The Top 6 Benefits of Trading Cryptocurrency
As cryptocurrency becomes more and more popular, many people around the world are jumping into crypto trading. If you also want to trade cryptocurrencies, the first step is to decide whether you’ll speculate on their price changes or buy the actual digital assets.
You also need to know the advantages and disadvantages of trading cryptos. You can trade many cryptos, including Ethereum, Litecoin, Bitcoin, etc. Of all these digital currencies, bitcoin is the most popular.
The top six benefits of crypto trading include:
1. Volatility
The crypto market is relatively new compared to other financial markets, but it has become very popular, making it very volatile. This market is volatile because the prices of these digital assets, especially bitcoin, keep fluctuating.
For example, from 2017 to 2018, the price of bitcoin varied from $1,000 (lowest) to $29,000 (highest). Other cryptocurrencies are more stable than bitcoin, but they are also likely to become volatile because of new technologies.
It is this volatility aspect of cryptos that excites many investors. The rapid price changes provide a good opportunity for investors to make a kill, though it also comes with some risk. So, before crypto trading in cryptos, research well and develop a good risk management strategy.
2. Market Hours
The digital currency market is open 24/7 because no government or bank controls it. Cryptos operate in a distributed system that supports peer-to-peer transactions. You won’t need anyone to come between you and the individual you are dealing with. However, you will need a platform to buy and sell currencies. Visit FX-List and pick a broker that can help you trade cryptocurrencies.
3. Improved Liquidity
Liquidity is a parameter used to measure how easily and quickly you can convert a digital currency into hard cash without interfering with market prices. Liquidity is crucial because it results in increased accuracy for analysis, faster transactions, and better pricing.
Generally, the crypto market is considered not liquid because transactions take place across many exchanges, meaning that small trades can significantly affect the market prices. This explains why the crypto market is deemed to be volatile.
However, you can enjoy improved liquidity when choosing a suitable broker because they source prices from many venues to ensure your transactions are executed faster and at lower costs.
4. You Can Choose to Go Short or Long
When you rely on speculating digital currency prices to make money, you can make profits whether the prices are going down or up. This is referred to as going short. But when you buy a cryptocurrency intending to sell it later when its price increases, it is referred to as “going long.”
The price change should be as you predicted to make a profit when going short. So, for example, if you open a short position at a price that you hoped would fall, and it ends up failing, you’ll make a profit. But if the price increases, you’ll make a loss.
5. Exposure to Leverage
When crypto trading, you can open a higher value position than the deposit in your trading account. For example, if your trading platform offers leverage of 1:200, it means you can open a position 200 times the value of your deposit. In such a platform, if your deposit is $100, you can open a position worth $20,000.
While leverage can boost your profitability, it can also multiply your losses, so you must approach it carefully. You can make a huge profit or loss from your small investment. If the loss you make is more than your deposit, your trading account will read negative. That explains why you need to develop a watertight risk management plan with appropriate limits and stops.
6. Ease of Opening an Account
When you want to buy or sell digital currency, you need to have an account with an exchange. The account is where you’ll store your currencies in a digital wallet. If you need a place to trade cryptocurrencies. They’re one of the trusted cryptocurrency exchanges and they offer a great experience.
Opening an account can be time-consuming and restrictive. But when dealing with a broker, you won’t need to deal with the exchange directly. Meaning you won’t need an exchange account. You’ll handle all your crypto buying and selling transactions through your broker. Opening a trading account with a broker is easy and fast. You’ll be done in less than five minutes.
Conclusion
Trading in cryptocurrencies provides you with an avenue to make a good profit. If you’ve learned as much as you can about this industry, the next step is to develop a trading strategy that can lower your chances of making losses. You can then choose a good broker and start crypto trading as soon as today.
