When dipping their toes into the world of cryptocurrency, many beginners wonder if they should day-trade or hold (invest long-term). Some traders proclaim that while trading cryptocurrency for beginners can be daunting, it is by far the best way to maximize potential profits in a chaotic market. The other side often scoffs at taking the risk of day-trading and insist that holding coins for a long-term payoff is the only reasonable decision. The answer, of course, lies somewhere in between these two extremes. Let’s take a look at the pros and cons of trading and holding.
Advantages of Trading
If the market is timed correctly, day-trading currencies can be absurdly profitable very quickly. This is especially true if using leveraged trading to take advantage and maximize even the smallest market movements. Due to these huge swings, it only requires a small investment to see very large returns. Also, due to the nature of the constant buying and selling, your funds are not “stuck” in a single investment for a very long time.
Advantages of Holding
Fees are a large part of why people decide to hold long-term. Since the act of holding for a long time is a simple “buy then sell later” process, there is usually a singular fee on the transaction, whereas the constant transaction fees in trading add up quickly. Also, there is much less time doing chart analysis and because of this, frankly, much less stress.
Disadvantages of Trading
It can be very exhausting and stressful to need to constantly keep up with market trends and act quickly enough to consistently profit from your analysis. Also, it is necessary to always do risk-assessment and leave room for lost capital on any one move. The fees add up too, so keeping track of transaction costs when making decisions is another constant headache.
Disadvantages of Holding
Before entering a hold position responsibly, a tremendous amount of time should be spent researching the currency and why it deserves a long-term investment. Also, as we’ve seen time and time again, the entire crypto market can go on long bear-cycles, and a long-term position can have you holding “bags” for a long time.
Overall, trading and holding both have their merits and are not mutually exclusive. At BXB, we encourage our customers to try out all of our trading options in order to get the most out of their cryptocurrency portfolio.