Cryptocurrency trading is very stressful, as you need to follow the news daily and consider too many factors before you actually make it. Consider high price volatility - one minute; your portfolio's up; the next, it's plummeted. Additionally, threats like crypto scams and malware add another layer of anxiety.
For many, the potential for significant profit is alluring, but this unpredictability can make trading cryptos an emotional roller coaster. Is crypto trading stressful? Well, traders often feel the strain from worrying about sudden drops to experiencing the rush of a soaring market.
But why does it have such a profound impact on stress levels? Despite these challenges, people are drawn to cryptocurrency trading – from bitcoin (BTC) enthusiasts engaging in day-to-day intraday trading to investors looking at long-term gains through staking or lending their digital assets.
This article will go through why crypto trading is stressful and how PlasBit can help you reduce nervous moments.
What is Cryptocurrency Trading?
Cryptocurrency trading involves buying and selling digital assets such as Bitcoin, Ethereum, and other altcoins. Day trading is a strategy where traders buy and sell crypto within the same day, while swing trading involves holding onto assets for longer to take advantage of price swings.
How Does Day Trading Work?
Day trading is buying and selling digital assets within a single trading day. Traders aim to profit from small price movements in stocks, cryptocurrencies, or other financial instruments.
Advanced technologies now allow individuals to engage in this activity using automated trading systems. These systems can follow complex algorithms that quickly look for patterns and signals to enter and exit trades.
People who focus on day trading are called day traders. They rely on technical analysis and various strategies such as auction market theory, volume profile, and market dynamics. Successful day traders need quick decision-making skills and access to real-time market data to capitalize on opportunities that last only minutes or seconds.
For example, Imagine a day trader named Alex specializing in the crypto market. Utilizing an automated trading system, Alex sets up algorithms designed to identify patterns indicative of a short-term price increase in Ethereum. On a typical trading day, the system spots an emerging pattern in ETH 2.0 development, suggesting a price surge due to positive news about a groundbreaking product release. Acting on this signal, Alex buys $ETH. Within hours, as anticipated, the crypto price climbs significantly due to investor excitement around the news. Alex sells his $ETH and closes the position on a profit.
Is Swing Trading a Viable Strategy?
Swing trading is a strategy that balances the rapid approach of day trading and the longer-term perspective of position trading. Unlike day traders who buy and sell within a single day, swing traders hold their positions for several days to weeks, aiming to capitalize on anticipated price movements.
Such an approach is particularly suitable for individuals who may need more time to monitor the markets constantly but still wish to profit from the trends.
Swing traders rely heavily on both technical analysis, which involves studying price patterns and market trends, and fundamental analysis, which assesses the intrinsic value of an investment. By capturing significant price moves, swing traders can achieve substantial gains with fewer transactions, offering a more relaxed trading pace than the often frantic nature of day trading.
For example: Consider a swing trader, Jordan, who focuses on the cryptocurrency market, specifically Bitcoin. Jordan notices a pattern indicating that Bitcoin is poised for a bullish trend based on both its technical indicators, such as moving averages and RSI (Relative Strength Index), and fundamental factors, like increased adoption by institutional investors. Acting on this analysis, Jordan buys Bitcoin at $30,000, predicting that the trend will unfold over the next few weeks.
As anticipated, positive news in the crypto space, including announcements of new blockchain partnerships, drives Bitcoin's price up to $35,000 over the next two weeks. Jordan then decides to sell, making a significant profit from the price movement.
Can You Day Trade Crypto?
Yes, you can day trade crypto, much like you would stocks or other financial instruments. Day trading cryptocurrency involves buying and selling digital assets within the same day, aiming to profit from short-term price movements. The crypto market operates 24/7, offering a unique advantage over traditional stock markets bound by opening and closing times.
It is a way to buy and sell tokens on the same day, taking advantage of quick price changes. Many people do this with currencies like Bitcoin and Solana. Traders use strategies such as scalping, which involves making many small trades fast.
Cryptocurrency's inherent volatility provides day traders with the potential for significant returns. However, this same volatility also increases the risk, making it crucial for traders to stay informed and use strategies to manage their exposure. Traders often rely on technical analysis, utilizing charts and patterns to create predictions about future price movements and on trading platforms that offer real-time data and sophisticated trading tools.
Furthermore, the accessibility of cryptocurrencies means that day trading can be started with relatively low capital compared to traditional markets. It democratizes access to financial markets, enabling more individuals to participate in trading activities.
In addition to trading, cryptocurrencies can be used for daily transactions and purchases, bridging the gap between speculative trading and practical utility.
Is Crypto Trading Stressful?
Crypto trading can be stressful due to high price volatility, scams, phishing and malware, and the fear of missing out (FOMO). It’s important to understand the potential risks and how to manage them effectively before you engage in this activity.
High price volatility
Cryptocurrencies are notorious for their high volatility, leading to significant price swings within very short periods. This volatility stems from several factors, including the speculative nature of investors, the relatively small market size compared to traditional financial markets, and the sensitivity of prices to market sentiment and news.
Unlike established markets with decades of historical data and a more stable investor base, the crypto market is influenced by diverse participants, ranging from individual retail investors to large institutional players, each reacting quickly to news, rumors, and trends, contributing to price volatility.
The unpredictability can be as addictive as gambling for some, with the thrill of potential quick profits driving speculative trading. The adrenaline rush associated with timing the market correctly and achieving substantial returns can encourage traders to take on high risks, sometimes without adequately considering the potential for loss.
A stark example of crypto's volatility was observed with the FTX crash, which significantly impacted the price of Solana ($SOL). In the aftermath, Solana's price plummeted to just $8, a drastic fall influenced by the exchange's collapse and the ensuing loss of market confidence. However, demonstrating the market's unpredictable nature, $SOL has since recovered remarkably, trading at around $104.
Crypto scams
While offering vast opportunities for innovation and investment, the cryptocurrency industry is also rife with scams that prey on the unwary and greedy. Among the most notorious are Ponzi schemes, which promise high returns to early investors through the capital contributed by newer participants. These schemes inevitably collapse when the flow of new investors dries up, leaving later investors at a loss.
Fake Initial Coin Offerings (ICOs) are another prevalent scam, exploiting the fundraising mechanism used by new cryptocurrency projects. Scammers create fraudulent projects with sophisticated websites and whitepapers to lure investors into buying nonexistent tokens. Once the fraudsters collect the funds, they vanish, leaving investors with worthless assets.
Pump and dump schemes are widespread in the crypto world due to its relatively unregulated environment. In these schemes, organizers artificially inflate the price of a cryptocurrency by spreading misleading information, only to sell off their holdings at the peak, causing the price to plummet and leaving other investors with significant losses.
Social media scams exploit the reach and influence of platforms like Twitter and Facebook to spread fraudulent schemes or impersonate well-known figures in the crypto industry, often promising guaranteed returns or free giveaways in exchange for an initial investment or the sharing of private keys.
Additionally, the zero-transfer scam has emerged in the crypto space, where scammers trick victims into authorizing a transaction that appears to transfer assets to their account but, in reality, does nothing or transfers assets out. This scam exploits the complex nature of smart contracts and transaction permissions, misleading users into approving malicious contracts that drain their wallets without their knowledge.
Phishing and Malware
Is crypto trading stressful? Indeed, participants face many security threats, with phishing and malware standing out as particularly prevalent dangers. Phishing attacks are cunningly designed to appear as legitimate communications, often mimicking emails, websites, or messages from trusted entities. The primary aim is to dupe individuals into divulging sensitive information such as personal details, login credentials, or financial data. These deceptive tactics are not just limited to direct financial theft but can also lead to unauthorized access to cryptocurrency wallets and exchanges, resulting in substantial losses.
Malware, or malicious software, represents another significant threat, infiltrating devices through compromised software downloads, email attachments, or seemingly harmless links. Once installed, malware can enable hackers to take control of devices, spy on user activity, and steal cryptocurrency directly from digital wallets. Blockchain transactions' decentralized and irreversible nature makes recovery from such thefts particularly challenging, emphasizing the need for robust security measures.
To safeguard against these cybersecurity threats, individuals should prioritize using reputable antivirus and anti-malware software, ensuring constant updates for the latest protection. Additionally, enabling two-factor authentication (2FA) on all exchange platforms and digital wallets adds an extra layer of security, significantly reducing the risk of unauthorized access. Vigilance is also crucial; be wary of unsolicited emails or messages that request sensitive information or promise unrealistic returns. Always verify the legitimacy of any communication or software by directly contacting the source or visiting official websites.
FOMO
FOMO, or the fear of missing out, is a common psychological phenomenon in cryptocurrency trading. It arises from the anxiety of missing out on potential profits due to market fluctuations.
This can lead to impulsive decision-making and emotional responses, which often result in losses rather than gains. FOMO can also contribute to stress and mental health problems for traders who find themselves constantly chasing trends without a clear strategy.
The illusion of control and availability heuristic associated with FOMO may also influence individuals susceptible to addiction tendencies. This can further exacerbate the stress and emotional impact of cryptocurrency trading as they struggle with compulsive behaviors driven by the fear of missing out on lucrative opportunities.
How Can You Profit from Investing in Crypto?
There are several ways to profit from investing in crypto, including investing, trading, staking, lending, and mining. Each method comes with its risks and rewards.
Investing
Investing in cryptocurrency can be done through various methods, such as trading, staking, lending, and mining. Bitcoin's market capitalization and speculative factors have led to estimates that its future value will be worth as much as $500,000 or more per Bitcoin.
Altcoins are also known for their vast swings in value, making them an intriguing investment option for those willing to take on the associated risks. It is crucial to diversify your portfolio and put only some of your eggs in one basket when investing in cryptocurrencies due to the high price volatility and market fluctuations that can occur.
Investors can mitigate stress by holding onto assets for the long term instead of engaging in emotional trading or quick conclusions while still seeking profitable outcomes. Understanding risk management strategies helps individuals avoid impulsive decisions driven by FOMO or fear of missing out.
Trading
Cryptocurrency trading presents both opportunities and risks, as discussed in detail. Day trading, involving buying and selling assets within a single day, is highly volatile but can be profitable. However, it comes with significant risks due to high price fluctuations and market volatility.
Traders must exercise caution and develop clear strategies to navigate these challenges effectively. We already mentioned that Bitcoin isn’t perfect, and so are altcoins.
Staking
Staking can pose challenges for newer traders, requiring a clear trading strategy. Automation, however, can help alleviate these challenges in the cryptocurrency market. Trinity offers the Rule Builder and Code Editor, empowering traders to automate and create trading algorithms effectively.
Lending
Crypto lending involves loaning your cryptocurrency assets to others in exchange for an interest rate. It can earn passive income from your crypto holdings without actively trading.
Lending platforms connect borrowers and lenders, allowing individuals to lend their crypto to others who want to use it for margin trading or short selling while earning interest on the amount loaned.
Smart contracts automate the lending process using blockchain technology, ensuring security and transparency. However, it's crucial to carefully assess lending risks, such as borrowers' default risk and potential volatility in the crypto market impacting repayments.
Mining
Now, let's get into mining. Bitcoin mining involves verifying and adding transactions to the blockchain through complex mathematical problem-solving using powerful computers.
Miners are incentivized by being rewarded with newly minted bitcoins as well as transaction fees for their efforts in securing the network, which is essential for decentralized and secure Bitcoin operations.
However, it’s important to note that the increasing difficulty of mining demands more computational power and energy consumption, raising concerns about its environmental impact.
Common Strategies to Invest in Crypto Without Stress
If you are afraid of the question, “Is crypto trading stressful?” the next couple of methods on the list might be a good resort.
Hold your assets for the long term
Long-term asset holding, or HODLing, in the crypto world, is a strategy that emphasizes the potential for substantial growth over time, steering clear of the stress and hands-on management associated with frequent trading.
It banks on the historical upward trajectory of major cryptocurrencies, suggesting that patience can yield significant rewards despite the volatility and periodic downturns the market experiences.
However, it necessitates a solid resolve to weather market fluctuations without succumbing to panic selling and accepting that some short-term profit opportunities will be foregone.
Investors must also stay informed about long-term trends and developments within the crypto industry to ensure their holdings remain aligned with future growth potentials, thereby balancing the passive nature of holding with strategic oversight.
Do not go too emotional
Not letting emotions cloud your judgment is essential when considering investing in cryptocurrency. Emotional decision-making can lead to impulsive actions, causing unnecessary stress and potential financial losses.
It's crucial to assess the market rationally, using facts and analysis rather than being swayed by fear or excitement. By maintaining a disciplined approach and staying level-headed, investors can mitigate the stress often associated with cryptocurrency trading while making well-informed decisions.
By employing self-discipline and rational thinking, investors can navigate the volatile crypto market more easily and reduce the potential for emotional distress.
Don't jump to quick conclusions
It's crucial to avoid jumping to quick conclusions when making investment decisions. Before making any significant moves, take the time to thoroughly research and analyze the market trends, potential risks, and long-term prospects.
Rushing to conclusions can lead to impulsive decision-making and increased stress levels, especially in the volatile cryptocurrency trading landscape. By approaching investment opportunities with a well-thought-out strategy and avoiding hasty conclusions, traders can mitigate potential losses and maintain a more balanced mental state amidst the unpredictability of crypto markets.
In the fast-paced world of cryptocurrency trading, jumping to quick conclusions can often result in detrimental outcomes. Traders must exercise patience, conduct thorough evaluations, and consider various factors impacting their investments before making any decisions.
What is PlasBit and How Do We Help Our Customers?
At PlasBit, we understand that trading cryptocurrencies can often be a stressful endeavor. However, we're here to help alleviate some of that stress, not by intervening in the trading process itself but by offering a straightforward and efficient crypto exchange service. Our approach is to provide a secure environment where you can keep the earnings you've made through other trading methods without additional stress.
We achieve this by securely storing your funds in cold storage and maintaining a 1:1 reserve of all our users' funds.
We realize crypto is more than just an investment commodity – it can be a viable option to pay your bills, buy your loved ones gifts, and do a lot more than just trade. Our customers can load their PlasBit debit cards with cryptocurrency or use Visa or Mastercard for transactions, and we also provide a crypto wallet to add and release funds safely.
Last but not least – PlasBit enables cryptocurrency exchange into fiat money and facilitates wire transfers in euros or USD.
Conclusion
Is crypto trading stressful? Yes. And there’s no going around it. The high-stakes nature of cryptocurrency trading can lead to extreme mood swings and addictive behaviors. Traders must be mindful of this volatile market's potential stressors and risks.
However, suppose you invest smartly in the right crypto and make the right decisions based on your analysis (not your emotions!). In that case, you can dramatically reduce the stress and earn a sizeable profit.
But it is still stressful. It’s just in a moderate amount.
