Crypto Trading: Are Digital Currencies Still a Smart Investment?

A man checking trading analytics using his phone and laptop

Ever since Bitcoin burst onto the scene in 2009, cryptocurrency has become a hot commodity. Historically, it’s no longer enough to scoop up huge stockpiles of digital coins and hope their value remains on an upward trajectory. Of the thousands of digital currencies that have emerged over the past decade or so, only a small fraction remain. What’s more, the market is particularly volatile, with significant depreciations in coin value rendering many crypto pots almost worthless.

However, purchasing coins outright isn’t the only way to make money with cryptocurrency. Recently, cryptocurrency trading has emerged as an enticing alternative for those looking to speculate on the value of the likes of Bitcoin, Ethereum, and Tether.

Is There Money to Be Made From Trading Cryptocurrencies?

Simply buying cryptocurrency is considered a risky enough venture. Even powerhouse performers like Bitcoin have suffered from waning interest and price crashes, with 2022 being a particularly bleak year for the digital currency. Admittedly, values can recover and even surge beyond previous highs, but this level of volatility doesn’t fill most people with confidence.

With crypto online trading, you get to engage with the cryptocurrency market anywhere you are, without actually having to purchase digital coins yourself in a specific place. There are many reasons why this is such an appealing alternative. It’s one of the most volatile markets around. What’s more, sudden drops or meteoric rises in value tend to attract considerable press coverage and consumer attention.

Unsurprisingly, crypto attracts a lot of interest in the short term. While you can, of course, buy and sell cryptocurrencies on an exchange, market volatility makes speculating on crypto price movements a more exciting alternative. There’s still an element of risk involved, but you’re not sinking fiat assets into purchasing crypto coins outright.

More Reasons to Speculate on Cryptocurrency

Owing to the decentralised nature of the blockchain and largely free of regulatory compliance, the cryptocurrency market is open for business around the clock. Many different exchanges support cryptocurrency transactions, although not all of them allow you to trade fiat currencies against digital knees. However, trading crypto is worth considering if you’re still using manual investing techniques in other markets.

No matter what the asset class, you’ve probably been late to the table once or twice and missed out on a lucrative opportunity. Despite being a fairly young market, many would argue that the crypto bubble has burst. Even still, new crypto assets can generate a surprising amount of buzz, with some investors managing to walk away with a sizable profit by making their mover early.

Failed to strike while the iron is hot? When you trade crypto, you can still secure a profit, even if the value of a coin is crashing. By going short with a trade, you’ll net a tidy profit should the value of a crypto asset fall against the currency you opened the position with.

Another barrier preventing many people from investing in cryptocurrency outright is the relatively large costs involved. For most would-be traders, the current market value of something like Bitcoin makes engaging with the market conventionally a no-go. However, other investment products like contracts for difference (CFDs) provide a more affordable way to trade.

Because you’re only using a fairly small amount of capital to trade crypto, the potential profit margins can be huge. However, this works both ways. With CFD trading, losses can far outstrip the amount you deposited in the first place. As such, you’ll need to carry out a thorough risk analysis before attempting to throw money behind your first CFD trade.

Making a Profit From Crypto: Trade or Buy?

Worried your capital won’t stretch to snapping up the latest cryptocurrency? Perhaps you’ve missed out on your chance to get in while the going is good on the latest coin. Trading cryptocurrencies in the form of CFDs is a more affordable way to turn a profit from digital coins. What’s more, thanks to the volatile nature of crypto, it can be a more exciting way to engage with the market.

If you have more money to play with, buying cryptocurrencies remains a viable option. Once you’ve paid upfront for a digital coin, the asset is your own. If price movements work in your favour, you can make a hefty profit from selling your assets. However, there’s no guarantee that prices are going to move in the desired direction.

Furthermore, there are many additional costs involved when buying cryptocurrency. Some exchanges charge fees for depositing funds in fiat currencies. What’s more, you’ll often have to shell out for commissions or sizable withdrawal fees. Ultimately, buying digital currency is rarely as lucrative as making smart choices when trading crypto CFDs.