It is starting to gain popularity and is now being offered by more brokers as a tradable investment. Although it functions similarly to forex trading, cryptocurrency trading can present a lot more challenges and opportunities than you might expect. It can appear one way from the outside but behave very differently inside. We will be discussing some of the differences in expectations and realities when trading cryptocurrency.
Expectation 1: Huge profits
Many people believe that trading cryptocurrency can make huge profits. This is especially true when you compare it to forex. If you look at social media, you will see many people posting photos of their results. Some of these are quite ridiculous and make thousands of dollars per day. It is possible to take screenshots, but most of them will be fake or taken from demo accounts. While some people can make a lot of money, we don’t mean that they are rare.
Reality 1: Big profits and big risks
There are huge profits to be made, especially if you can catch one of the cryptocurrencies on one of their long and large trends. You must also be willing to take on a lot of risks to make big money. You can make more money if you trade more, but you could lose more if you trade more. People who make a lot of money have large balances or take on more risk than they should with every trade. They could lose everything and end up losing all their money. Profits can be very large, but they are not worth the risk.
Expectation 2: Only Bitcoin can be traded
Bitcoin is the most popular cryptocurrency. It is the one mentioned in mainstream media, and the first people think of when they mention cryptocurrencies. Either because they don’t know any other cryptocurrency or the most widely used, many people believe that Bitcoin is the only currency available for trading. The good news is that this is not true.
Reality 2: There are many assets available
There are many tradable assets for cryptocurrencies, tokens and coins. Many brokers are offering crypto trading, and some even specialize in it. Brokers offer more than Bitcoin trading. Some of them even offer over 30 cryptocurrencies and pairs. As the industry grows, this number continues to rise. While Bitcoin is the most popular and widely traded, there are many other options if you want to trade something else.
Expectation 3: It’s hard to get in
It was hard to purchase cryptocurrencies a few years back. You had to use a third-party service or buy directly from the owner. There were high fees and risks. Also, no one could guarantee you would receive your coins once you paid. It was also necessary to purchase whole coins, which is no longer necessary. It is now much easier to access the internet thanks to the advancements in technology and infrastructure.
Reality 3: Very accessible
Cryptocurrencies have become more accessible to almost anyone. To trade the coins, you only need to deposit $10. This means that people are not being priced out. You can also find various brokers offering it, including the well-known ones and those that specialize in crypto trading. Some of these brokers allow you to start even without doing all the KYC stuff required by many. It is easy to start crypto trading.
Expectation 4: It is predictable in comparison to forex
Although crypto trading is very similar to forex trading in appearance and feel, people perceive it as easier to predict. This is most likely because banks don’t control it. This makes it easier for people to predict whether the markets will rise or fall. This could be because crypto is still a new world, and the prices have only been rising over time. Although it was easy for people to predict the rise in prices, it was difficult to predict the many drops.
Reality 4: It is influenced by whales, but also the news
It is very easy for larger holders to influence the market in crypto. There have been many instances when the crypto price has stopped at the top or bottom due to larger holders placing millions and billions there to influence and stop the price.
However, a single person can’t influence the price, several cans. This makes it slightly more difficult to predict because a decision can be made at any moment, and the whales can put their money in. News can have a big impact on the market. A major company taking it up or a ban in place can cause it to go up, and it will. This can lead to a price jump of thousands of dollars, catching many people off guard.
These are just a few examples of the differences in expectations and reality between what people believe and happening. Expectations are often viewed through social media and the news, which can often only show half of the story. However, trading will reveal that things are quite different. While some things may be similar, it is important that you have a clear head and not let your expectations get in the way of success.
How to survive in the crypto market
Is it possible for cryptocurrencies to be used as a means of world dominance? It’s possible to say something similar. Although it may not be in a dystopian sense of the word, it is certainly relevant to global interest. It’s easy to get a conversation started by simply uttering “blockchain” or “crypto”.
However, despite a phenomenal run and its total market capital reaching over $2-trillion in Aug 2021, the market’s unpredictable nature has not changed. It’s been this way since the beginning.
Crypto space veterans would be the first ones to call crypto investing the ultimate love/hate partnership. There are many risks involved, including market volatility and extreme technological risk. Oh, and all the stories about people who stay up late checking trading charts to make sure they can sell their investments in a flash. Yes. All true.
It is also easier to get into the market, as hundreds of exchanges offer a variety of cryptocurrencies. Although this is a great way to get started, it can be problematic if you want to make a dramatic exit or sell your portfolio. When panic selling is common, this can lead to currency conversions on different exchanges and underlying technological delays due to the volume of sales or withdrawals.
Another important factor is regulatory risk. Many countries and sectors have expressed increased interest in cryptocurrency over the years. However, most of the world is still sceptical. Some countries continue to have problems with crypto due to anti-money laundering regulations.
This is not to mention the differing views on Bitcoin mining’s impact on the environment. It’s difficult to predict which coins will survive the next few years when you consider all this. The majority of cryptocurrencies will certainly fail. This is something every investor must accept
The solution
It has been proven that diversification works in all investment categories, so it is not surprising that it also works in crypto. Diversification strategies are a great way to ensure the highest returns, even if certain investments are experiencing a decline.
Diversification will not help when the whole crypto market corrects itself (the day it all turns red and your friends start calling you at 3 am). Still, it can minimize the damage when one or two assets perform poorly or are pulled out of the crypto market altogether.
A host of people and institutions in the investment industry have different opinions about crypto and its underlying technologies. Crypto’s ongoing journey towards mainstream adoption has brought many internet personalities and public figures to the forefront of the investment community. All over YouTube and other internet sites, financial “gurus” suddenly appear.
They are eager to offer “serious” financial advice. Be careful when choosing your sources.
Newer investors are also driven by the desire to find the next great altcoin. Many place blind bets that certain coins will explode in value overnight despite not having done any proper research about the coin’s purpose or the underlying technology. It is easy to ask: Would you invest in stocks of a company that you don’t know anything about?
Diversifying your portfolio is important, but investors should also understand the contents of their portfolio. It can be a great way to ensure that your investments can bring you the highest possible long-term returns. It is often difficult to find cryptocurrencies that outperform the market because of their volatility. Professionals have difficulty choosing cryptocurrencies that will consistently outperform
