What’s better for new investors – HoDLing or Trading Bitcoin?
For those who are completely new to the crypto world, investing might be a better option than trading cryptocurrencies. However, each method has its pitfalls and perks. Here in this article, we will discuss two main methods of making money with bitcoin: trading and HODLing. We will discuss the strategies used in both their perks and pitfalls and learn what crypto experts have to say about both.
What does HODL mean?
Hold was purposefully misspelled as HODL, which stands for Holding on For Dear Life. HODLing Bitcoin means investing in bitcoin for the long term through all its ups and downs. This method of bitcoin investing is highly recommended by crypto experts as HODLing bitcoin can provide you the best returns that no other investment asset can provide you. Most investors HODL bitcoin with the hope and expectation that its price will boost in the near future and offer them higher returns.
What does trading mean?
Trading cryptocurrencies means buying crypto coins like bitcoins and waiting for only a short period for their price to increase and earn small profits. Traders tend to open positions even for few hours, and if there are price movements that provide you good returns, they close the trend once price movement is done. It can also result in the decreased price of cryptocurrency and avoid loss of money, and traders set profit and loss limit that helps you save your money. If you want to trade cryptocurrencies, you should check whether bitcoin can replace dollar or not in near furure.
New investors opt for one of two things from buying and holding cryptocurrency or trading cryptocurrency. From these two methods, HODLing is considered a better strategy for inexperienced traders. But both trading and HODLing involve different risks and strategies. Therefore it is important for new traders to execute trade properly to avoid risks or any dangerous situation.
The two main problems that arise here are:
- Not all traders are great at implementing the right strategies, especially when it comes to trade in such a volatile market as a crypto market.
- HODLers are apt to HODL bitcoin to top and then get down again, which means they don’t aim to make high profits.
So what should traders do? Well, the right answer to this question is that traders should HODL bitcoin with the right exit plan or trade bitcoin by learning the right strategies and implementing a risk management plan that most experienced traders and investors approve of. In simple words, using the right strategies can make your journey easy and successful. Let us now explore the perks and pitfalls of both HODLing and Trading.
Perks and Pitfalls of HODL
Buying and HODLing bitcoin is an easy process. Traders can buy coins and store them in the wallet, and you have to do nothing. Patience is required in HODL as it will pay off one day. The main benefit of HODL bitcoins is that you don’t have to pay taxes until traders cash out their funds. Talking about the pitfalls of HODL, investors mostly get into the crypto world when the market is at its peak because of the excitement. Secondly, when it comes to taking profits, HODLers don’t have enough experience or knowledge as they only HODL and don’t know the updates of the market. HODLers often condition themselves to just HODL bitcoin or other cryptocurrencies.
Perks and Pitfalls of HODL
The cryptocurrency market is volatile, but crypto trading provides you amazing gains after hitting the buy button. In trading, traders get a plethora of opportunities to experience big profits and losses in crypto. If you are experienced or have the right amount of knowledge, you can take maximum advantage of gains and easily get ahead of any HODLer. Talking about pitfalls, trading requires a complete understanding of the crypto market, and traders must learn fundamental and technical analysis of coins. If you don’t have a proper understanding of the market, nature, and mood of the market, you can easily face losses.
Additionally, there are many pitfalls and traps in the crypto market, and traders need to be highly careful. The inexperienced traders often face portfolio erosion because of trading out bitcoins that aren’t doing great in the market.