When trading crypto as an investment strategy, you are opening yourself up to a world of risk and volatility, yet the rewards can be astronomical. Many traders talk about getting in at the right time, usually early on in a new project. Let me tell you something though. That way of thinking is based on hype in a 2019 market that has seen a slew of ICO ERC 20 tokens that are pumped and dumped.
This investor knows better, and I will use the stock market as a parallel. You don’t make money getting in early on all the IPOs. Some of them tank in a bad way, and you’re better off entertaining IPOs from time to time but focusing on trading well-established securities. Trading options can even make you more money.
With crypto, many of the coins out there don’t have much of a track record, yet. That doesn’t mean you shouldn’t trade them. Personally, I am more of a HODL investor when it comes to crypto. Yet you can use the exchanges to trade crypto so that you’re holding different assets, too.
Trading crypto isn’t just about buying and selling specific cryptos to get your USD. It’s about using the exchanges like Forex. You can take either approach, but I’m hitting on a specific point here. Even people that primarily buy and hold coins do exchange tokens for other ones from time to time.
It’s really difficult to time the crypto market. If you had bought into BAT recently ahead of the Brave Browser 1.0 release, you would have made some good money. But the BAT token quickly dipped back to its normal price a couple of days afterward. You do have to move quickly if you’re going to trade crypto.
XRP looked like it was on the move recently, getting right near 30 cents a token before it went back down to normal levels. It is one of the premier tokens out there on the market, but it is priced at under 30 cents a token. That tells you that another factor that comes into play when trading crypto is that you’re essentially dealing with penny stocks.
Bitcoin of course is priced like Berkshire Hathaway, but the point here is many of the crypto coins have yet to come close to that level. That doesn’t mean they don’t represent great opportunities, whether you trade them or buy and hold them. You can make quick money as a trader, no matter the prices of the coins.
You are just going to get burned from time to time, chiefly because the market is so new and more difficult to manage than the stock market. You’re not going to have an easy time guessing what the stock market is going to do either, but the crypto market is even more volatile and unpredictable.
People often guess that many of the coins are going to move along with Bitcoin on the next big bull run. But that isn’t what happens, and it’s not so cut and dry. XRP at one point was moving while other coins were going down. And as each crypto coin distinguishes itself from others and develops its own niche, the tokens aren’t going to be known for moving together.
Granted, the stock market collectively moves in one direction or another, but that’s based on the DOW. At any given time, there could be some major winners out there, even when the stock market loses in a big way for the day.
Just like with stocks, it’s a good idea to diversify if you’re a trader. The same thing goes for buying and holding of course. When placing trades, you’re going to want to look at charts very closely. Understand that the value of each coin is more relative right now, early on, and it’s not like determining the value of a company’s stock.
You might want to start small as a crypto trader. Take those modest gains as they come, and enjoy them. You will get your feet wet, and you will learn more about trading crypto-currencies. You can then move towards placing larger trades, but just be careful. With a market this young, there’s always money to be lost if you’re trying to profit quickly.