The cryptocurrency market is wildly volatile, and it has been for the past several years. Even a single rumor about something that could affect the price of Bitcoin can send its value skyrocketing or plummeting at a moment’s notice.
When you’re learning how to buy and trade crypto, it’s very easy to get caught up in the details. Bitcoin trading pairs along with other pairs including SOL USDT and DOGE/USDT, wallets, transaction fees—it can all be overwhelming. And while all of those things are important to know when you’re trying to make money with your investment, they’re not the only things that matter.
But with this volatility comes some very profitable opportunities. There are two main ways to profit from Bitcoin: HODLing and day trading.
What is Day Trading?
Day trading (sometimes referred to as day trading or swing trading) is a form of short-term speculation that consists of buying and selling financial instruments within one day. A typical trader might make anywhere from several dozen to hundreds of trades over the course of a single day, depending on the nature and volatility of their chosen market.
When you hear about people making millions by “day trading” bitcoin or another cryptocurrency, they are really performing what is called scalping. It is a type of high frequency trading where they buy and sell assets in rapid succession using sophisticated algorithms to find small price discrepancies between exchanges. Because the assets are so volatile, they can make a profit simply by capitalizing on these tiny movements.
What is HODLing?
Hodling is a cryptocurrency slang word that is used to describe holding on to your coins rather than selling them. It originated from a typo made by an early bitcoin adopter, which he then took as the name of his website to talk about bitcoin and the crypto community in general.
Hodlers are holders of cryptocurrency who demonstrate their belief in the long-term growth potential of a crypto asset. They tend to be long-term investors, buying low and selling high as opposed to short-term traders who try to make money by buying low and selling high many times within a short period of time. Hodlers believe that if they buy now and hold onto their investment for the long-term, it will pay off in the end.
Is it better to day trade cryptocurrency or hodl?
As a beginner, it’s natural to feel excited about the prospect of making money by day trading. Unfortunately, as you can see from the above comparison, day trading cryptocurrency is risky and stressful.
If you don’t have time or patience for that kind of risk and stress—or if you don’t have enough money to buy the amount of cryptocurrency needed to be successful at this—hodl may be a better option for you.
Benefits and drawbacks of day trading
Day trading is more risky than hodling because you can lose a lot more money. You may have heard the story of someone buying 10,000 bitcoin in 2010, only to have it all stolen in a hack and never seeing it again. In that same year, a person who day-traded during the Mt Gox hack made millions. So yes—day trading does carry increased risk. However, if you’re careful and get lucky enough to be around for a big move like this one (or many others), it can be very profitable.
Day traders also spend more time than holders do watching charts and studying market patterns. This isn’t necessarily bad; however, if this kind of thing isn’t your jam then maybe HODLing might be better for you.
Benefits and drawbacks of crypto hodling
The benefits and drawbacks of hodling are as follows:
- The best way to make money in the long term is by HODLing.
- It’s easy to do, and you can do it from anywhere in the world.
It’s important to note that there are risks involved with both HODLing and day trading. HODLing involves putting your money into a currency when it’s rising in value and waiting for the price to continue to rise so you can sell for a higher profit.
This can be very risky when done incorrectly, because if the price suddenly falls again, you could lose all of your investment. Day trading also involves taking on risk—by constantly buying and selling at different prices at different times of the day, you could get stuck with something that doesn’t end up increasing by much over time.
The Bottomline on HODLing Vs. Day Trading
If you’re someone who is interested in making money off of Bitcoin, then it helps to have a clear understanding of what the best options are. If your time horizon is short term, then day trading might be the right move for you. But if you’re an investor who wants to make money over the long term, HODLing may be better suited for your needs.
It all depends on your risk tolerance, investment strategy and goals as well as your time horizon and goals. No matter which option seems more appealing or fits into your investment plan better (or both).
Day trading and hodling are both exciting ways to make money in the crypto market. However, with all the hype around cryptocurrencies and blockchain technology, it’s important to understand that not all investment strategies work equally well for everyone.
While many people have made fortunes by day trading or hodling their bitcoins over time, others have lost a lot of money when they didn’t know what they were doing. So before you decide on which method works best for your needs, do some research and ask questions!