With cryptocurrency prices falling rapidly since late November and bitcoin sliding below $20,000 for the first time in 18 months, the crypto market is undergoing a contraction phase, better known as ‘crypto winter.’ During this time of volatility, where everyone remains clueless and chaos takes over the market, a bold player will always find an opportunity even in an uncertain market, and that is what crypto trading is all about.
Is it a good idea to trade Crypto during a market crash?The answer to this question depends on how far you are going to get involved in studying this market and the reasons behind the crash. Some opinion leaders in the market would say there are always opportunities in the financial markets despite the geopolitical and economic conditions, that’s what history tells. However, to deal with this, your success in crypto trading completely depends on your tactics and how clever you are. A well-planned trading strategy and a deep understanding of the crypto markets can make a difference.
Moreover, again the history tells us that this isn’t the first time the cryptocurrency market is experiencing a crypto crash or a crypto winter. It did happen before and the last crypto winter occurred between January 2018 and December 2020. Eventually, the term first appeared in 2018 after Bitcoin, Ethereum, and Litecoin (LTC) lost more than half of their market capitalization. Crypto winter appears to be similar to a traditional bear market, and the results are might not too dissimilar from bear markets in other asset classes. Apparently, that’s why it might be something you need to consider about crypto trading.
Bitcoin Price Chart:
For us to understand, let me first share a quick history of Bitcoin:
- The Bitcoin price has historically been one of the most volatile among asset classes. Bitcoin’s first significant price increase occurred in 2010 when its value jumped from just a fraction of a penny to $0.09. Following the COIVD-19 pandemic in 2020, Bitcoin’s price spiked once again. In January 2020, Bitcoin was valued at $6,965.72, and by Nov. 23, it was worth $19,157.16. Its price reached just under $29,000 in December, up 416% from the start of the year.
- As we can see, the price of Bitcoin reached an all-time high of $68,789 on Nov. 10, 2021, before falling back to $64,995. With uncertainty about inflation and the emergence of a new variant of COVID-19, Omicron, Bitcoin fell to $46,164 in mid-December 2021. The Bitcoin price fell below $30,000 for the first time since July 2021 on May 20, 2022, after reaching as high as $47,445 by the end of March. As of June 13, Bitcoin plunged below $20,000 for the first time since December 2020, bringing crypto prices to a record low.
Here’s the Ethereum Price Chart for you to observe:
What is Crypto Winter? And What is going with market?Simply put, the phrase "crypto winter" likely came from the hit HBO series, "Game of Thrones." In the show, Starks' motto was "Winter Is Coming." This was considered a warning of war to come. In the same way, the crypto market may be settling into an extended period of trouble. Taking the phrase literally, crypto winter means prolonged periods of low prices.
What are the Advantages & Disadvantages of Trading Crypto During This CrashWhile several members of the crypto community have expressed concerns over the possibility of a crypto winter in light of the recent cryptocurrency crash. Some may believe that the days of ‘Lambos’ and ‘get-rich-quick schemes’ are over in the crypto world. However, I remain optimistic about the possibility of gaining a reasonable profit even in uncertain cryptocurrency markets, but I don’t believe there is a huge gain in the short term. So, manage your expectations properly and check these advantages and disadvantages before you jump in:
Advantages of Crypto Trading during uncertainty times:
- No one is certain about this crash: Investing in crypto now or buying a dip while the market is in a downtrend gives you no assurance of profits and can result in a significant loss as well as lengthen the wait for the price to recover. However, in contrast, it is good to consider crypto trading and what it offers. There are good chances here in this market as you are trading both from upward as well as downward price movements with the ability to go long and short.
- You can start with less risk: Making an investment in crypto may require a tremendous amount of funds since cryptos such as Bitcoin and Ethereum are very expensive to purchase in large quantities. However, leveraged crypto trading enables you to invest a small amount and turn that into good profits quickly. Benefiting from pending orders, Take Profit and Stop-Loss can drastically give you more control over your capital.
- Provides easy access to the system: Liquidity is the defining characteristic of cryptocurrency. This refers to the ease with which cryptocurrency can be converted into cash without affecting the market price. Liquidity enables better pricing, faster transaction times, and more accurate technical analysis. With many reputed trading platforms in action, now you can buy and sell assets more rapidly while eliminating time-consuming transactional processes.
- Uncertainty exposes you to more details: Unlike the forex and stock markets, which operate 24/5, the crypto market usually operates 24/7 since it is not governed by a central authority. So it can be a great opportunity if you’re a newcomer or a part-time trader with a full-time job to trade cryptocurrency in your spare time. Learning to trade in the volatile market can teach you a lot about the functionality of the market and thereby enhance your trading knowledge.
- Crypto trading is easy to start: For investments, cryptocurrencies can only be purchased using an exchange, which requires an exchange account and digital wallet storage. It can be a time-consuming and complicated process. Crypto trading, however, allows you to create a trading account in less than five minutes with instant online verification.
Disadvantages of Crypto Trading during the crash:
- Highly volatile: It is important to note that crypto trading involves a high level of volatility, which may result in a loss of funds. Consumer demand determines the price of cryptocurrencies, so if it falls, the value will also decrease. You may sometimes lose all your capital for no apparent reason.
- It is too risky: If you are trading crypto without a well-thought-out working strategy, all you will gain is a loss of your deposit. It is very disappointing to lose even a small amount of start-up capital because of a lack of preparation.
- The trend is not really your friend here: Cryptocurrencies are still too new to provide sufficient information about key support and resistance levels. Compared to stocks, currencies, and commodities that provide historical price levels, even known cryptocurrencies like Bitcoin have a short history of track record.
Different types of Crypto Trading:Crypto trading has now become an obsession for everyone owing to the fact that both amateurs and professionals are interested in portfolio diversification and using Cryptocurrency Contracts for Difference (CFDs) to generate returns without actually owning any digital coin or assets. The following are the two different ways you can profit from crypto trading.
- Trading Crypto CFDs — Crypto CFDs are similar to traditional CFDs, except they trade cryptocurrencies instead of currency pairs. Trading crypto CFDs can be appealing to traders who want to profit from price movement without dealing with the technical process of buying and storing cryptocurrencies. You need not worry about their legality when you buy and sell crypto CFDs since they adhere to all financial regulations.
- Trading Crypto Assets — The concept of trading crypto assets is relatively simple. Cryptocurrency assets are digital coins that can be purchased on cryptocurrency exchanges and stored in crypto wallets. A few of the most well-known crypto assets include Bitcoin, Litecoin, and Ethereum. It is preferable to trade Crypto Assets only if you are familiar with their technicalities, safety, and legality. It can be challenging for first-time cryptocurrency buyers to buy and store crypto assets securely.
Is Crypto trading a dangerous game?That’s a big no! Whenever you gamble, you are putting your money at risk. There are both chances that you might become wealthy or become a beggar by the end of the game. When it comes to gambling, you don’t need to follow any particular strategy. The outcome depends entirely on luck.
While cryptocurrency trading also carries the risk of losing money in the process, properly analyzing the market and developing a smart strategy can also make you become a millionaire. It is imperative that you gather as much information about the crypto market as possible in order to be successful at crypto trading. You need to analyze the market based on those pieces of information and create a strategy based on them.
You can mitigate the risk associated with cryptocurrencies if you play smarter. The problem is that if all you do is invest your money because your boss has also invested, you are actually gambling with it. You decide whether you trade crypto coins following the right guide or whether you just go with the trending buzz about Crypto trading.
So, What is the Future of Cryptocurrency?According to data from the last 12 years, Bitcoin fluctuates between uptrends and downtrends, but on a macro scale, its value is always increasing. Over time, Bitcoin’s price is bound to rise due to increasing adoption among institutions and retail investors. I anticipate that the market will become stronger over longer time periods (years, not months), given that the overall crypto market structurally follows Bitcoin. The prices we see today may therefore represent some of the best entry points into the market.
However, even with the best advice from an expert, you should only invest what you are prepared to lose and stick to more conventional investments for building wealth over the long term. It’s best to keep your investments small and focus more on crypto trading as it also gives you the possibility of generating income even in a down market.
In addition, instead of learning how to navigate a cryptocurrency exchange to trade your digital assets, you can add crypto to your portfolio by adding it to the brokerage with which you already have a retirement or other traditional investment account.
Original Article: Is This The Right Time For Crypto Trading | Crypto Crash
Disclaimer: This post is from Aximdaily and it is considered a marketing publication and does not constitute investment advice or research. Its content represents the general views of our editors and does not consider individual readers’ personal circumstances, investment experience, or current financial situation.
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