Is cryptocurrency a profitable investment?
The answer is not always as clear-cut as it might seem.
There are many factors that go into determining if investing in cryptocurrencies is worth your time and money.
In this post, we’ll explore the subject of whether or not crypto is profitable, so you can make an educated decision for yourself.
There is no denying that cryptocurrency has been a major part of the modern world these last few years.
Whether you are for or against it, many people have invested in it and continue to invest in it with the hopes of making money.
But is cryptocurrency really that profitable? Let’s see…
What Makes Cryptocurrency a Profitable Investment?
Below are the factors that make crypto a profitable venture:
1). Cryptocurrency Volatility
A cryptocurrency’s volatility is a measure of how much the value of its exchange rate varies over time.
The higher the volatility, the greater the risk associated with trading in that currency as it makes future prediction more difficult and risky.
Historically, some cryptocurrencies have been less volatile than others-such as Bitcoin (BTC) which has an annual standard deviation for daily price changes on major exchanges at between one to four percent versus Ethereum’s 20% or Litecoin’s 90%.
This means that you could potentially get better returns from holding onto your coins rather than spending them if they’re not too expensive to begin with – but always do your research before investing any money!
The bottom line: Crypto is risky, but that’s what makes it profitable.
2). There is a Fixed Supply of Cryptocurrencies
There are only so many tokens to go around.
When more people buy into the system, there is less for those who choose not to invest or run out; this is known as dilution and creates an upper limit on how much each token may be worth at any given time based on market demand.
This means that the value of your holdings can potentially increase over time but it will also depend greatly upon the current size of investment in that particular cryptocurrency.
3). Investing in Cryptocurrency is Speculative
The speculative nature of Bitcoin and other crypto makes it an interesting investment vehicle.
The value of cryptocurrencies is determined by the underlying market forces and demand for them, not any intrinsic worth like gold though many people do see it as a store of wealth in times when other markets are volatile.
This makes profitable when you take advantage of it in the right time.
For this reason, you should use some caution before investing in Bitcoin or any other cryptocurrency.
4). Cryptocurrencies are Not Regulated by an Overseeing Body
The lack of regulation is one of the core features.
Crypto contracts that execute automatically can be used to create self-executing deals and complex financial agreements.
Without going through a third party, such as a bank or other institution.
This means there is no single entity responsible for making decisions about the future direction of cryptocurrencies.
Which takes away some risk involved with investing in them but also allows fraudsters more opportunities to take advantage of people who don’t understand how they work.
Is Trading Cryptocurrency Profitable?
As the price of bitcoin and hundreds of crypto coins and tokens has skyrocketed in recent months, many people have been wondering if it’s a good time to get into cryptocurrency trading.
The answer is yes, but since there are so many factors to consider it would be impossible for me or anyone else to give a definitive answer if trading cryptocurrencies are profitable or not.
Trading crypto is a great way to make money. I’ve made ton from it.
When it comes to making money from the crypto market, there are multiple ways you can do so.
One of these ways is through buying and selling coins on exchanges like Coinbase or Binance. The other way that you could make money is by investing in cryptocurrencies directly using platforms such as eToro.
These two scenarios allow for traders to profit off the ever changing price fluctuations of Bitcoin and other altcoins (e.g Ethereum).
What About day Trading Cryptos?
Day trading involves actively buying and selling coins and tokens within the same trading day.
While it is possible to make money this way, most people don’t have enough time for all that effort, not to mention the skills required.
You could easily spend more hours per week on buying and selling than you do at your job.
So unless you’re retired or independently wealthy with time (or both), then I’d recommend staying away from day trading.
Should I Hodl or Trade Cryptocurrencies?
Well, it’s a tough question, and it all depends on your circumstances.
If you are just starting out in the crypto world then I recommend that you hodl for now.
Best to buy and hold currencies with real world use.
This is because trading can be risky – if you buy high and sell low, there will likely be significant losses to account for at the end of each trade.
Not only this but transaction fees also apply when exchanging one cryptocurrency with another so these costs have to be taken into account as well.
However, many traders choose not to hold their cryptocurrencies long-term because they see them more as investments than currencies or assets (as such, they don’t want prices fluctuating too wildly). They’ll therefore use fiat currency from their bank accounts to purchase cryptos which they’ll then sell once the prices have gone up, in order to make a profit.
I recommend holding ONLY for those with enough crypto sense and knowledge.
Is Mining Cryptocurrency Profitable?
Mining is the process of adding transactions to a blockchain.
This is done by securing blocks together in order which they form a continuous chain, with each block containing data about previous and subsequent transactions.
Bitcoin mining was designed so that it would become more difficult over time as there are only finite bitcoins available for miners to find and transact with.
The difficulty levels have been steadily increasing ever since 2009 when bitcoin started being mined around the world.
As mining has grown more competitive, individuals have looked for alternative methods of earning cryptocurrency without having to mine themselves
Or take on any risk from volatility in prices or changes in value compared to fiat currencies like USD or EURO (or even other cryptocurrencies).
Cryptocurrency mining can be profitable and is a way for people to earn cryptocurrency without risk, it just takes a hell lot of time.
Another problem with mining is that the hardware becomes obsolete every few months or years.
So you need to keep buying more powerful equipment/tools or less power-hungry equipment if you want your miner’s output to be competitive in terms of hash rate (the speed at which they solve blocks).
Most miners are simply looking for short-term profits by investing in older systems and then selling them once newer models become available.
Is Trading Bitcoin Profitable?
Right now, it’s difficult to give a definitive answer on whether or not trading Bitcoin is profitable.
Because at its current price, you won’t make much profit on Bitcoin compared to the first time it came into existence.
Unless you’re ready to hold it for years to come. Which isn’t trading.
However you can trade other alt coins and new coins coming up. Especially all these new meme tokens.
Regardless of which scenario plays out though, there’s still one thing we know for certain: trading is risky business no matter who you’re dealing with or where you live on Earth.
Don’t jump on because of FOMO (fear of missing out). Trade with caution my friend!
Trading Other Cryptocurrencies
Trading in the crypto market, in general, can offer significant profit opportunities when done properly and with sound research.
As a rule of thumb, if you’ve researched an investment opportunity before investing any money into it, then over time you should make more than your initial capital back but less than twice what you invested initially (known as “a double”).
The key thing here though is “over time” because sometimes markets fluctuate dramatically so while one day might be very lucrative another may result in sizeable losses – all depending on your analysis and trading strategy.
In the crypto world, there are a number of exchanges which allow you to buy or sell cryptocurrencies not just bitcoin.
So if you’re thinking about jumping on the bandwagon then do some research into other coins too.
Is Making Your Own Cryptocurrency Profitable?
Creating your own crypto project is not only a difficult process, but also very risky. But yeah, it can ONLY be profitable if it takes off and being adopted and backed a trusted community.
To be successful, a cryptocurrency must have solid fundamentals such as:
- A strong team of developers
- Good project management skills from the founders and organizers
- Strong leadership quality in both business practices and development
A well designed roadmap is also necessary to keep investors on track with what goals are being achieved. Crypto projects that lack any one of these fundamental elements will likely not succeed.
What is the Long-term Outlook for Cryptocurrencies?
At this point in time, it’s difficult to say exactly what will happen with Bitcoin and other cryptocurrencies because they’re so new.
The best answer that we can offer is “wait and see.”
If you do choose to invest a significant amount of money into cryptocurrency, be sure to monitor your holdings closely.
You don’t want to wake up one morning only to find out all of your investment has disappeared overnight due to some sort of hack or weakness in the system.
You should also look at how much risk you’re willing/able to take on before investing any funds.
If you have emotional baggage around losing financial investments then crypto might not be right for you.
In other words, you must have thick skin for the game.
Where Can I Buy a Cryptocurrency
Here are favorite places/exchanges to buy Cryptos:
- Coinbase: One of the most popular US crypto exchanges
- Binance: Best Crypto exchange to buy altcoins and currently the world’s largest crypto exchange
- KuCoin: Best exchange to find the next crypto gem
- Kraken: Another great exchange option from a European perspective
7 Tips for Investing in Cryptocurrency (from experience)
#1. Research the team behind it:
What is their experience and background?
Is there any information about who is running or creating this cryptocurrency, how many developers are working on it, what other projects they have been involved with?
Also you can go an extra mile and research coins by using a combination of these two FREE research platforms:
- CoinGecko.com
- CoinMarketCap.com
And this awesome AI cryptocurrency analytics platform called:
- Token Metrics
#2. How much of the currency will be created (total coins in circulation):
This number should not exceed 21 million for solid projects.
If you do so then everybody would own more than one coin making a single unit worthless which defeats the main purpose of having an alternative to fiat money
#3. What does your token represent?
Should it only serve as a utility for transactions within its ecosystem(e.g., storage space) or can people use them outside of that environment too (e.g., $TNT)?
Remember that if your token is only used to transact within your ecosystem then the tokens will not be as valuable outside of that environment.
#4. What is the distribution model for this cryptocurrency?
When do you plan on distributing coins, how are they going to be distributed (e.g., all at once or over time), and what percentage of total supply is being allocated to initial investors vs future coin holders?
#5. Is there any information about where these coins are listed and traded?
What exchanges have been involved in their trading so far or what markets should people use if they want a safe place to buy them with fiat currencies such as USD, EURO etc.?
#6. Use Stop-loss orders
You see, stop-loss orders are a simple and effective strategy for minimizing losses.
They give you the opportunity to protect your investment in case market conditions change.
A stop order, when activated, becomes an active trade at whatever price is currently showing on the order book – usually better than what it would have been without one as prices often fall faster than they rise.
It lets you to automatically buy on dips and sell when it hits a certain limit.
#7. Never Chase a pump
Never buy on rapid upswing on the candlestick chart if you’re not sure why it happened and can’t figure it out.
The reason is likely that it is a “PnD”.
PnD means a “Pump and dump” scheme.
People will buy a coin on the upswing, with hope that it goes even higher in value so they can sell them for profit.
But when more people find out about this pump going on, then quickly all these buyers start to sell their coins as well because they want to cash-in.
It is usually a coordinated trading action where people organize to coordinate the laddered purchase of an asset.
Then wait for others to come in at some delay and further increase the price before coordinating the unloading of their position once a specific price target is reached.
Final Thoughts – Is Cryptocurrency Profitable?
To conclude, Cryptocurrency can be considered profitable and a sound investment.
There are risks that should be accounted for before deciding to invest but it is important to note that traditional investments have their own set of risks as well.
The volatility in the cryptocurrency market will continue to persist; however, if an investor has the time and patience they could potentially see a higher return in the short-term and long-term.
Investing is not for everyone, but those that are interested should do. And crypto is one interesting and viable one you should look into.
