Trading cryptocurrency is one of the most profitable businesses in the world. However, it is as well a risky business. For real, many individuals can attest that they’ve made a lot of cash. Nevertheless, others have made huge losses too.
If you are looking forward to engaging in the crypto world, then you need to learn all the basics and strategies. In this piece, we will help you comprehend the differences between crypto long term investment and short term investment, their pros and cons as well. Additionally, we will also explain how an investor should invest in making maximum profit.
What is long term investment?
If you are an experienced crypto trader, you understand what HODL entails. If you are a novice, then it might be your first time to hear the word. Basically, it is a word you will undoubtedly find in crypto community chat groups and forums.
Normally, HODL is a slang term implying to reserve a cryptocurrency long term instead of selling it. In other words, it means Hold on for Dear Life. Generally speaking, it is holding a crypto coin for one year or longer. The long term concept is that no matter the volatility, the prices will increase over the long term.
How does it work? For instance, if someone bought Bitcoin in 2011, the price was at $0.35 each. If the same person held it till late 2017, the prices had increased to almost $20,000 each. What is how long-term investment work. Interesting! Isn’t it?
The initial benefit of crypto long term investment is that it is simple and needs little time to get started. You don’t require learning about mathematical analysis or understand complex trading graphs and charts. You only need to hold the coin for a significant amount of time.
Long term investment requires little capital to get started. A lot of cash is not necessary, you can purchase crypto coins with a small amount, and if things get better, it will undoubtedly grow over time.
Long term investment keeps you stress-free. You don’t require stressing yourself with the volatility of the market because short term price movement does not affect your future target.
One setback of crypto long term investment is that you can miss out on a nice chance to make fast short term profits.
Another setback is that traders miss out on bad news, which can affect your future gains. This is due to the lack of market analysis. If the bad news could affect the value of your crypto coin, then there is a high chance of price falling for a couple of years.
XTRgate has a really good article focuses on long term investment with cryptocurrencies. If this is your aim, check it out.
What is short term investment?
Short term crypto trading uses the same principle as the long term trading. You purchase crypto and reserve it for a short time. Usually, traders reserve it for minutes, a few hours, days, weeks, or a few months. Basically, what traders do is scalping. What does that mean? Well, you purchase crypto and sell it when the price rises in the short term. This way, you can make a quick profit provided that the price rises.
The main benefit of short term investing is that it gives you the chance to really make a good profit in a short time. Interesting, unlike other markets where price movement can’t even account at 1% daily, the crypto prices can double overnight.
Since there are several distinct Cryptos to trade, it becomes easier to trade them and make huge profits. Additionally, some have large trading volumes.
Large trading volumes are critical because you will arguably get a buyer or a seller, which implies high currency flow.
Due to the volatility of the crypto market, the value changes very fast. This means for you to invest fast, you should spend a lot of time in market analysis.
For you to make huge returns, you should make a substantial investment, of which many novices are not comfortable with.
How an investor should invest in getting the maximum profit
Investing in a crypto business is an excellent idea to make good money. However, a critical aspect to remember is that there is a chance you can lose the whole investment as well. Basically, making the right decision is ultimate. It will tailor you to avoiding losses and making significant profits. For you to make maximum profit, you need the right broker; there are a couple of them online, do your research and select the one that suits your needs. Besides, consider paying low investment management fees, check on the taxes you pay, and avoid anticipating the market. All the best!