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Cryptocurrency has seen plenty of ups and downs over the past few years. From coin prices soaring to the moon overnight and plummeting just as quickly to unprecedented controversies in the industry, this asset has definitely been on a rollercoaster.
Nonetheless, every year, there are countless new traders entering the market with hopes of capitalising on it. But the question on most peoples' minds is, how profitable is crypto trading? Although the answer to this question isn't black and white, we still want to offer some valuable insight.
After reading this article, you'll know how to increase your chances of making a profit when trading cryptocurrency. We'll also highlight the key risks you should be aware of when entering the crypto markets. Although making a profit isn't a sure thing, there are always steps you can take to improve your chances.
As a multi-billion dollar industry, crypto offers countless opportunities for traders. With tons of success stories and the crypto markets being more valuable than ever before, the potential to make a profit is undeniable.
However, we can't produce an exact figure when it comes to addressing how profitable crypto trading actually is. The chances of making a profit vary between each trader and can depend on lots of different factors. This includes their risk tolerance, portfolio size, budget, experience level, and chosen strategies.
For instance, short-term strategies can often ensure small yet consistent gains. We can use this example to argue that, yes, crypto trading is profitable. But, this profit usually happens at a snail's pace and takes a long time to build up to a significant sum. On the other hand, traders who invest huge amounts at once can make sustainable profits in a short time. Using this, we can say that a massive profit is possible, so long as you have a big budget.
As you can see, this question can be looked at from multiple angles. Due to this, it's impossible to establish a clear and honest answer.
So, with the answer to this question being up in the air, let's turn our attention in another direction. Although you can't guarantee that you'll make a profit from trading cryptocurrencies, there are still actions you can take to tilt the odds in your favour.
Firstly, staying updated with news will keep you informed about the crypto and financial sector. The cryptocurrency markets are constantly shifting and impacting coin prices. So, it's vital for you to stay ahead of the game if you want to make a sizable profit from your trades.
Updating yourself with relevant news is fairly straightforward and less time-consuming than you may think. There are plenty of reputable news sources, such as CoinDesk, that regularly discuss project developments, coin updates, price predictions, and much more. You can also check out various social media platforms and online forums to see the community's general consensus at any given time.
Furthermore, by subscribing to a few different newsletters, you can receive constant updates. Overall, there are tons of ways to easily stay updated with the latest news.
Beginners, in particular, suffer from having unrealistic expectations regarding their crypto holdings. That's no surprise since the web is full of success stories, some true, some not.
All it takes is one crypto influencer or self-proclaimed guru to reveal how they made thousands in profit from a single coin. Traders often get a skewed view of this asset's potential and end up investing way more than they should. This is a massive reason why many new traders end up with losses.
To avoid this and give yourself a chance to make a steady and long-term profit, you should begin your trading journey by setting realistic goals. Ideally, you'll want a short-term and a long-term goal. You can even set daily or weekly targets to maintain discipline. Furthermore, you can base long-term goals on thorough technical and fundamental analysis. By fully understanding the attributes of any coin you want to buy, you can predict how it will realistically perform.
These goals aren't set in stone either. One of the main characteristics of a profitable trader is adaptability. This means that when the crypto market conditions change, you should be able to alter your goals and even execute exit strategies if needed.
Last but not least, the state of your portfolio can make or break you as a trader. Often, traders who invest in a wide variety of assets, such as several crypto coins and other digital currencies, will have a higher chance of profiting.
If you invest in just one coin, such as Bitcoin (BTC), you can be setting yourself up for failure. Although this coin is notorious for withstanding market pressures, it's still not invincible. The market can shift at any point, causing coin prices to plummet. There are no exceptions, so even those who trade Bitcoin can be left with losses. But, it's uncommon that all coin prices will fall at the same time and rate. Therefore, if you invest in multiple rather than one, you can offset your losses.
So, when establishing your portfolio, you should aim to buy a handful of coins with various use cases, prices, market caps, and industries. This ensures that you cover all your bases and you're prepared for any situation or changes in the underlying market. Diversifying your portfolio will also increase your market exposure. This will help you build up the skills necessary for becoming a successful trader, even in a short period.
Whenever you trade cryptocurrencies, you are at risk of falling for traps, scams, or common mistakes. This is just the nature of trading. With such a profitable industry and a widely unregulated space, crypto traders are typically more at risk of experiencing losses. But don't worry, because being aware of these risks is the first step towards avoiding them.
Unlike traditional currencies such as fiat currency or tradable commodities such as gold, crypto assets have no physical form. Their prices are largely driven by market demand, investor sentiment, and perceived utility. Due to this and other factors, such as liquidity issues, cryptocurrency is a highly volatile asset.
This volatility is both a good and bad thing. In some instances, volatile coins can skyrocket without warning, such as in the case of Dogecoin (DOGE). However, prices can fall equally as fast, leaving traders with losses. Understanding and anticipating this volatility is crucial if you want to make a profit from trading.
Sadly, another risk of trading crypto is the possibility of falling for scams or having your sensitive information stolen. Scammers and hackers often target the crypto sector and are always finding new ways to capitalise on traders. One common way of achieving this is by either targeting a crypto exchange or masquerading as one.
If you end up joining an unsafe exchange, you're putting yourself at risk of losing all your funds and crypto assets. Therefore, you should always do plenty of research on different platforms to ensure they're legitimate and secure. To do this, you should check out user reviews and ensure that the exchange has all the necessary security measures (such as 2FA).
As an alternative option, rather than joining a cryptocurrency exchange, you can choose to use a broker. Brokerages are ideal for beginner traders as they offer guidance in the form of tools and resources. When you trade cryptocurrency with a broker's assistance, you have a better chance of avoiding mistakes and reaching your full potential.
If this interests you, you can effortlessly find a suitable broker by joining a brokerage-matching platform. Platforms such as Immediate BitMasters use AI technology to make optimal pairings between their users and well-rounded brokers. The process is super-fast and easy, giving you more time to focus on your portfolio and trading strategies.
The truth is that the likelihood of you profiting from cryptocurrency trading will depend on multiple factors. For instance, if you're a beginner trader, then you may have more chance of experiencing losses due to mistakes. On the other hand, if you've worked out how to diversify your portfolio and stay up to date with relevant news, a profit will be more attainable.
By following our helpful tips for making a profit, you can increase your chances of establishing both passive and active income from cryptocurrency assets. Similarly, understanding the risks of crypto trading will help you set realistic goals and keep your emotions in check. Over time, you'll make fewer mistakes and learn how to capitalise on the lucrative world of crypto. Our final advice is – don't lose hope!
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Disclaimer: Analytics Insight does not provide financial advice or guidance. Also note that the cryptocurrencies mentioned/listed on the website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments. Read more here.
