The cryptocurrency market has continued to grow since the introduction of Bitcoin to the world way back in 2009. Since that time, many other alternative coins, or altcoins, have entered the digital currency world. Nowadays in 2020, when people hear about cryptocurrency, it is not just Bitcoin that comes to mind. There is Ethereum, XRP, Litecoin, and more!
Trading cryptocurrency has attracted a lot of people, including seasoned investors, traders, and even trading newbies. If you are about to begin trading, one of the questions that will come to mind is this: How much money can you make trading cryptocurrency?
Anyone can get into trading and investing in cryptocurrency. All you need is to set up an account in a trustworthy exchange, prepare your starting capital, and you are good to go.
There is a huge possibility of earning a profit from trading cryptocurrency, as long as you trade responsibly, so you can minimize any possible losses. But how much exactly can you make? Continue reading to find out.
What Is Cryptocurrency?
Cryptocurrency is a digital currency that uses cryptography to keep it secure. This currency also makes use of blockchain technology to add to the security of the coin. Unlike fiat currencies, cryptocurrencies are not backed by any government or financial institution.
Although cryptocurrency is not regulated, countries around the world have different policies when it comes to the use of cryptocurrency as a form of payment, or the act of trading cryptocurrency itself. Some countries also imposed a total ban on cryptocurrencies because of the threat that these digital currencies will be used for fraudulent transactions or money laundering.
Cryptocurrency is a good investment because of the market and its volatility. Compared to a more mature market like the stock market, movements in the cryptocurrency market occur more often. Additionally, the range of these movements are much larger, and can even double just within the course of a year.
For example, in the last three months of 2018, Bitcoin moved about 8%. After a year, in the last month of 2019, Bitcoin moved by 4%. In 2020, Bitcoin movement was so unpredictable due to the COVID-19 global pandemic. Nonetheless, the price has surged in the last few months of the year beginning in October of 2020. As of the first week of December 2020, Bitcoin is trading for more than $18,000.
Similarly, Ethereum has also been highly volatile, especially in 2020. The volatility of altcoins is due to these coins having a much smaller market capitalization, therefore making the coins more unstable with a future that is still uncertain.
Earn by Trading Cryptocurrency
Now that you have an overview of what cryptocurrency is, how much money can you make trading cryptocurrency?
The cryptocurrency market is open 24 hours a day, 7 days a week. This means that you will encounter many trading opportunities during a single day. These trading opportunities can be highly profitable. However, you must understand that trading always comes with some amount of risk.
It is recommended to start practicing how to trade first, before moving on to executing actual trades. You can start practice trades with a capital of $50 to $100. Through practice, you will be able to formulate your own strategies, check your profits, and get an overall feel of the cryptocurrency market.
How will you know when you can start making actual trades? This will all depend on you. Once you have a good grasp of the different technical indicators used in trading, and you have developed the discipline to control when to buy or sell, you can begin making actual trades with the goal of earning a profit.
Beginners in trading cryptocurrency can make at least 2% to 3% profit per month. A safe starting capital would be in the range of $500 to $1,000, although you can always invest a higher amount than this. Investing a higher amount can lead to a higher profit, but it can also result in a greater loss.
The amount you can earn per month will also depend on how long you are trading per day. Some people get into cryptocurrency trading to earn profits as a side hustle, while some have made it a fulltime job. If you have a solid strategy, and diligently trade every day, you can earn up to $100 per day!
Cryptocurrency Trading Strategies
To make money by trading cryptocurrency, you must execute a trading strategy that will work for you. Here are two popular strategies that can help you earn a profit when trading.
Buy and Hold Strategy
This strategy is one of the most popular passive trading strategies for investors and traders that are looking for a long-term investment. This strategy involves purchasing a crypto asset and leaving it to grow for a long period, usually a few years.
Buying an asset and holding it for a long time is primarily based on the assumption that the cryptocurrency market will continue to grow. This strategy is good for you if you don’t have the time to check the market on a regular basis, and you have the capital to purchase relatively more stable coins such as Bitcoin or Ethereum.
Day trading is an active trading strategy that make trades during a single day. This means buying and selling based on price movements during the day. Since the cryptocurrency market is open 24/7, day trading in this market means that you will be executing trades inside of 24 hours.
This type of trading is more stressful than the buy and hold strategy. It involves keen attention to detail, as well as a high risk. Since you will be relying on price actions within the 24 hours, you can either make a profit or suffer a loss when day trading.
Day trading can be the best strategy for you if you are ready to invest time, patience, and discipline when trading. Due to the highly stressful nature of this strategy, it is essential that you have the discipline to know when to buy and when to sell. Learn more about trading cryptocurrency here!
How much money can you make trading cryptocurrency? The answer will depend on how much capital you invested in the market. On average, you can expect to earn at least 2% profit when first starting out. When you gain more experience and begin trading higher amounts, you can see your profit reach up to 10% or even more. The key is to find the right strategy that will work for your time, capital, and end goal.