Introduction
Bitcoin trading refers to the short-term strategy of buying and selling bitcoin to earn profit from short-term price fluctuations. On the other hand, bitcoin holding is a long-term strategy of buying and storing bitcoin for a long period of time. The main purpose of bitcoin trading is to make profit in short period of time and purpose of holding bitcoin with the belief that its value will increase over time. In this post we will discuss some major advantages and disadvantages of bitcoin trading and holding.
Pros Of Bitcoin Trading
The main advantages of bitcoin trading can be highlighted as follows:
1. Quick Profit Potential
Traders can earn significant profit on short period of time because of price swings. Skilled traders can turn volatility into opportunity.
2. 24/7 Market
Another advantage of bitcoin trading is 24/7 market access because cryptocurrency market operates around the clock. So, it is flexible and makes traders easy to buy or sell cryptocurrencies.
3. Profit From Both Direction
Experienced traders can make profit from both rising and falling price of bitcoin.
Cons Of Bitcoin Trading
The major drawbacks of bitcoin trading are as follows:
1. High Level Of Risk
Price of bitcoin swings dramatically in short period because of volatility, it may lead to significant losses for new and inexperienced traders.
2. Not Suitable For Passive Traders
It requires constant monitoring, market analysis and sound decision making. Therefore bitcoin trading is ideal for active investors or traders.
3. Transaction Fees And Taxes
Frequent traders may suffer from transaction fees and withdrawal charges. Traders also have to pay capital gain taxes that reduces their profits.
4. Emotional Fatigue
Frequent price swings (increase and decrease) may cause emotional stress to the trader that may lead to poor decision making.
Pros Of Bitcoin Holding
Some major advantages of holding bitcoin can be pointed out as follows:
1. Potential Long-Term Growth
Bitcoin holders can enjoy substantial return in the long-term. It's historical trend shows that it has been the best performing digital asset.
2. Less Stressful
Bitcoin holding is less stressful than trading because investors do not need to track and monitor daily price swings like in trading.
3. Less Transaction Costs And Fees
Investors can avoid trading fees and other costs because of infrequent transactions
4. Tax Benefit
Bitcoin holders can enjoy tax advantage because capital gain taxes are lower than trading taxes.
Cons Of Bitcoin Holding
Some notable drawbacks or disadvantages of holding bitcoin can be described as follows:
1. Security Risks
Storing bitcoin for long period of time increases the risk of hacking and loss of private keys so investors may loose their funds permanently.
Also Read
Things You Should Know Before Buying Bitcoin
2. Price Volatility
Holding bitcoin is challenging because of market volatility.
3. No Passive Income
Holding bitcoin does not generate passive income (dividend or interest) like stocks.
4. Uncertainty
It's value can be affected by government policies and regulations. Therefore, the future of bitcoin is uncertain.
