Bitcoins, Etherum, Ripple and Litecoin are crypto currencies that has unbelievably produced astronomical gains over the years, producing lots of millionaires all over the globe. Most of these smart investors bought these crypto currencies while they were extremely cheap in the market and sold at higher prices after it became well recognized. While some trade the price of these crypto currencies day to day due to price change within a short period of time. Actually there are three major forms of investing in the crypto currency financial market which are namely (i) Margin Trading (ii) Buy & Hold and lastly (iii) Mining. However in this article we will focus on the first two forms.
The MARGIN TRADING form of investment in crypto currencies involve opening and funding an account with a crypto currency broker. Then speculate if the price of a particular crypto will either rise or fall. This way you make profit from either direction as long as your prediction is right with the market. However just like FOREX or Binary option trading, you are susceptible to loosing all your capital if proper skills and proper money management isn’t applied. Just like FOREX brokers, crypto currency brokers offer trading platforms as well where traders can have a full and detailed view of the market enabling them to conduct technical analysis to speculate if a crypto currency will rise or fall.
Crypto currency markets are extremely volatile compared to other financial markets so i advise extreme caution to be applied while indulging. A way to trade with a more balanced psyche in this market is not to over leverage your account. I have seen a lot of times where price change between a short period of time could be so significant that if you happen to be at the wrong side of a trade, your account could get wiped within hours. Usually margin trading is that type of investment i will recommend for traders who have a high risk-appetite and wish to take profit from the market within short period of time, usually within minutes, hours and max daily. We also call it Day Trading!
Contrary to margin trading, we have the BUY and HOLD form of investment which happens to be more safe and secured. This form of investment involves buying a crypto currency at a cheap price and wait for its value to appreciate and then sell at a higher price to make profits. The buy and hold version is safer as it only deals with the fundamental aspect of the crypto currency you are investing into.
Fundamental factors like the idea behind the crypto itself, the circulating supply available in the market, accessibility of the crypto currency to users and many other factors is the main criteria required to consider while purchasing a crypto as a form of investment. In this form of investment you might loose the value at which you purchased the crypto currency but most importantly you are guaranteed your investment cant wipe like the margin trading.
The only major risk associated with the buy and hold form of investment is the security of funds rendered by wallet provider companies. Over the years some well known companies has been hacked resulting in massive loss of investors funds. This is why i will always advise not to store all your coins in one wallet, try to use three reputable wallet providers so as to spread investment.
I feel relaxed and psychologically balanced even when the price of a particular crypto is depreciating during bad times of the market. If you ask me why? Its all based on the natural law of life. What goes up must come down and what goes down must go up. Its the way nature is programmed! So if you see price of Bitcoin soaring up over the years, am still expecting it to fall and over time rise again. Its all a cycle and it will forever be this way so do not panic when you see price fall after you invest into a crypto currency as it will surely rise again over time.
A simple advice i will give to investors who wish to indulge in the buy & hold is to see this form of investment as a long term form of investment. You are not a margin trader who is expected to make profits within short duration of time (minutes, hours or daily). There are times you have to wait for 3 months, 6 months or even a year before you make decent profit on your investment. So if you are not the patient type, do not indulge in the buy & hold.
In conclusion both forms of investment is profitable, however it all depends on the investor. Do not try to copy other investors, do what works for you and you are guaranteed of success!