Cryptocurrencies shot to fame in the final quarter of 2017. Since then the question has arisen on many occasions, should I buy to own cryptocurrencies, such as Bitcoin? Or should I trade them? This article will explain the main differences, which should then leave you able to take a decision as to which method is most suitable for you.
Buying a cryptocurrency means you will own it outright. However, before purchasing there are a few obstacles that you will need to clear. Firstly, to buy or sell a cryptocurrency, you must do so on an exchange. This means you need to apply for a set up an account. This can be a very manual, tedious process, which sees your application join plenty of others before you in the long wait for manual approval.
Once you have opened your account with the exchange, the exchange is most likely unregulated meaning you are involving yourself in a high-risk environment with little, if any protection. You are likely to incur costs for depositing your funds, in addition to withdrawing your funds.
Once your purchase your cryptocurrency, you then have the problem of where to store it. Security has been a big issue for cryptocurrencies in their short history, with threat of theft running high.
You can often trade cryptocurrencies through forex brokers. Vantage FX is one such broker. It is a regulated broker, meaning that its clients received heightened protection over their funds, whilst also giving traders peace of mind that the broker in well capitalised and not fraudulent. Be wary, not all brokers are regulated.
Trading on cryptocurrency means you can make money from the price rising or falling. This is because you can either go long or short, quite useful given that Bitcoin has plummeted over 50% since the beginning of the year!
Trading cryptocurrencies is done on margin. This means that you only need to put forward a small percentage of the value of the overall trade. So, whilst only a small amount of initial capital outlay is required, you can still have access to the gains on losses of a much larger trade.
Another beneficial feature for trading cryptocurrencies are risk management tools which these brokers, such as Vantage FX provide their clients. These tools, like stop losses mean that it is not necessary to continuously watch the trade. Given the high volatility associated with Bitcoin, or example, a stop loss can be a very useful tool, especially given that the price can tumble or rally over 20% in just 48 hours.
Finally, setting up an account at Vantage FX is a simple procedure. Simply fill in the online form, which should take just a few minutes and your account will be opened. Deposit some funds into the account and then you can start trading.
Trading vs. Buying
After this simple comparison between buying and trading cryptocurrencies, trading appears to be a standout winner.