Advantages and Disadvantages of Trading Bitcoin and Cryptocurrencies
An experienced crypto trader knows everything about all the nooks and crannies of his activity. When compared to other kinds of trading, the environment of crypto trading is much more volatile and unpredictable. It has its own pros and cons, considering which people decide whether to start getting involved into activity. Want to know how trading can benefit or entail losses? Then this article is right for you.
We’ve already said much about crypto’s benefits in our previous tutorials. However, there are still many points to review.
Firstly, trading crypto is not geographically limited. For instance, you are in Estonia and you have a friend in New Zealand. Sending some Bitcoins to him would be like shooting fish in a barrel. Since the crypto is not issued materially and is underpinned by no financial institution, anyone from all over the globe can access Bitcoin trading.
As there are not any central authority figures controlling BTC transactions, there aren’t any limitations such as crossing borders, ‘bank holidays’, etc. You are the only who decide which amount of your money to trade. The transactions can’t be tracked and identified. A government is able to stripe away ownership of many assets, but not Bitcoin.
Trading traditional currency pairs or fiat-crypto pairs runs the inherent risk of losses due to the possible force majeure banks could face, while crypto pairs don’t. Additionally, economic obstacles have no major impact on crypto. Nor do hikes or cuts in interest rates by central banks.
Bitcoin is non-inflationary. Only 21 million Bitcoins were created and this is known to everyone. It means that the inflation will thus never be a headache.
Apart from above-mentioned points, paying through Bitcoin has very low (as compared to any financial intermediary or digital wallets) and sometimes no transaction fees at all.
Those were the key reasons why users start trading cryptocurrencies. Nevertheless, nothing is flawless in this world. The first thing that probably jumps out at you while speaking of the crypto’s disadvantages is its volatility. Many say that volatility is concurrently an advantage of trading Bitcoin and cryptocurrencies. However, it is usually the issue which scares people away from investing.
One should be very attentive if he/she wants to make profit from every price fluctuation. Crypto prices are extremely sensitive: every piece of news, good or bad, can make an impact on its behaviour.
As a result, market sentiment becomes unfixed. It always changes unexpectedly, making it extremely risky to play short-term. That’s why many newbies follow the ‘buy and hold’ strategy and hope for the bullish momentum on the market.
Another disadvantage, or to be accurate, a consequence of crypto’s advantages, is the rivalry with the traditional financial world. Bitcoin and other cryptocurrencies offer an independent path from governments and central banks. Underpinned by decentralised ledger, crypto bypasses the traditional banking world, which threatens a part of their fees, income and revenue. Many countries are about to impose bans and harsh regulations on crypto in order to protect national interests and local, thus making it harder for users to operate in the crypto space.
To conclude, we can safely say that today Bitcoin is building a track record. Although its history is short, the number of events, ups and downs, really impresses. Many from the camp of ‘crypto-haters’ laud Bitcoin as a bubble which will soon burst. But so far, there has been no hint of that.
A CEO of Chatex Michael Ross-Johnson shares his thoughts on this:
“A mass adoption is coming, and those, who don’t believe in crypto, must accept that. There isn’t a technology in the world which can be immediately adopted. But that can be accelerated by young blood – ambitious projects which bring revolutionary solutions to the industry. I believe that ‘greenfield’ startups, whichever the sector of the crypto world they disrupt, are those few which can make the naysayers say how profoundly they are mistaken”