fortune. But cryptocurrency needs to be handled well. If a trader knows what his financial goals are, and has a clear plan for achieving them, he just needs to make an informed choice. You can’t expose your investments to unthinking risk.
Peculiarities of cryptocurrency as an asset
Cryptocurrency is a way to pay when exchanging online goods or services. A lot of companies create their own tokens that can be used to pay for the products provided by the company. Crypto trading has become a narrow niche and a new specialty for many investors.
Some of the distinguishing characteristics of crypto trading include:
- Most of the time all popular cryptocurrencies are in a state of high volatility, when in a short time the user can lose everything (close on margin) or get a tangible increase in the deposit.
- The entire cryptocurrency industry has changed a lot over the past few years. It depends on many economic factors and has become similar to stock trading. This means that it is no longer advisable to use unidirectional strategies designed solely to buy or sell assets. You need a complex system that adapts to different situations and changes in the market.
- Cryptocurrency is considered to be a young asset, about which there is not enough analytical information to choose the most effective working strategy. It is important to learn to trade crypto from real professionals, so that you can overcome all difficulties together and move faster to implement highly profitable strategies.
- Because of its relative newness, the cryptocurrency market is full of scammers looking to sell trading signals, forecasts or training to newbies. This is why it is important to trade crypto and always rely only on the experience of trusted sources.
Short term trading or long term investing?
At first glance, long-term investing using Buy&Hold tactics looks like a win-win option: you buy the right asset once, you don’t waste time on stock analysis and if you do it right, you gain more than many short-term traders. The problem with this approach is hidden in the cryptocurrency itself – it is a rather unstable asset that is poorly supported by the states and is not backed by any physical value. This means that at any moment, even a stable digital currency can completely devalue and lose relevance.
In such a scenario, short-term trading looks more profitable, with which you can not only react quickly to changes, but also try to make money. In addition, you do not need a large initial capital, you can start with practically any amount. Also, don’t forget about the huge trading experience that short-term cryptocurrency traders develop. If needed, it will not be difficult for them to switch and start using long-term strategies.
Cryptocurrency volatility to help the crypto trader
In the case of cryptocurrencies, the value of any currency is based solely on the contractual principle. Bitcoin, like any other cryptocurrency, is not subject to classical inflation. Further rise or fall in the value of this cryptocurrency cannot be changed in any way by issuing additional money.
The political component of financial markets should not be excluded either. National banks of almost all countries lobby only for traditional fiat currencies. It is simply impossible to regulate bitcoin or ethereum: the cryptocurrency system does not belong to anyone and it is impossible to cut off the source of its receipt from the outside.
Cryptocurrencies, as digital assets, are created on the basis of new, experimental technologies, in addition, the industry has a thin and constantly changing regulatory oversight. That’s why crypto-assets are considered riskier bets than more traditional assets like stocks and bonds. But if you learn to trade crypto, you can learn the behavior of the coin and market players, acquire a new profession and achieve a steady income.