Cryptocurrencies are not only a new type of virtual payment system, but also a unique trading asset. From the point of view of the trader, this is a very profitable object for trading. And there is a logical reasoned opinion why direct investors are less likely to earn on cryptocurrency than traders. In this article we will try to explain the essence of this issue. Let’s consider cryptocurrencies not only from the point of view of traders, but also as investors. To start, let’s go on a brief excursion through the crypto industry.
What are cryptocurrencies
From a purely practical point of view, they are the result of a computer program which is used to select very complex digital combinations. The means of obtaining cryptocoins involves a long process of sorting out numeric and symbolic combinations – and there are trillions of options. This process is called mining and it requires a lot of computer power and energy costs. Therefore, mining is currently not carried out on ordinary computers due to the low level of feasibility.
In different countries, entire centers of thousands of devices specially designed for mining cryptocurrencies are already functioning. Their total computing power is millions of times higher than that of conventional computers. The great complexity of mining cryptocurrency is reflected in its value and that’s why the number of cryptocoins is limited. This leads to the opinion that cryptocurrencies will be the future of the global financial system. There are many contradictory opinions on this matter, but in this article we will not consider them. Rather, we will immediately move on to what interests us – how a regular person can make a profit on cryptocurrency.
A cryptocurrency is made up of arbitrary units that have a certain value. They can be bought on the exchange with real money and then sold to get the money back. And if the rate of the cryptocurrency manages to grow while it is being stored in a wallet, then you can earn a certain profit after making a reverse exchange. That’s how this industry is attracting the attention of investors and traders.
Earnings on investments
The direct purchase of cryptocurrency would seem to be the easiest way to make money. However, in reality there are many nuances to this. First, a profit can be made only in one case, if the volume of capitalization and the exchange rate increase. In the reverse situation, there will be equivalent losses. Certainly, anyone interested in this topic remembers the legendary fall of Bitcoin from $20,000 to $6,000, which occurred at the end of 2017. And this has been continuing for almost a whole year as of October 2018.
Disadvantages of cryptocurrency investments:
- Time. You have to wait for cryptocurrency growth for an indefinitely long period of time – it could be a month, a year, 5 years, etc.
- Expenses. To earn a substantial profit, you need to invest a very large amount. For example, even if the rate doubles, the profit on $100 would be insignificant. But on 1 million, it would be very good money.
- Risks. No one can guarantee that Bitcoin will again reach its maximum of 20,000 dollars. The same applies to any other cryptocurrency.
When investing money in cryptocoins, the investor cannot rely on quick profits. Even in a favorable situation, profits will be earned over weeks or, more likely, months or years.
Traders view the crypto industry as a new and very promising trading asset, the same as, for example, EUR/USD, EUR/JPY, or any other one. The rate is constantly changing, which makes it possible to represent price fluctuations in chronological order on the chart. Most traders use technical analysis, which involves working with charts. Therefore, the question as to exactly which asset is being used is only secondary.
Advantages of cryptocurrency trading:
- Time. The minimum duration of a transaction is 30 seconds: no need to wait months for the rate to change. This short period is long enough for the price to rise or fall within it. And there will be a substantial profit immediately following it.
- Affordability. Anyone can become a trader, the minimum investment is only $10. It doesn’t require a lot of start-up capital.
The principle of earning on trading is simple. The trader has to predict where the rate will go in the near future (from 1 minute to 1 hour) – up or down from its current point. If the forecast is correct, then the trader immediately makes a profit in the amount of 70–89% of the initial investment amount. Similar conditions are offered by the popular company Binomo. This trading platform is best suited for beginners who are only learning to master trading.
In the eyes of traders, cryptocurrency is a volatile asset that does not depend on fundamental economic factors. Consequently, it is can be easily forecasted using technical analysis techniques.
General Risk Warning: The financial products offered by the company carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose.