Crypto Trading
I actually don't recommend this for the average person, and this is by no means financial advice. Cryptocurrency trading is dangerous if you don't know what you're doing, and it's a surefire way to lose all your money in the blink of an eye.
Having said the above, I do think cryptocurrency trading is a huge opportunity for the savvy trader, and a path to self-employment and even financial freedom. You could already do this with the stock market, and Forex, but neither possesses the volatility required to generate the eye-watering amount of profits seen by the very best crypto traders in the industry. Many, many years ago I used to work for a company that wrote and ran a derivatives online trading platform. They had Forex derivatives, Contracts For Difference (CFD) and Spreadbetting. Basically, gambling.
Gambling, including online gambling, is perfectly legal in the UK. You can play poker, play the lottery, bet on horses and so on and stay within the law. What's more, your winnings are completely exempt from taxation. By the way, this is why we in the UK have since hoped and prayed that the Government would class cryptocurrency as gambling, not "property" for the purposes of taxation.
Most of the products that company I worked for had were banned in the United States at the time. We did have a New York office, so they were doing something there, not sure what.
Back then, we'd occasionally have open days when clients could come in and interact with us in the back end. I once had the displeasure of dealing with a client that had "lost all his money" because of what he insisted was a "technical fault" in our system. I had no power, nor authority, to actually make comments on behalf of the company, so I just nodded sympathetically. I was actually from a different department and was just filling in for a colleague who was off sick. I wasn't ever supposed to be client facing in the literal sense. So much so, that I wasn't even dressed for the part. I had on a pair of jeans and a hoodie like any good backoffice guy worth his weight in gold.
From what I could see, he basically didn't know what he was doing. He got a margin call on his account and got liquidated because his funds fell bellow a threshold. So even though he still had funds in the system, he didn't have enough to stay active, so the system liquidated his positions, resulting in a massive loss. Poor guy, if only he had a little more money to put in, perhaps the following day the graphs may have turned around, and he could even have made a nice profit. Or, perhaps that liquidation actually saved his bacon by cutting his losses before he remortgaged his home for a silly online bet that a stock was going up or down.
Back then I thought it was crazy that anybody would do this. Just like in a casino, or high street bookies, there are always more losers than winners. It was so clear to me having also worked in a betting shop when I was a student. Yet people would throw everything and the kitchen sink into a bet, chasing a win to cover their previous losses.
We had leaflets and signs warning of gambling addiction and where to get help - at the betting shop, not the trading company. Mind you, we should have had them at that company too. Our clients had much the same energy as those I encountered at the betting shop on the high streets many years before.
So who is crypto trading for?
In my opinion, crypto trading is not for everyone. In fact it's not for most people. First of all, if you are prone to addiction I'd advice you stay well way from it. Gambling addiction is similar to other types in that it triggers the same parts of the brain as other addictions. In my days at the betting shop, I could see that alcoholics were more likely to be gambling addicts than non-alcoholics. (Not scientific but anecdotal ).
Secondly, if you don't have spare capital that you're willing to lose, then I wouldn't risk it. You may win now and again, but I believe you will see a net loss. I have been studying these graphs on the exchanges for the best part of this year, and I've lost way more than I've won (with my fake money).
One could argue that COVID-19 has skewed the graphs massively this year, and that whales are manipulating the system. Yes, both of these are true, which is even more reason why you should keep off unless you have extra disposable money to play with.
Whales have money. Most of them only play with 5-10% max of their worth! They can indulge in crazy pump and dumps, even at a loss, so they can control the narrative. If you're betting with your life savings, or your children's future university fees, then you're a sardine playing in the deep ocean with killer whales.
HODLers win in the end
HODLing is a totally different ball game. HODLers don't care what the day-to-day price is. HODLers don't have margin calls or short coins. They buy, hopefully at a very low price or range of prices, then just forget about it until a significant bull run.
As long as the coin survives, this is a winning strategy, since in the long run, most of them will win. The risk with HODLing isn't the price, but rather picking the right coin in the first place. This is why most HODLers run to Bitcoin, because it's seen as the most likely to be around in years, even decades to come.
Are you a trader or a HODLer?
Peace & Love,
Adé