The meteoric rise in the price of Bitcoin in 2017 led to the growth of individual altcoins and the cryptocurrency market as a whole, increasing the liquidity and volatility of cryptocurrencies. However, despite strong price movements, traders in stocks, futures and other trading instruments remain hesitant about digital coins. Let’s see whether it is worth trading cryptocurrencies and what are the main benefits.
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Volatility is good for trading because price fluctuations create earning opportunities for traders. If the price only went sideways for a week, month or year, it would be impossible to trade and make a profit.
In 2017, it seemed like the uptrend in Bitcoin and other cryptocurrencies would never end. However, market sentiment can change, and most often it happens at the most unexpected time. Nothing lasts forever, and the sentiment of market participants also goes through stages of rise and fall.
Long positions differ from short ones in that the trader buys an asset at one price and sells it at a higher price. In this case, the difference from the sale will be his profit. In turn, with a short position, the trader borrows the cryptocurrency, sells it on the open market and buys shares at a lower price, again making a profit from the difference in value. That is, there are no restrictions on cryptocurrency. You also have an optoin of trading using platforms like bitindex prime, but ensure that the platform you are using is reliable.
Freedom of Choice
Another benefit of crypto trading is freedom of choice. You can trade with or without a broker. Of course, the presence of a broker is necessary, but you can still do without them.
Generally, crypto brokers are rapidly gaining popularity in the past years. However online FX brokers also offer crypto-trading possibilities to customers. They have a wide choice of trading instruments and cryptocurrencies are one of them.
Only a liquid market can guarantee high returns and deep trading. Cryptocurrencies have high liquidity, which is why they are popular among traders. Compared to currency markets they have a huge advantage, which is really beneficial for customers.
It means the use of a deposit (margin), thanks to which you can get increased access to digital currency. That is, you trade partly with your assets, and the provider lends the rest to you. Leveraged trading includes CFDs and spread bets. This trading option is suitable for experienced traders who do not have a large start-up capital, but can earn money by borrowing capital.
Quick Account Opening
Registration on a cryptocurrency exchange does not take long and does not cause difficulties, so a trader can focus on cryptocurrency transactions and start trading as soon as possible. In addition, to save time, traders are provided with special tools for automatic trading.
Such tools are crypto robots that serve as advisors to traders. They have a broad range of advantages and can carry out profitable transactions.
Are There Drawbacks?
When we talk about the benefits of cryptocurrencies it is necessary to say a few words about some disadvantages that crypto trading has.
Uncertainty Related to Hard Forks
The general public is not aware of what the management and Bitcoin developers are discussing. Sometimes internal contradictions lead to the division of the Blockchain into two chains, as happened with Bitcoin and Bitcoin Cash. Information appears in various sources that the developers and the Bitcoin community are considering other options for modernizing the protocol.
The possibility of the next division of the coin undermines the confidence of investors in the reliability of the coin and poses threats to both Bitcoin and the entire cryptocurrency market.
Conflict with Central Banks
Bitcoin and most other cryptocurrencies are decentralized in nature, they are not issued by the central banks of countries. On the contrary, if digital coins become a popular means of payment and accumulation, it will make it difficult for central banks to conduct monetary policy. In the long run, this might even make government financial institutions unnecessary. It cannot be argued that the development of events will follow this scenario, but its results may lead to:
- Increased uncertainty and risks in the economy due to the decentralization of monetary emission;
- The slowdown in inflation, since most cryptocurrencies have a limited volume of emission;
- Weakening demand for traditional currencies – dollars, euros, yen, etc.
Deflation is undesirable for countries with high debt levels because it increases the actual value of their debt. Moderate inflation provides debtor countries with a reduction in the face value of debt obligations without a threat to the national economy. Deflation leads to a decrease in sales tax and payroll revenues, as well as to a decrease in consumption levels.
It is not yet clear how governments and central banks, especially Western countries, will react to such trends.
Conflict with the Financial World
Bitcoin and other cryptocurrencies are independent not only from governments and central banks, but also from the banking system as a whole. Blockchain technology makes it possible to dispense with traditional banks, which puts them at risk of receiving fees and other income. Financial institutions may try to counter this by lobbying for laws governing cryptocurrencies.