Trading VS Owning Crypto.
The staggering potential of Bitcoin and the rest of the crypto gang is fast becoming hard to ignore for anyone on the planet. While the difference between owning and trading these new-age stocks/assets/currencies, (whichever you prefer to refer to them as), may be small, the difference in the outcome of each can be rather staggering.
Let’s explore a few pros and cons of each:
- Going long or short : Perhaps the most significant difference between trading Bitcoin and purchasing it is that when trading, you can either place buy (long) or sell (short) positions* at any given time depending on your outlook. If you buy Bitcoin outright, you obviously can only go long, and will usually just compel you to hold through all of the volatile ups and downs in Bitcoin’s price.
- Profit on either side of the swing : Traders will attempt to take advantage of all the potential opportunities of Bitcoin’s volatility. You can potentially make money when the prices rise, as well as fall!
- Double your opportunity to profit : Bitcoin analysts are divided as to whether the cryptocurrency will continue to shoot up in value or if it will drop sharply instead. As a Bitcoin trader, you can nimbly position yourself to potentially profit from price movements in either direction.
- Loose ownership encumbrance : Relatedly, when you trade Bitcoin you can place positions against the price swings on a short-term basis, instead of purchasing Bitcoin at a certain price and holding long-term, hoping for further price appreciation.
- Leverage your investment, with leveraging tools : Another approach to make trading Bitcoin more flexible than buying it directly is to use margin and leverage. Owning only one Bitcoin might be too expensive depending on the price of each Bitcoin at any particular time. Leveraged Bitcoin trading allows you to take a position with less money, but keep in mind that increasing leverage increases your risk.
- Stop your losses, take your profit : Finally, trading Bitcoin on platforms like Binance and Capital Crypto actively allows the use of entry orders, stop losses, profit-limit orders, and risk management techniques that are just not possible when simply purchasing Bitcoins.
- A lottery ticket to a ride that some see having a 1,000% upside : It could happen. There are only ever going to be 21 million bitcoins (BTC) , confirmed by Luno, many of which, like The Roman Gold Coins, are already lost forever. If Bitcoin was to be worth just half of the gold globally, it would be about $200,000 a coin. If all the BTC was worth $1 trillion then the price would be north of $50,000, which it was for a period a few months into 2021.
- Blockchain is “the next big thing.” : Owning Bitcoin and going through all the stages to “get” crypto will position you perfectly for the day that “crypto IPO” hits. That day will come, and it will be big. Owning bitcoin will position you to take advantage of that boom.
- Portfolio diversification is crucial : Everyone should have a little gold, for example, to buffer the roller coaster of other financial instruments. According to Business Insider, Bitcoin and gold are very similar in as much as they are havens. “Physical” Bitcoin however is easier to store, faster to sell and has much greater upside if you are sitting on assets for what you see as being extremely volatile times in the future. It’s easy to travel with Bitcoin; with gold bars and sacks of silver, not so much.
- The Bitcoin story is still unfolding : If you are an investor, it is obvious that you need to hold equities, bonds, gold and cash. That is still true, but you need to hold a little crypto these days because it is a new positive-sum financial instrument. If you don’t have Bitcoin, the world won’t end, but you will be less diversified and more at risk than an investor that does hold some. Bitcoin will continue to be the ‘kingpin’ of the emergent blockchain industry, and everybody needs a little bit of exposure to that in the same way as they needed a little Amazon in 2002.
The biggest important distinction between trading Bitcoin and buying it is that while trading, you can go long or short based on your view at any particular time. If you acquire Bitcoin, you can only go long, and you’ll be forced to keep it through all of the price’s unpredictable ups and downs.
Bitcoin analysts are split on whether the cryptocurrency will continue to rise in value or will plummet in value. As a Bitcoin trader, you can move quickly in any direction and take advantage of directional trading opportunities with platforms like Binance and Capital Crypto, as they present themselves.
The content presented in this publication is meant for informational & educational purposes only and you should not construe any such information or other material as legal, tax, investment, financial, or any other advice. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement, or offer by the author/s or any third party/ies to buy and/or sell and/or invest in any financial instruments.