Cryptos are currencies that are decentralized and run a blockchain-based ledger. There are several advantages offered by these currencies in comparison to their traditional counterparts, like the dollar and the pound, that have made them very popular in a short span of time. Traditional currencies are printed by the central banks of the country in most cases, and their usage and circulation are tightly regulated.
Cryptos are safe and decentralized, meaning that they do not have many regulations and inhibitions attached to them. They also offer protection against inflation, and transferring them is easy and secure. It is due to the numerous advantages associated with these currencies that their demand and the corresponding values have increased manifold ever since they were discovered.
Hence many investors are investing in them to make profits. If someone is interested in trading in them, they can visit this site https://bitcoin-primeapp.com to know about it.
What Are Long-Term And Short-Term Investment In Cryptos?
Short-term investment, as the name suggests, involves investing for a short period of time, that is, a few days to a few hours. Most short-term investors go for intraday trading, which means that they trade on an everyday basis, and they can see the profit before they go to sleep every night.
Apart from intraday, they indulge in range and high-frequency trading. The range is given by trade experts, and it predicts the highest and the lowest value particular crypto will reach. An investor buys or sells based on the range of maximum and minimum value that is given out by experts in the field.
In long-term trading, as the name suggests, the investors hold on to an asset, in this case, the crypto, for a long period of time. Long means anything that is more than six months.
However, people usually hold on for one to many years to realize profits. Here there are SIPs or systematic investment plans, just as in the case of mutual funds. In SIPs, a regular amount is deducted every month, and that money culminates over time. The availability of SIPs maintains discipline in an investor, and even those people who do not have a large amount of funds can also use this option.
Which One Is Better ─ Short Term Or Long Term Trading
Time Taken To Realize Profits
In the short term, the profits are quick; that is, one can make money in a matter of just a few hours. Thence, this strategy works well for those individuals who want to get money quickly and do not have the patience to hold on to an asset for years before they finally see a profit.
In the long term, realizing profits takes time, and people who have the patience and funds to hold on to an asset for years are best suited for this kind of investment strategy. People need to have spare funds which they can afford to keep locked up in the market for a significant duration. Hence, the availability of such funds is a must for engaging for durations of four or five years.
Volatility Of The Market
Volatility means how often the price fluctuates in a given period of time. Short-term traders have to face much more fluctuations as compared to long-term traders. Hence, if a person has an appetite for risk and can indulge in rapid transactions, they are probably more suited for the short-term market.
Amount Of Risk Involved
Short-term investment involves a high amount of risk. The risk stems from the fact that the transactions happen in a short time, and if the prices rise high, they can also fall down very low. Speculations play a huge part, and that also increases the risk involved to a great extent.
Long-term investment involves less amount of risk than a short-term investment. The primary reason is that here a person holds on to the crypto for a considerable amount of time. In this case, if the market dips at one point, it also rises at another point, and there is an overall balance that is maintained.
Also, in this case, since the asset is held for years, there is no chance that a person will miss out on any good opportunity when the price rises. This factor also lowers the risk involved considerably.
The Actual Amount Of Profit Made
The actual amount of money made is a key determining factor for most people in choosing any type of investment option. In the short term, the price fluctuations are more but so are the profit margins.
If someone has a good idea about how the market functions and what factors affect trade, he can gain a large sum of money. Again since political decisions, economic recession, elections, wars, etc., affect the value of cryptos, an intraday trader can suffer huge losses if he is not well aware of the happenings of the world.
Holding on to cryptos for long durations is useful if the underlying cryptos have a lot of potentials. There are several thousand types of cryptos that are available in the market; however, not all of them are equally popular or useful. Some of them have been very well accepted, like Bitcoin.
Hence, a person who invested in Bitcoin when they were discovered got them for around $1 per Bitcoin, but today the value of one Bitcoin is almost $50000. Thus, holding on to the asset for a long period of time has given windfall gains to these people. Thus when going for such investments, it is important to see the growth potential of a particular crypto. If it will be of great utility to mankind, then investing in it will prove to be a good decision.
Each investment strategy has its own set of merits and demerits, so one should choose a plan that suits their appetite for risk and is in tune with their expertise in dealing with and predicting the upcoming situations in the market.