The past few years have shown exciting developments for cryptocurrency!
Despite it being relatively new, the volatility of cryptocurrency is what maintains investors’ interest.
As a new technology, it has attracted many investors that have reaped the rewards, making cryptocurrency the hottest commodity to date.
These benefits make cryptocurrency unbelievably attractive, but is it better to buy or trade?
Buy or Trade What’s the Difference?
When you trade cryptocurrency, you can speculate on the price without ever taking ownership using CFDs, which are financial trading instruments that will allow you to speculate on the cost of an asset.
This means that you can benefit from both rising and falling markets.
If you want to buy, you can own units of cryptocurrency, but you have to pay in full for the asset’s price.
Trading also allows you only to pay a small part of the overall size of the asset, thus giving you leverage, a cheaper option, and far greater exposure!
This method has the potential to magnify your profits but is also at risk of creating a significant loss.
A Good Strategy
If you choose to trade cryptocurrency, you must have a good strategy.
If your trading strategy is wrong, it can amplify your losses. However, there is no need to open an exchange account, allowing traders to act on opportunities faster.
For investors, rapid price movements can be a deterrent, while for traders, the volatility can supply more exciting opportunities.
The tax advantages to trading over buying are that you don’t have to pay capital gains on the profits of trading cryptocurrencies, but this is the case if you are buying cryptocurrency directly.
I Want to Buy
Cryptocurrency is stored in a digital wallet.
There are a variety of ways to buy and sell cryptocurrency, one of the most popular ways to do this is through an exchange account.
Once your account is set up, you can then store your cryptocurrency in the digital wallet.
This process can also be restrictive and time-consuming.
Now there are many cryptocurrencies to choose from; in fact, over 1500 cryptocurrencies exist.
The most popular ones to buy and sell currently are Bitcoin, Ethereum, Bitcoin Cash, Ripple, and Litecoin.
The other exciting thing is that new currencies are being added all the time, and as more are developed, you will have more to choose from.
Tracking Your Favourites
You can track the price movements of cryptocurrencies, which will help you decide which currencies to buy and sell.
When starting, it is best to choose a currency that you are familiar with, as with so many to choose from, and it can be slightly overwhelming.
At the same time, focusing on one cryptocurrency will be more beneficial, as you can hone your expertise and become successful in one currency.
I Want to Trade
As the cryptocurrency market is a decentralised system, the market is available to trade 24 hours a day, seven days a week.
All transactions take place directly between individuals all over the world.
The set up to trading cryptocurrency is usually quicker and easier than buying and selling.
What Will I Need?
Rather than an exchange account, you will need a brokerage account to trade cryptocurrency, which means that the broker will be exposed to the underlying market instead.
This provides a more efficient system so you can start trading as you won’t be directly exposed to the market.
Understanding Your Trading Strategy
Understanding your market is fundamental to your trading strategy.
There are multiple factors that affect the price of cryptocurrencies, such as government regulations and ministers, the US dollar, media coverage, including influence from celebrities and business people.
As cryptocurrency grows, more and more factors will influence the price. Although it is hard to predict and understand, platforms such as vrm research helps investors and traders to better understand how the industry is changing and what are the prospects for the industry.
Defining My Conditions
Once you’re set on your trading strategy, you need to define the conditions. The point that you exit a trade will depend on whether you have reached your target or your maximum loss, in which case you will need to exit the trade.
Remembering that cryptocurrencies are highly volatile, rather than leaving them open, it is best to close the trade when you reach the maximum point; otherwise, it can be risky.
Another major benefit of trading over investing in cryptocurrency is the liquidity of the transactions.
This is the measure of how easily and quickly cryptocurrency can be converted into cash without impacting the price.
Generally, the cryptocurrency market is seen as illiquid as the transactions are made up of multiple exchanges.
When you use CFDs to trade, you can improve the liquidity because the prices are sourced from multiple places on your behalf, which allows trading to be quicker, cheaper, and thus more effective.
Do We Have the Perfect Currency in Mind?
It is very difficult to determine what the correct cryptocurrency would be for you.
As a beginner, you will need to assess your trading goals and your attitude to risk.
And let’s remember that there is no one cryptocurrency for beginners to trade in.
Each currency is different, and each one comes with a variety of benefits and risks.
Some popular options for cryptocurrencies to invest in as a beginner might be Litecoin, Dogecoin as well as the popular Bitcoin and Ethereum. However, all though all of these are popular for different reasons, the crypto market has new and innovative coins like Fly Token coming in, so it is quite important to keep your portfolio diverse with a set of tokens from different backgrounds.
An Ethereum Explosion
Ethereum is currently the world’s second-largest cryptocurrency behind Bitcoin.
It is surging in the crypto market and has received a lot of press as the new favourite currency with a lot of potential.
If you are thinking about investing in cryptocurrency instead of trading, Ethereum is a good investment if it is long-term.
However, if you are expecting fast results with Ethereum, you could end up being disappointed.
As Ethereum has rocketed in the past year, it is a good investment as long as you stick with it through the ups and downs and gain knowledge on it.
However, do not invest blindly without researching the cryptocurrency first, just because of the hype surrounding Ethereum.
It is a high-risk investment so ensure you only invest money that you can afford to lose.
Weighing It All Up
Buying cryptocurrency is great if you want to take full ownership of the cryptocurrency and you’re happy to pay the total value of the asset upfront.
It is recommended if you want to gain direct exposure to one underlying exchange per account and you’re happy to wait for an exchange account before you can buy or sell, despite it being a lengthy process.
If you don’t mind introductory limits or maximum deposits or paying additional fees for deposits or withdrawals, then buying cryptocurrency would be the best method for you.
However, trading in cryptocurrency CFDs will be better suited to you if you want to speculate on the price of cryptocurrency without owning the digital asset. You want to leverage your position so that you only put stop part of the cost upfront.
The advantages and tax benefits of CFD trading might well appeal to you, and at the same time, you would gain exposure to multiple exchanges from just one account!
If you’re interested in the bonus of trading straight away and you don’t want a maximum deposit limit or to pay a deposit or withdrawal fees, then trading cryptocurrency would be the right path for you.
Knowledge is Power
By now, you should have an idea as to whether or not you want to buy or trade-in cryptocurrency.
Please remember that it’s important to take your time and do your research before investing in any form of currency.
Cryptocurrencies can be high-risk and volatile.
To avoid disappointment, let’s make sure that we know a fair bit about the currency before investing in it.
Using safe platforms is also vital and let’s also ensure that we only invest money we can afford to lose.
That being said, have you jumped in and discovered just how exciting it could be to dabble in the world of cryptocurrency?
Why not share your thoughts?
