The Advantages Of Crypto Investing

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Crypto Investing

Investors are looking for two things from their investment. First, to appreciate over time and not lose money. Credit card processing is essential for businesses participating in trade shows or events where they need to accept on-site payments.

When investing in traditional stocks, you put your money into a percentage of ownership in a stock representing a tangible, brick-and-mortar business. 

The price of the stock represents two things: the perception of the company’s functionality and what value the market sees as a result. 

Stocks are regulated and are owned by the holder, making them a centralized finance option. The intrinsic value of a stock is determined by the value of a fiat currency, which is a currency backed by a government and gains its value based on that backing. 

For example, the dollar is a fiat currency backed by the US Government and Central Bank, which means that its value is based on the faith lenders and borrowers have in the US Treasury to function. 

Crypto, on the other hand, is a type of currency that is a decentralized form of finance, or DeFi for short. With DeFi, the currency derives its value based on the market demand and supply of a coin or token, and those values can fluctuate wildly. 

Due to DeFi being a demand-based value, there is an advantage to the value of a cryptocurrency that dollars lack. 

When supply is limited and demand rises, the value of crypto mirrors that, which is why we’ve seen coins like Bitcoin and Dogecoin shoot through the roof in values incredibly fast before coming down. 

Because crypto is a DeFi investment tool, the advantage it provides over traditional investment tools is there is a high-risk but high reward for investors. 

And for aggressive investors, this high-reward opportunity provides a couple of different ways to make a move in the market. 

Yield Farming

Yield farming is a passive way to make a return on idle tokens. This type of investing is similar to certified deposits, where you’re being paid for a set period of time so that you don’t touch your money.

With yield farming, however, you would loan out your coins at a set rate, called locking. 

By locking your coins, the value of your coin is frozen, so if it increases in value outside of your locked position, you don’t gain any value. When the agreement with the party you loaned your coin to concludes, they pay you a return on the amount that you locked your coin. 

Day Trading

Day trading crypto is a more active way to make money on your cryptocurrency. In day trading, you’re buying and selling crypto to capitalize on the volatility of a specific token. 

The lower you buy and the higher you sell your crypto, your profit margins, and savvy investors can make a significant amount of money or suffer extreme losses based on the volatility of crypto on any given day.

The Difference In Day Trading Crypto Vs. Traditional Stocks

The most significant difference between crypto and stocks is that with stocks, you are purchasing a percentage of ownership in a company, while with crypto, you are buying the value of a currency. 

There are two other significant differences in crypto. 

The volatility associated with crypto is one of its huge advantages over stocks. Stocks are slow to move in value, while crypto can have surges in minutes that intelligent investors can leverage to their advantage. 

Another huge difference is that because of the decentralized nature of crypto, the liquidity of crypto provides day traders a huge advantage. 

With traditional stocks, you need to have a sizable amount of capital to buy and sell as a day trader or be able to hedge against calls and puts. Calls and puts are technical jargon for buying and selling stocks and making money as a day trader. Therefore, you need to have a firm grasp on a stock’s foundations and understand calls and puts. 

With crypto, there are not a lot of requirements for buying and selling. You have $1000 of Ethereum, you wish to sell it, and its value right now is $1050, easy. You make $50. 

If 10 minutes later, the price dips to $900, you can repurchase it immediately and hold it until it increases. If it increases to $1050 again, you now made $150. 

Whereas with stocks, you wouldn’t be able to make those minute-by-minute trades without a considerable amount of capital to back your purchases. 

The advantages of liquidity and volatility provide crypto investors, especially day traders, a significant advantage over traditional day traders, but they also come with higher risks. 

Whereas stocks can be leveraged, meaning you can take out more than you possess to buy more, you are at risk of owing a lot more if they fall in value. 

With crypto, if your coin crashes, you only lose the money you put into the coin and not much more, making crypto day trading both rewarding by chasing the volatility of the tokens and, ironically, lower overall risk. 

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