CRACKING THE CRYPTO CODE

Michael Kamerman, CEO of Skilling

 

The Covid pandemic has left a lasting imprint on the way consumers handle their finances. In fact, 15% of today’s retail traders only began trading in 2020 – with cryptocurrency (“crypto”) in particular skyrocketing in popularity. Crypto can now be traded just as easily as forex using online brokers, resulting in an estimated 3.3 million people currently owning cryptocurrency in the UK alone. Crypto has been widely embraced by traders worldwide, so it’s somewhat unsurprising that its total market cap is now an impressive $2.19 trillion.

However, crypto’s popularity has not been achieved without any backlash, as although it’s a great way for both experienced and novice traders to widen their portfolio, many still see it as a “get-rich-quick scheme” with several governing bodies pushing for additional regulation of crypto assets, leaving a sour taste in the mouths of those who strongly believe in its potential.

To remedy this mindset and uncloud crypto’s negative reputation, retail traders need to do their due diligence when looking into trading cryptos, while also making sure they have a handle on their emotions, allowing them to reap maximum reward from their investment.

 

Crypto’s negative perception

By simply scrolling through social media and news feeds, the average trader may think the crypto world is surrounded by too much volatility and risk. As with any opportunity to make money, there are those who have exploited the current zeitgeist. These are notably ‘rug pulls’, where developers abandon a project and take investors’ money by creating novel crypto coins which promise incredible returns, then quit the project and make off with the money, as witnessed in the recent Squid Game tokens scandal.

On top of that, the fact that online influencers can also dictate the price of a crypto(for example Elon Musk’s tweets in the past affecting the value of Bitcoin, Doge and Shiba Inu), may deter prospective investors from investing in valuable crypto projects. Crypto is also decentralised, meaning it is not issued, regulated or backed by a central authority, which may appeal to some, but may scare others who do not yet fully understand crypto’s nature.

This doesn’t mean that there is little value in crypto, nor that it should be avoided as a trading option, be it through CFD trading or as a physical asset. In fact, there are many crypto projects in the market with incredibly valuable business propositions and profit potential. What retail traders therefore need to ensure is that they don’t blindly invest in a crypto because it is currently a hot topic in the media or heavily promoted on social media, but instead carry out as much research as they can into a crypto before buying, in the same way that one would any other significant investment such as a car or a house.

 

Controlling your emotions when trading crypto

‘Fear of missing out’ is powerful, especially in the crypto space where a related post is uploaded every 2 seconds on social media. This constant media presence means a crypto token or coin’s value can fluctuate within a relatively short period of time and, if traders are relying heavily on their emotions when investing, this can result in less-than-favourable and even sometimes regrettable results.

Spending all day monitoring each dip or jump in a crypto’s value and being emotionally driven by what others are doing can lead to spur-of-the-moment decisions which can cause more harm than good. To avoid this, pairing thorough research with an emotionally resilient mind-set can prevent traders from making rash or regrettable decisions, be it buying too high or selling too quickly.

 

Youth’s championing of crypto

Having begun their trading journey decades earlier through investments in traditionally “safer” trading options such as bonds and stocks, traders from older generations are enjoying the fruit of their early labour and are less concerned with taking risks to earn money in the short-term.

This isn’t the case with today’s younger retail traders who, with the luxury of time on their hands, can afford to take bigger risks for better rewards in a shorter period of time when compared to traditional forms of investments. Younger generations are championing this era of crypto by taking part and investing in novel crypto coins, tokens and projects with innovative plans and prospects. With crypto having application in digital art, finance, games and more, today’s youth are the ones who are seeing its potential and are helping to drive these innovations.

Even though there is much to be excited about for traders when it comes to crypto trading, it goes without saying that those wishing to take part should be as rational as they can with their investments and apply emotional intelligence to ride through the inevitable fluctuations. As is the case with any other asset in the market, carrying out thorough research and having a fundamental understanding of the asset is required for traders to make the most of this new cryptocurrency era and become profitable in the long-term.

 

Not investment advice. 66% of retail CFD accounts lose money. Trading cryptocurrency is not available for UK retail clients.

 

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