Many traders have started day trading cryptocurrency, instead of hodling, as the strategy proved a better source of consistent returns.
Day Trading Cryptocurrencies
Day trading cryptocurrency can be done through arbitrage, fiat-to-crypto, coin-to-coin, and cryptocurrency derivative, but not hodling or staking as these two strategies are long-term oriented.
Arbitrage consists of profiting from price differences between trading pair on the same exchange or of the same trading pair on different example. For example a trader buys BTC on an exchange where the price is lower and sells BTC on another exchange where the price is higher.
Fiat-to-crypto consists of buying or selling cryptocurrencies like Bitcoin in exchange for a national currency, called fiat, like USD or EUR. The buying or selling is done on the spot and profits are made through price speculations. The idea is to buy low and sell high and the volatility of the cryptocurrency markets allow for potentially very profitable day trades.
Coin-to-coin function on much the same way as fiat-to-crypto works through on the spot buying or selling of one cryptocurrency for another and price speculation.
Cryptocurrency derivatives is the last mean of day trading currently available for cryptocurrencies. The now most in vogue products are.
How to Make Money Trading Bitcoin?
Arbitrage is a risk-free trading strategy with good returns but that takes time to find as good opportunities do not stay on the market for long.
Fiat-to-crypto and coin-to-coin have good earning potential in bull markets but lack leverage to maximize profits and find it hard to profit from bear markets.
Futures and perpetual contracts are the best potential profit turning financial tools for cryptocurrencies but represent as significant risk as leveraged products can be entirely liquidated if the market goes against them.
Trading can be a profitable but risky business, never trade more than you can afford to lose.
Knowledgeable traders are successful traders, as information drives the market engine. Coinmarketcap and trading view are good source of information for purely technical analysis, while coindesk, cointelegraph, IOClancer, ccn, bitcoinist, bitcoin com, coincentral, and cryptovest are good source of English information regarding Bitcoin and other cryptocurrencies.
Day Trading Cryptocurrency Taxes
Trading cryptocurrencies is becoming increasingly scrutinized and subject to taxes in many countries including the USA, France, and the UK. The problem with trading cryptocurrencies is that, depending on the countries, they may be subject to either income taxes or capital gain taxes or even sometimes both, making it for a very complex system particularly for those of us who travel a lot. Please refer to your country of residence to see applicable cryptocurrency taxes and make sure that trading them is legal where you reside or stay at before opening your exchange.
This concludes today’s article about day trading cryptocurrency, we hope you enjoyed the read, learned a lot and stay tuned for more great content.