An increasing number of people are now entering the crypto markets, thanks to cryptocurrencies exploding in popularity in recent years. The majority of these investors have a common goal: to invest in cryptocurrencies to make large profits. Undoubtedly, while some people consider the volatility of the cryptocurrency markets to be a bit too risky, others see a golden opportunity to make enormous profits.
So how profitable is crypto trading actually? Let’s find out. But first, let’s look at how crypto markets work.
Pros of the Crypto Market: There are thousands of cryptocurrencies that traders can choose from today. There are various crypto trading strategies they can use to earn handsome returns. Moreover, the availability of different types of cryptocurrencies, such as blue-chip cryptocurrencies, small-cap cryptocurrencies, stablecoins, etc, provide traders with a variety of opportunities depending on their risk appetite and investment/trading objectives.
Cryptocurrencies can be traded on crypto exchanges that function 24 hours, seven days a week, and cater to traders from all over the globe. Centralized crypto exchanges facilitate trades between traders, whereas, on a decentralized exchange, the transactions happen directly without the intervention of any third party.
Cryptocurrency trading isn’t just restricted to spot trading. It also includes margin trading, derivatives trading, ETFs, etc.
Volatility in the Crypto Market: In the financial markets, asset price fluctuations are referred to as volatility. It may be healthy with consistent price increases or drops within a broad range. Extreme price swings in either direction are considered unfavorable trading conditions as traders are unsure which price will move in which direction and might incur huge losses.
Cryptocurrencies are inherently volatile, and there are no indexes to measure the volatility of cryptocurrency prices. You only have past price charts to look at and observe. Compared to prices of assets in traditional markets, cryptocurrency prices experience more rapid and dramatic peaks and troughs.
How to Start Crypto Trading: If you’re wondering where and how to start crypto trading, we’ve got you covered. Read on to find the general steps to begin your crypto trading journey:
1 Choose the Best Crypto Exchange
The first step is to look for a trusted crypto exchange that follows security protocols like KYC verification, 2-factor authentication, and other due diligence to diffuse risks related to cryptocurrency trading. Crypto exchanges that insure the funds of their traders against a possible mishap help traders employ crypto trading strategies easily.
2 Set up a Trading Account
You must create a trading account at the cryptocurrency exchange of your choice. This account will resemble a bank account. The exchange will check your credentials during registration based on the services you choose, the amount you intend to deposit, and the choices for exchanging coins.
To start crypto trading, begin by creating an account on MultiBank.io
3 Deposit in Your Account
After creating an account to purchase cryptocurrencies, you must deposit funds into the cryptocurrency wallet provided by the exchange. You can transfer money online from your bank account to your cryptocurrency wallet. Traders can manage a non-custodial wallet for storing their cryptocurrencies offline.
4 Make your First Purchase and Start Trading
After opening an account and transferring money, you must choose the coins you want to invest in.
Risks in Crypto Trading
Crypto markets are prone to be volatile and uncertain, given the nascence of the assets that get traded on them. Volatility is inherent in all financial markets, including stocks, commodities, forex, and cryptocurrency. A healthy price fluctuation is a significant factor in determining how much cryptocurrency traders make. The crypto space has a higher level of intensity and spread when compared to the traditional stocks and forex markets.
Lack of Regulations
Cryptocurrencies are borderless assets. However, each country is trying to figure out a framework or legal treatment concerning its jurisdiction. While some countries have embraced cryptos and designed a regulatory framework around its ownership, perusal, and trading, some countries lack any regulations, are hostile, or have put a total ban on them.
Lack of regulations exposes cryptocurrency trading to risks such as money laundering, terror financing, hacks, thefts, and other issues jeopardizing investor interest.
Cryptocurrencies are considered riskier assets and are subject to risks brought on by changes in the market, just like other commodities. Trading cryptocurrencies carries two kinds of threats: systematic and unsystematic. Because it is a component of cryptocurrency markets, systematic risk is present in all cryptocurrencies.
A shift in the company’s fundamentals could be a portion of the unsystematic risk, which is unique to a single cryptocurrency asset, such as the decline of the Terra-UST platform due to inconsistencies in its algorithmic pegging model.
There is some confusion regarding the tax position of bitcoin investments and returns. Taxes play an important role in determining how much cryptocurrency traders make. Depending on the jurisdiction, Bitcoin and other cryptocurrencies may be categorized as an asset, security, or store of value in different countries and may be taxed accordingly. In contrast, crypto-investments are tax-free in certain countries like Germany, Singapore, and Portugal.
Hacks and Exploits
Cryptocurrency may mark the beginning of a new era, but it also has a less well-known adversary in the form of cybercrimes such as hacks and exploits. Of late, cryptocurrency exchanges, especially DEXs, and blockchains, have been facing several exploits due to loopholes in the source code or hackers exploiting the underlying source to their advantage.