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Cryptocurrency trading is rising in popularity, but that doesn’t mean that it’s easy to get started. Successful crypto investing demands traditional trading skills, a grasp of the way that the new tech works, some knowledge of blockchain, and an understanding of crypto trading jargon.
If you got your start back at the beginning of the crypto wave, then everything was new and you weren’t the only one making mistakes. Today, we’ve seen that it’s far harder to turn a profit.
But the outlook is not all bleak. There are also a lot more resources, wallets, tools and exchanges with hand-holding features to help you learn what to do in a murky market – the kind of stuff that I wish existed back in the heady days of late 2017 when the charts all looked like hockey sticks.
Here are some key differences between the experiences of first-time crypto traders in 2017 and today.
In March 2020, there were over 5,100 different cryptocurrencies. At the end of 2017, there were just over 1,300 crypto coins to choose from. There’s a slight disagreement about whether the final total was 1,335 or 1,368, but whichever way you slice it, there’s a lot more to wrap your head around today.
Hundreds of new coins come online all the time, but there are also hundreds disappearing. David W. Perkins, a specialist in macroeconomic policy for the US Congress, notes that “The existence of multiple currencies adds difficulty to buyers and sellers making exchanges; all buyers and sellers must be aware of and continually monitor the value of different currencies relative to each other.”
That was no small task three years ago, but it’s about four times harder today.
In 2020, you have a far greater risk of investing in a crypto coin that goes up in smoke than you did back in 2017, and you’ll need to learn about far more currencies before you can make an informed choice about the marker as a whole.
In 2020, there are more coins, more traders, and a higher trading volume than ever before. Writing for ScienceDirect, professors Leirvik and Le Tran note that “the trading volume in the largest such currencies has grown exponentially.” March 12, 2020 was the busiest trading day in the history of Bitcoin, with 146,500 messages per second taking place on Binance’s exchange alone.
When you’re new to trading, this activity can easily be overwhelming. You’re still trying to spot trading patterns and learn which events are significant and what those events might signify. When trade volume is so high, you have to put in far more effort to sort the wheat from the chaff, at the same time as keeping track of overall market trends.
“The crypto market today is simply bewildering. Trades take place all the time, around the clock and around the world,” says Luka Boškin, CMO of NewsCrypto’s exchange platform. “New traders are in even greater need of educational materials to help them quickly get up to speed about what’s going on in the world of crypto, because the whole thing is moving faster than ever.”
The good news is that there are more tools today that can track and analyze trades for you, identify patterns, and monitor the high-level ebb and flow of the markets to help you to cope.
In 2017, bitcoin had its price explosion. Until then, it was a niche trading option, and the markets in general were low. Today, millionaire hedge fund owners are investing in bitcoin. Additionally, general worldwide uncertainty and fiat volatility has made many rush for crypto.
Together, these trends have pushed the crypto market far higher, so that any further rises are smaller and less frequent.
Although there are more exchanges and investment vehicles to help you buy whole or partial bitcoins today, it’s more challenging to turn a profit. In 2017, an initial $1000 investment might have made a 10% profit in six months, but in 2020, it would only make a 5% profit in the same timespan.
When markets were low, it was possible to approach crypto trading in the same way as some people approach stock markets – invest a certain amount of money and wait patiently for the market to rise as the asset matures. Between 2015 and 2017, the crypto market trended steadily upwards, enabling the crypto noob of that era to overlook the fact that crypto trading is essentially speculation, requiring you to make decisions fast and trade fast, and succeed in making a more or less passive profit. In 2020, it’s less forgiving.
Crypto evangelists who want to encourage more people to take crypto seriously and invest in it, combined with rising media buzz in the wake of the 2017 bitcoin transformation, can often create unrealistic expectations among crypto noobs.
Before 2017, coin traders were primarily motivated by curiosity and enthusiasm. They were in it for the long haul. But newbies coming to crypto in 2020, after years of hearing all about the potential of the market, bring different assumptions.
Scott Melker of the Wolf of All Streets podcast, comments that “In legacy markets, nobody expects to get rich quick. Crypto appeals to people looking to quickly turn a small sum of money into their retirement, which is unrealistic.”
New crypto traders are misled into thinking that they can get rich quick by buying altcoins, sometimes deliberately by unscrupulous crypto hypesters. No one who reads up has those expectations about the stock market or investing in gold, and it’s a machine that simply didn’t exist until the end of 2017.
Just like the stock markets, crypto trades are affected by economic and political events. It’s hard to remember a year as volatile as 2020, so it’s inevitable that crypto prices are more unpredictable, more uncertain, and more volatile than they were three years ago.
In 2017, when the price of bitcoin and ethereum rose, it turned into a crypto bubble that popped in early 2018. Sure, 2019 saw it rally slowly, but it’s too early to say whether we’ve entered another bubble. We’ll only know for sure when (or if) it pops.
However, the community of respected big-picture economists does believe that the mainstream financial markets are in a bubble, and crypto tends to be influenced by major market trends.
On the other hand, if central banks’ efforts to keep their currencies afloat start to fail, then it’s possible that altcoins will suddenly see surges in adoption for transactional use cases.
All in all, 2020 is proving tough in a number of ways, and crypto trading is no exception. As well as the unknowable impact this unpredictable year could have on the crypto market, crypto beginners today have to master far more coins and a higher trading volume, overcome unrealistic expectations, and struggle to make a profit in a higher market.
It’s not an easy time to enter the crypto market, but there’s plenty more support available to smooth the way.
Disclosure statement: The author has no relationships with any of the companies mentioned in this article.