Cryptocurrency trading burst onto the scene with the introduction of bitcoin in 2009 and the plethora of other contenders that followed suit soon thereafter. Cryptocurrencies have sparked endless debates among friends and financial analysts alike. Everyone is wondering the same two things: how can a speculative and unregulated financial instrument be worth so much and how can I cash in on it? Here are some answers.
High risks and high rewards
Well, the beauty lies in its speculative nature. While the downside can be massive, as bitcoin alone lost more than half its value since its high water mark in December 2017, the potential for return on investment is unlike anything we’ve ever seen before. While certainly down from its high point of $20,000 per coin, bitcoin remains firmly in the green over this time last year, clocking in around $2,000 higher at this time of writing.
Even if you didn’t sell at the peak, a hold strategy appears to be paying off handsomely in its own right. And bitcoin isn’t the only contender here. A robust portfolio of cryptocurrency is the first step in developing success. Successful cryptocurrency trading for beginners begins with a devotion to research and practice, and this leads to consistently netting healthy returns, no matter the speculative buzz around just one commodity.
Avoiding the duds
One key part of a productive cryptocurrency portfolio is knowledge of which currencies to avoid. Many altcoins (as they are often called) are based on trending jokes, fads, and popular posts, such as dogecoin. Others revolve around use for a particular product, like potcoin. Gimmick altcoins like these are fun to talk about or even use, but should be avoided by investors. Since you can buy portions of cryptocurrency, there is no reason to invest in coined valued in miniscule digits.
Dogecoin in particular is currently worth less than half a cent. The traditional barrier to entry that the stock market presents is not present here. You can buy bitcoin without a $6000 plus startup cost, so don’t waste your time with these minor entries into the space. Potcoin may also not be right for investors. Its purpose is for use specifically within the medical marijuana industry and does not enjoy wide appeal like ethereum or litecoin. As such, its relevance as an investment choice should be questioned.
Approaching cryptocurrency with intelligence
Cryptocurrency serves as a functional monetary instrument, and you can certainly use these to purchase goods and services. If you approach these entities as investments however, it’s necessary to see their value as something beyond money. Forex and stock market trading operate under the auspices of this principle as well. While these are worth real money, your stake is only speculative until you sell. Therefore, a trained eye in spotting trending prices and real world catalysts of those price changes is essential to your success as a cryptocurrency trader. As with all financial planning, an informed consumer is a successful one. It is incumbent upon you to investigate these products and study their movements relating to each other and the dollar.
Cryptocurrencies are exciting investment opportunities and a cutting edge new way to trade, and they can prove a massive hit in reaping the rewards. These trades are encroaching on the stock market as well, so the idea that you are doomed to lose money investing in an untested racket is quickly fading away. Despite their jagged price movement, there’s enormous potential for informed investors to make it big.