Is trading crypto tough?
|Bitcoin’s crazy price rise|
|Is Bitcoin the only cryptocurrency you can trade? Is it easier to trade others?|
|What else do I have to look out for when it comes to cryptocurrency trading?|
|Social media and cryptocurrency|
|So how has social media been used when it comes to trading crypto?|
|Do your research|
|So, the crypto market is a rough one?|
Much like any new and widely unregulated market, the opportunities that lie within cryptocurrency range from meteoric profit to serious despair. But over the last decade, this market has grown from strength to strength. If you purchased Bitcoin in 2012 and held it until its market high in 2021, the return would have been gigantic. Today, we take a look at trading crypto and some of the challenges crypto traders are facing, as well as opportunities.
Bitcoin’s crazy price rise
In January 2012, you could’ve purchased 1 Bitcoin for $4.72. In November 2021, the price of 1 Bitcoin hit $65,000. Absolutely ridiculous gains. If you bought $500 worth of Bitcoin in January 2012 and then sold it in November 2021, you would have made $6.8 million. Of course, this is a hypothetical scenario, but plenty of people have made life-changing gains trading cryptocurrency.
To highlight just how volatile and tough the market can be, if you purchased 1 Bitcoin at $65,000 in November 2021, you’d have lost $45,000 in 12 months.
For example, the tale of Laszlo Hanyecz, who made the first purchase using Bitcoin. In May 2010, he bought two pizzas in Jacksonville, Florida, for 10,000 Bitcoin. An amount that would have been worth roughly $650 million if held in November 2021. Probably the most expensive pizza that will ever be bought. I’m sure the pizza was easier to swallow than the news Bitcoin hit $65,000, that’s for sure.
Is Bitcoin the only cryptocurrency you can trade? Is it easier to trade others?
No, hundreds of solid cryptocurrencies are out there, but with many of them already going through periods of incredible growth, now might not be the easiest time to invest in them. Other major cryptocurrencies include
● Ethereum (ETH) - Ethereum is the second largest cryptocurrency by market cap. It is considered one of the best cryptocurrencies for future investment and 5-year returns.
● Cardano (ADA) - Cardano is a cryptocurrency that has exploded in value over the past three years. It went from $0.03 in March 2020 to $2.85 in August 2021. It has, however, retracted quite heavily and is currently trading around the $0.48 mark.
● Polkadot (DOT) - Much like Cardano, Polkadot was created by one of the teams that split away from the original Ethereum development team. Cardano was developed by Charles Hoskinson, and Polkadot was developed by Gavin Wood.
What else do I have to look out for when it comes to cryptocurrency trading?
It’s important to stress that huge swings can take place unexpectedly due to the lack of regulation in the cryptocurrency market. This can be down to “whales” (traders who hold millions of dollars of cryptocurrency), who can manipulate the price by buying and selling.
This type of manipulation is illegal, but due to the unregulated nature of the market, it’s notoriously difficult to prove. Even though central exchanges such as Binance & Coinbase have started to successfully crack down on it, it’s still something that occurs. For example, it’s not as easy to regulate and monitor as the stock market.
Social media and cryptocurrency
Social media and cryptocurrency experienced similar popularity growth over the past decade. Instagram, TikTok and Twitter are so ingrained in our culture that it’s difficult to imagine a world where they don’t exist. During the cryptocurrency boom in 2021, the market cap reached over a trillion dollars. This meant the cryptocurrency market was the same size as Apple.
So how has social media been used when it comes to trading crypto?
When Elon Musk started promoting Dogecoin (DOGE), it was considered a bit of a joke and was the first meme coin in a string of even more bizarre ones. As Musk tweeted more and more to his tens of millions of followers about this intriguing token, the price of this cryptocurrency, which has basically zero utility, rose considerably.
Unfortunately, some people jumped on this bandwagon a bit too late, with some people buying Dogecoin at $0.40 and $0.50. It is worth roughly $0.06 (September 2022) after this particular fad ran out of steam quickly. So, it can be a tough and unforgiving financial landscape.
However, it highlights the importance of doing your own research and investing wisely. If you bought thousands of dollars worth of a dog token because a billionaire told you to on Twitter, that’ll probably not end well. Be smart, and don’t trade what you don’t understand.
Social media also fuelled the mass panic when LUNA went from $119 a token to what it currently trades at - $0.005. If you held any LUNA during this horrific crash, it would highlight how tough crypto trading can actually be.
Do your research
In today’s internet age, “do your research” is a phrase we usually associate with rookies who, quite ironically, haven’t done their research on whatever topic they’re shouting about. However, in the world of cryptocurrency and trading in general, you must do your own research.
As it is such a new space, promising generational wealth, you don’t want to go into it with a nice bit of cash but no knowledge. This is a recipe for disaster. That being said, a whole host of cryptocurrencies will provide a fantastic return over the next five years. We don’t have my crystal ball with me today, it’s at the dry cleaners, but there’ll be gems out there for sure.
So, the crypto market is a rough one?
To put it bluntly, there’s room for considerable gains but also for devastating losses. It’s about getting in at the right time and getting out at the right time. Trading on facts and logic will stand you in a much better place than trading on emotion. If you don’t understand the market and the fact that it can sometimes go up and down 10 to 15% in a 24-hour period, then crypto trading is tough.
However, if you can establish a solid plan, research, put safety nets in place to manage your losses and stick to your initial plan, you may not find it as tough as others.