update 19 August 2021

The Risks and Rewards Of Day Trading in Cryptocurrency

Crypto day trading is also known as intraday trading and involves purchasing and selling cryptocurrencies within a day. The goal of a day trader is to earn a good profit amidst value fluctuations of cryptocurrencies.

Cryptocurrency day trading is slightly different from conventional day trading because it has specified overlapping hours of trading each day. Intraday trading, on the other hand, has no set time intervals within a day. It is easy to own cryptocurrencies in crypto day trading, while in-stock day trading, traders can only acquire full ownership through the right legal procedures.

This article will address the risks and rewards surrounding cryptocurrency day trading. The knowledge will help you weigh the pros and cons to decide if you are ready to invest in cryptocurrency day trading. 

Risks of Cryptocurrency Day Trading

Intraday trading comes with a variety of risks that often deter crypto traders. Knowing these risks is essential, especially if you think of day trading as an option for your crypto portfolio. Here are some of the significant risks that come with crypto intraday trading.  

  • Highly Volatile Crypto Market

The cryptocurrency market is highly volatile. Therefore, the value of cryptocurrency can easily change at any time. Volatility refers to how sudden the cost of assets can increase or decrease. When the price of cryptocurrencies falls, traders selling these coins can make significant losses. 

  • Risk of Your Exchange Getting Hacked

When you are day trading, you will probably keep your cryptocurrencies in a cryptocurrency exchange. The essence of storing crypto in an exchange is to reduce the disruptions when transferring cryptocurrencies during day trading. However, when coins are exchanged, they are at a high risk of getting stolen after the exchange gets hacked

  • Misleading Projects 

Projects with substandard business systems rise in price for a while and then suddenly fall in price. The peak of such projects may mislead a day trader into investing in them. Eventually, the value of the project drops, the trader who invested may suffer high losses. It is, therefore, wise to investigate particular projects before investing in them to avoid losses.

  • Day Trading Occurs Through Speculation

There is no assurance that a particular way of day trading will earn you money. A trader can make an illegal transaction, making them lose a lot of money. Day trading is, therefore, risky to some level.

Rewards of Crypto Day Trading

  • Global Access

One advantage of cryptocurrency day trading is that you can practice it anywhere as long as you have the right internet connection. It thus has benefits over conventional day trading, which has a location limit.

  • Potential for High Returns 

The volatile nature of cryptocurrency projects is not just a negative thing. When a trader invests in a cryptocurrency project which increases in value, he may gain enormous profits. Projects may increase their value by over 10% within a few hours. 

  • Low Fees and Low Taxes

Exchanges that facilitate day trading, such as BitMEX exchange, also charge low fees and low taxes. You cannot compare day trading exchanges with conventional exchanges because the latter charges its users high fees and high taxes. 

  • Crypto Day Trading Markets are Always Open

When it comes to crypto day trading, markets are open 24 hours a day. One can, therefore, get more hours to day trade, unlike when one is trading stocks. Therefore, Crypto day trading has benefits over conventional day trading because it has a trading time limit.

  • Favors Both Average and Large Investors

In crypto trading, both average and large investors are favored, unlike conventional trading, which is expensive for the average investor. The probability of success for both small and large investors is equal. Therefore, one does not need a long-term view to determine the potential success rate when crypto day trading. Investors should focus on the current cryptocurrency rates when day trading because they are uncertain of the future coin rates.

Final Thoughts

Day trading can earn you high profits or cost you significant losses. Therefore, it is wise to get yourself a stable trading strategy to avoid making these losses, especially if you are new to day trading.

Despite the risks associated with it, day trading is a great platform that will enable you to expand your cryptocurrency portfolio. Also, the high volatility nature of the cryptocurrencies trading market allows you to make significant earning.

Btc
Bitcoin
$47.688
price
1.26626%
price change
BUY NOW

Cryptocurrency day trading is available 24 hours each day. Therefore, you have more time to carry out your exchanges than conventional day trading, where you have limited hours in a day. In this case, you can make more profit because you have more time to trade. You can weigh the risks and rewards of day trading to get ready for this exciting cryptocurrency adventure!

More posts

How Many ETH Will Burn After the London Fork?

Since its launch in July 2015, Ethereum has grown exponentially to be the second leading cryptocurrency in market value after Bitcoin. The platform’s growth has primarily been attributed to its smart contract feature, which powers the deployment of a wide range of applications, including oracles, decentralized finance (DeFi), decentralized exchanges (DApps), marketplaces, crypto-collectibles (NFTs), and developer tools.  Despite its growth, Ethereum faces numerous challenges that hinder its usability. The scalability challenge is one of the biggest ones that Ethereum faces. The current state…

The Impact of Adoption of Cryptocurrencies on E-commerce Business

E-commerce is the short form of electronic commerce. It is the buying and selling of merchandise over the internet networks. It also involves the transfer of funds and the keeping of records to certify the transactions made. E-commerce is of three types; business-to-consumer (B2C), business-to-business (B2B), and business-to-government (B2G). The main reason for using cryptocurrencies in e-commerce is to get rid of third parties that control the transactions. This relationship can make online shopping much easier and safer since blockchain technology that backs up cryptocurrencies is…

What it Means to Make Bitcoin a Legal Tender

June 9, 2021, marks the first move that would make history in Bitcoin's timeline. El Salvador passed a bill where 62 of 84 congressional voters would make Bitcoin a legal tender. Fast forward to September 7, and El Salvador became the first country to make Bitcoin a legal tender. In this article, we shall look into what it means for Bitcoin to be a legal tender in detail; What is Legal Tender? "This note is legal tender for all debts, public and…

The Correlation Between Blockchain Activity and Transaction Fees

Miners and validators are essential cogs in any crypto project. They're the ones who process transactions on a blockchain (BC) activity. For their efforts, crypto projects compensate them for their efforts from transaction fees. A transaction is only valid when it has undergone validation. The process ends in the validators adding it to the BC. Mining consumes a lot of computing power. As such, it's an energy-intensive exercise. The motivation for the miners is the block reward that consists of…

Understanding Shrimpy’s New DEX Trading Feature

DEX trading is one of crypto's newest but also most complex investment options as of late. Decentralized exchanges are trustless peer-to-peer (P2P) trading environments relying on smart contracts that help facilitate crypto exchanges. The clear benefits of DEX trading are security, anonymity, and greater user control. Although decentralized exchanges, and DeFi as a whole, have gained immense popularity over the past two years, the segment is still considered new by many in the community. A large chunk of crypto investors still does not feel…

Why Do Exchanges Freeze User’s Crypto Funds?

cryPicture this: you've finally mustered the courage to take the plunge into crypto. Everything is going right for you. You're mastering the hacks to optimize your investment and are looking forward to a fulfilling experience within the space. Then it happens. You log in to your account and find that you can't access it anymore, let alone transact in it. In a panic, you try customer support to no avail. Next, you can't help asking how you got here. Is it…

Determining the Initial Value of Cryptocurrencies

It is quite obvious that the total market cap of cryptocurrencies has enjoyed impressive growth since their inception. It was able to hit the magic $2trn figure, standing at $2.064trn as at the time of writing. That is close to 2.5 times the value of crypto at the start of this year, 2021, as per coinmarketcap data. While all these huge figures are truly impressive, things haven't been like that. The increased market capitalization has been more of a result…

Factors Driving the Price of a Crypto Project to Skyrocket

Cryptocurrencies continue to showcase outstanding crypto performance since the launch of Bitcoin in 2009. Global investors are looking forward to establishing financial stability with digital assets. Due to the growing interest, crypto prices are making a drastic shift to the top.  Still, in some scenarios, the market trend keeps decreasing for specific periods. A coin's bearish momentum creates fear and panic for users who believe in the future of the asset.  The opposite is a bullish market that records skyrocketing prices of…

Vivid Indicators of a Bull Run in the Crypto Market (Bull Market)

In the cryptocurrency space, a bull market is one whereby the prices are expected to rise significantly or are rising. Due to the volatile nature of crypto, the term “bull market” is reserved for more extended periods characterized by the rise of a large portion of the prices. To be categorized as a rise, the price must be up 20% after two declines of 20% each. There is optimism, expectations of solid results, and investor confidence in a bull market,…

Historical Hardfork Events Every Crypto Enthusiasts Should Know About

Blockchains have been gaining attention since the history of crypto. The highly advanced systems help decentralize and streamline financial systems globally. As the blockchain systems grow, investors start noticing issues and propose an upgrade. However, for any upgrade to occur, blockchain requires the consensus of all participants. If there is no consensus, two factions with opposite ideas may form. The developers may choose to go ahead with the upgrade but maintain the status quo in the original chain. At that point,…