There are a few different ways to make money through cryptocurrency. One option is to buy and hodl for the long term in the hopes that you have picked a gem. Another option is that you can consistently trade the highs and lows in price. Neither are guaranteed to make you money and trading consistently requires a higher level of skill and a larger amount of time. Below, we help inform your decision to buy or trade cryptocurrency.
Buying and hodling
Buying and hodling is what many people throughout the years have chosen to do with cryptocurrencies. Sometimes they have become bagholders after buying at the top of a price range and become unwilling to sell as they don’t want to admit defeat.
In some instances, however, hodling can lead to better fortunes. For example, had you bought Litecoin in its first bull run the following years would have seen you achieving a loss. Yet if you hodled your way through to the bull run of 2017 you would have gone from a terrible loss to a potentially great profit, so long as you sold.
So clearly, there can be benefits to buying and simply hodling your cryptocurrency for the future. However, picking the right crypto isn’t so simple. There are thousands of cryptocurrencies nowadays and there is a strong likelihood that many are not very useful or will quickly fall out of favour.
Despite possible benefits, there are also risks that are unavoidable. Buying any cryptocurrency comes with risk and there are never any guarantees in such a volatile market.
One way to view cryptocurrencies is not as an investment at all, but as an act of rebellion. A rebellion against the power of the State and the current economic system. In doing, so the price of Bitcoin or any other cryptocurrency can become irrelevant. One Bitcoin is simply worth one Bitcoin.
Should you trade cryptocurrency instead?
Trading cryptocurrency sounds easy in theory. Buy low, sell high. Simple right? Unfortunately, if it was that easy everyone that was doing it would be rich. Whilst it may appear this way (especially on social media) with the numerous influencers in both Forex and cryptocurrency markets showing off their wealth, it isn’t.
Cryptocurrencies can be particularly hard to trade due to their volatility. There’s also a lack of regulation in cryptocurrency markets, meaning that market manipulation such as pump and dump schemes can easily happen.
To trade cryptocurrency, you need to have the know-how of the market as well as the skills to be able to become profitable. These are not skills that you pick up overnight and can take years of practice.
Trading cryptocurrencies also comes with the added risk that you are more likely to lose your money. This is because you’re trading on a consistent basis. thereby increasing your risk to the market. Whilst technical analysis may help in giving signs of how the market will perform, there are no guarantees that it will always be true. If your skills of technical analysis aren’t up to scratch, then you are likely to have a challenging time.
When trading cryptocurrencies, anyone can look like a genius in a bull market. However, a bear market can be a cruel mistress and this is where your skills will truly be tested. Until you have survived a bear market and traded through it then you will not know whether your skills are up to the test.
Trading cryptocurrencies is not for the feint hearted.
There is no right or wrong answer as to whether you should buy or trade cryptocurrency. It can depend on your situation, the time you have available, your knowledge and your skill level. Becoming a trader, at least a profitable trader, is no easy feat.
Buying and hodling cryptocurrencies is certainly much easier and less time consuming. However, mistakes can also be made through this, especially if you have a penchant for picking the worst coins on the market. Remember, even coins such as Bitconnect had a strong community of people telling you to buy it. Research is the key here and so be sure to listen to a variety of sources.
Another key tip is to keep your emotions at bay in both scenarios. Emotions can be fickle things so try to ensure rationality, regardless of whether you buy or trade cryptocurrency.
Whichever decision you choose to make, do not rush into it and make sure you consider the risks. As always never invest more than you can afford to lose.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.