Why You Should Trade Crypto Instead of Holding


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Crypto trading can give better returns than simply going long.

The days of 10x moonshots are mostly over in the crypto world. Everyone has heard stories of people who bought in at ultra-low evaluations, held for a long time, and then sold when their coin finally took off. Those tales of people who bought Bitcoin at $5 per coin and then sold when it hit $20,000 are pretty amazing, but there are very few people who got “f**k you” rich when Bitcoin blew up in 2017/2018.

What I’m saying is that hodling, as we call it in the crypto world, is not the worst strategy to use, but it’s also not the most optimal way to utilize your liquid capital. Remember, these tokens are not stocks. They are cryptocurrencies, and they’re meant to be moved around.

Long positions in crypto are riskier than most people realize.

First, let me say that holding some coins long-term does make sense. It’s part of balancing your portfolio, but you want to make sure that it’s not the majority of your portfolio. Essentially, when you hodl you’re taking a super long position, believing that the value of the coin will eventually reach some level that you’d like to sell it at, preferably at least one year after acquisition so you pay the capital gains rate instead of the regular income tax rate. It’s a very safe position to hold if you are willing to entertain the belief that crypto tokens have more in common with stocks than they actually do. It’s also a very risky position for the very same reason. The hot token today that’s going to be the next big thing might very well turn out to be an afterthought a year from now with its value hovering near the bottom of the price chart.

But here’s the big one: What if you didn’t get in at the perfect time? What if you bought when the market was on an upswing and you didn’t get your token at a great price point? It means you might have to wait quite some time before you’re able to realize serious profit gains from your portfolio. Bitcoin hit $50,000 because a lot of people bought it when it was $49,990. Just some food for thought.

How trading crypto outperforms holding.

If we zoom out, the token’s price chart might indeed look like a gentle slope upwards (or a giant hockey stick) with a few bumps along the way. Or it might look like a mostly sideways line with some spikes pointing up and down. But when we zoom in to the weekly, daily, or hourly view, we see a lot of smaller price movements.
A person used to hodling might not think much of a token bouncing between a $20 resistance and $17 support level for months at a time because they’re waiting for it to hit $30 before they sell. But to a veteran trader, those daily dips and bounces are a goldmine. They’re buying near $17 and selling near $20 every time it goes in either direction, accumulating profits each time. By the time this token finally hits the $30 Take Profit point the hodler is waiting on, the trader has moved in and out of this position multiple times, and they haven’t had to stare at coinmarketcap, hoping each day is the day their coin finally breaks out and goes on a run.
The whole point of trading is to use your assets to gain even more assets. The trader doesn’t have a sentimental attachment to a particular token, and nor do they rely on luck. While the hodlers will wait patiently for months, or years, for their assets to hit their price target, the trader takes advantage of all the price swings that happen during that same period of time to make a large number of small trades that add up to significant profits.

Whether the market is heading up, down, or sideways, the trader has a variety of strategies they can employ to continue accumulating profits, while the hodler’s only option is to hope for an upswing. Any experienced investor will tell you that hope is not a strategy.

Ready to go deeper down the rabbit hole and find out how you can start trading and stop hodling? 

Now that we’ve covered why you should consider actively trading your cryptocurrency rather than holding it, let’s take a look at two serious questions this article has probably prompted you to ask.

How do you effectively trade cryptocurrency?

Quick answer: automation. To be a truly effective crypto trader, you need to be using bots to execute your trading strategy. Bots allow traders to take advantage of scale. The strategy that works for one token may very well be suited to work on trades for 10, 20, or even 50 other tokens. Manually executing all of those trades may be technically possible, but it won’t be sustainable.
A bot can immediately initiate a trade once the conditions set by the trader have been met. Crypto markets never sleep, but traders do. Bots allow traders to concentrate on managing, analyzing, and optimizing, rather than manually executing.

How do I use a cryptocurrency trading bot?

The easiest way to get started with cryptocurrency trading bots is to select a platform. The ideal platform should have the following features:

  • Compatibility with major exchanges
  • DCA, Grid, and Futures bots with multiple deal conditions
  • Multi-pair trading
  • Single interface to control all your trading activities on different exchanges
  • Good community and knowledge sharing

In addition, it’s important that the platform you choose has reliable customer support and a solid business reputation.
From there, it’s all about configuration. A good platform will offer both preset bots to get you started fast, as well as more advanced options for you to configure your bots to your exact specifications. 3Commas is one of those platforms, and we hope you’ll consider giving us a try.