The rapid rise in the price of the cryptocurrency in 2020 led to a greater interest increase of the entire financial market in general, and individuals in particular. However, despite strong price movements and the prospect of great earnings, many are still hesitant about cryptocurrency trading. Let's find out the reason for such indecision and how justified it is.
Crypto trading is one of the main ways to make money on cryptocurrency. Trading cryptocurrency is not significantly different from trading precious metals, currencies, and stocks. The main task remains the same buy low, sell high. The main difference between cryptocurrency trading and the stock market is the high volatility. Many traders dream of a return of a thousand percent on a deal, but in the stock market, such a deal has to wait for years. At the same time, fast transactions with high profitability are not at all uncommon for crypto trading.
Unlike the traditional financial market, the cryptocurrency market is free from many restrictions. It differs from the securities market as it works around the clock, does not have big barriers to entry, and has relatively small fees. Since this market operates 24/7 and without interruption, there is no need to close positions at the end of the trading day or week.
Usually, investors must have a solid deposit to enter a foreign exchange market, which is a problem for new traders. For crypto trading, the minimum possible order is relatively small, ranging from 0.0001 to 0.001.
Lack of correlation
Cryptocurrency practically does not correlate with the traditional financial market assets. Besides, buyers often become active during periods of downturns in global indices as they see a “safe haven” in cryptocurrency for the preservation of capital in times of economic instability.
Many experts in the world of traditional finance are concerned about cryptocurrency volatility. However, significant fluctuations in price, on the contrary, make it possible to get more profit. It's no secret that digital assets are much more volatile than fiat ones. For example, when trading a pair of liquid currencies, say EUR\USD, volatility can reach only 2–5% per month.
A reason for indecision
Here's the thing: when you invest in cryptocurrency, you have to be ready to lose your money. This is not a thoughtless investment in a bank at interest, but a serious, well-thought-out trading strategy with all the risks. Here you can put only on yourself, your analysis, and your assessment of actions. This is the main reason for many hesitant people - they are not ready for such serious decisions.
So should you be crypto trading at all?
Trading can be a profitable business for those who have patience and peace of mind, who are willing to stick to certain rules. Trading successfully requires knowledge and a combination of Technical Analysis (TA), Fundamental Analysis (FA), and common sense, and this is not easy at all! That is why, for many, long-term investments in cryptocurrency can play into their hands. The data on the profitability of cryptocurrency over a long period shows attractive results. And the question is: why not just invest and store the cryptocurrency in the wallet for at least a few years? This question cannot be answered unequivocally, since everyone has their own strategy, psychology, and propensity to take risks.