.jpg)
Introduction:
Cryptocurrencies can be extremely volatile, which means that they’re often very profitable to day trade. Here are some factors to consider when deciding whether to day trade cryptocurrencies and some tips on how to do it effectively.
But there are some factors you should consider before diving in—and even after you’ve become an expert in the cryptocurrency market, you’ll always want to revisit this guide and make sure you’re keeping up with the latest trends.
The History of Cryptocurrency
Before we get into whether you should be day trading cryptocurrencies, let’s take a look at their history. The first cryptocurrency, Bitcoin, was created in 2009 by an anonymous programmer using the pseudonym Satoshi Nakamoto.
Because of its relative anonymity and easy exchangeability for dollars, Bitcoin became popular with criminals and people looking to buy things on darknet markets (the criminal version of Amazon). Around 2011 it became more mainstream as exchanges like Mt.
Gox was developed that could convert USD into Bitcoin. By 2012 it was worth about $5 per bitcoin; today it’s more than $7000. It has also become increasingly regulated in recent years—South Korea, China, and Russia are down on its use within their borders—but remains big business outside of them.
The Basics of Cryptocurrency
Although there are many cryptocurrencies, such as Bitcoin and Ethereum, that you can choose from for day trading, it is best to understand some of their basics before diving in. The following information will provide a brief overview of how cryptocurrency transactions take place, so you can better understand what steps come next.
Before we begin, it’s important to clarify exactly what day trading means when it comes to cryptocurrency. Essentially, it means buying on one exchange (or another platform) and selling on another at a price higher than where you bought for an immediate profit or loss.
How To Start Day Trading Cryptocurrency
The first thing you need to know is that day trading isn’t for everyone. To quote Investopedia, The term ‘day trading’ suggests manically executing trades every few minutes. But, as many beginner traders find out, it’s actually far more objective than that. So... Why trade cryptocurrency?
The best way to learn how to day trade cryptocurrency is through a step-by-step guide via one of our crypto news sites such as CryptoCoinNews or Ethereum World News. These crypto news sites offer a variety of helpful guides and tips such as which altcoins are good candidates for day trading, overviews of popular exchanges, and other useful pieces of information that are sure to speed up your learning curve and make your efforts successful.
Where Can I Buy These Cryptocurrencies?
If you’re interested in trading a particular cryptocurrency, here are some exchanges that currently support it. Many of these are only open to U.S. citizens and residents; check before opening an account (you can usually find out in their FAQ section).
Also, be aware that because cryptocurrencies aren’t really currencies—more like digital goods—they aren’t subject to securities regulations in most countries (in other words, if you trade cryptocurrencies for profit, you won’t necessarily have to worry about being charged with operating as an unlicensed brokerage firm). Check out sites like CoinMarketCap and CoinChoose for specific information on each coin or currency: Bitcoin, Ethereum, Litecoin . . . there are tons!
Initial Coin Offerings (ICOs) and Digital Wallets
If you are looking for quick investment opportunities, keep an eye on Initial Coin Offerings (ICOs). An ICO is a fundraising tool that trades future crypto coins in exchange for cryptocurrencies of immediate, liquid value.
For example, if you believe that a certain cryptocurrency will increase in value over time, you can invest in it at its ICO stage. In many cases, these investments can yield multiple returns on your initial investment with a high initial capital outlay and low market. However, they do carry additional and are not suitable for everyone.
Before considering any Initial Coin Offering (ICO), you should carefully consider your financial situation and look at all other possible investments first.
Market Volatility, Liquidity Issues, and Manipulation
The cryptocurrency market is prone to high levels of volatility; in fact, it’s one of its defining characteristics. Furthermore, trading volumes are low on many exchanges, making it hard for even an expert trader to make a large impact on prices.
This means that a single day can create significant price movements on exchanges and if you’re not paying attention, you could miss out on major opportunities.
How Long Does it Take to Make a Profit from Day Trading Crypto Currencies?
Day trading can be a hugely profitable endeavor, but only if you are properly prepared. It takes time and effort, so before diving in headfirst, you need to know what you're getting yourself into. Are crypto day trading profits taxable? How long does it take for your profits to become taxable income? Why are some cryptos more volatile than others?
Will I have enough resources and liquidity to trade on short notice? These are just a few of the many questions that will go through your mind as you prepare to trade currencies. When everything is ready and accounted for, there is a lot of excitement and expectation on your part; it's easy at that point to let greed get in your way.
Who Are the Major Players in This Game at Present Time?
We are going to discuss three of the best cryptos to trade and how they differ from each other. All of these cryptocurrencies have similar basic characteristics. But, as we all know, one is not necessarily better than another in every way.
Some will be better suited for certain tasks or used more often in specific situations because of their unique characteristics. Bitcoin, Ethereum, and Litecoin are currently some of the most popular cryptocurrencies in existence.
Future Trends in Digital Currency Trading
If you’re interested in cryptocurrency trading but aren’t sure which coins are worth your time, you’re not alone. There are hundreds of cryptocurrencies on exchanges and even more exist in theory.
Although I am a big believer in several digital currencies that have emerged recently, I believe that there is one currency in particular that has incredible potential and will likely be adopted around the world by both merchants and consumers.
It is important to note that cryptocurrencies may face extreme volatility due to a lack of regulation, a high, and uncertain future. Always do your own research before investing any funds and never invest more than you can afford to lose!
Conclusion
Day trading cryptocurrencies is different than other types of trading. There are a few factors that you should be aware of, including slippage and transaction costs. If you’re an active trader and don’t want to take it with your investments, you can still find success in day trading cryptocurrency.
However, if your investment strategy involves sitting on assets for a longer period of time, then consider other strategies that can help you grow your money over time while reducing through diversification. Whatever you choose, make sure that day trading cryptocurrency is part of a solid financial plan that allows you to meet all of your financial goals today and tomorrow.