Your interest in trading cryptocurrency has gotten you this far. You are probably thinking of making some good money, millions even from your crypto assets. After all, you have read about so many people who are making a killing online by trading in cryptocurrency. This market promises to be an exciting one for many an investor, and you wouldn’t want to miss out on sharing the cake either. However, succeeding with crypto investment is not as simple as that.
There are many people who assume this is a walk in the park, and it gets them in trouble. We reckon that there are many investors like yourself who fall for the get-rich-quick schemes and lose everything in the process. With this in mind, you have to learn to exercise restraint and caution when investing in cryptocurrency online. In the next section, we will discuss some simple tips that will help you trade in cryptocurrency online on your own.
Understanding the Investment Profile
One of the biggest mistakes many budding investors make when they make a foray into the world of cryptocurrency is that they do not know the risks they are taking. Some of them even ignore the risks altogether. There is a simple principle in the world of finance, that to enjoy high returns, you must be willing to take proportionate high risks. It is okay to take risks in the hope of earning good returns, but at the same time, if you are not taking calculated risks, you could be trading on a Hallelujah.
There are two ways you could invest in cryptocurrency. You could invest long-term or short-term. Whichever the case you choose, you must ensure you know what benefits and advantages there are.
Short-Term Investment
Short-term investment is a situation where you invest in cryptocurrency with a view of holding onto the assets for a brief period. The holding period is relative depending on your personal investment motive and goals. You might hold onto the assets for a few minutes and sell them, days or weeks. Remember that the short-term period also depends on your personal investment profile. For some people, holding onto currency for a few months sounds like a long-term plan, while for others, it sounds about as good a short-term plan as possible.
Many investors who engage in short-term positions with cryptocurrency hope that the value can appreciate within the prescribed duration, during which they will sell their crypto assets and exit the position. You sell when the price is right, or when you feel the price cannot go any higher. It’s almost like flipping a house.
While short-term investment sounds ideal for many investors, it comes with some challenges too. First, remember that this is a market whose asset values are highly volatile. Therefore, you have to be proactive when aiming for short-term gains. Prices change quickly and as a result, you might miss your window of opportunity in minutes. You have to set aside time to study the markets carefully so you can preempt certain positions.
One of the other challenges that many people struggle with, in as far as short-term investment is concerned is the inability to reign in their emotions. To some extent, investing in cryptocurrency online or even investing in the financial markets is more like gambling. You wager some money and hope that you can beat the market.
Long-Term Investment
Let’s talk about long-term investment now. Just like we mentioned that the acceptable duration of a short-term investment depends on the investor’s profile, the same applies to long-term investment. However, the general consensus is that a long-term investment is an investment position you hold for at least one year. Why would you hold onto an investment for a year or more, especially with the knowledge that the cryptocurrency market is highly volatile?
Now, this is where things get interesting. Long-term investors are people who are armed with lots of valuable information about the market, and the cryptocurrency assets they hold. If you are such an investor, you probably believe that even if the price of the asset crypto falls, it will not stay low forever. You have faith that the price will still rise in the future, and will probably rise higher than it is at the time you purchased it.
Let’s go down memory lane for an incredible example. The year is 2011 and Bitcoin is trading at less than $1. Investors who purchased Bitcoin in 2011 and held on for another six years would have sold them in 2017 for close to $20,000. Please don’t do the math!
One of the biggest risks involved in assuming a long-term position in crypto investments is that no one knows what the future holds. You don’t even know if you will be there to reap the benefits if there are any. Many times, assuming a long-term position means you forego the prospect of short-term gains. While everyone else might be selling their assets for a quick buck, you hold on for future gains, which might also not be a guarantee.
Many long-term investors also tend to be less proactive in the market. The reason for this is because you don’t have a reason to. Short-term investors are always looking for information that they can act on instantly and make a killing. Long-term investors generally do not analyze the market with such zeal. As a result, most of the news concerning the crypto assets you hold, or the market in general, might pass you by. That being said, however, in this market, you need to remember that whichever position you take as an investor, you have to stay informed.
One important lesson no one will probably tell you, which you should know by now is that in any investment, you cannot make profits all the time. You can, however, make losses all the time. You must be keen, learn to research and stay armed with relevant information. This way, you can accept losses when they happen, learn your lesson and use it to make wiser, bolder investment decisions later on.
