Having been around Crypto for a while, and having interacted with quite a lot of traders during that time, one of the most common issues I see are traders remaining stagnant on their path to earn profits. A lot of them ignore just how important price entry and end up in quite a few instances waiting to recuperate losses.
A main mental blocks they need to get around is this:
They Only Think and Dream in USD.
Most amateur Crypto traders will only think about how much crypto they can buy, and to then flip it to USD. Their brain is only wired towards trading Crypto vs. USD, and so, their thought process goes something like this:
- I will Spend $500 to buy Coin X which costs $10 each → That gives me 50 units worth of Coin X.
- When Coin X reaches $30 I will sell all those coins back to USD and have made a profit of $1,000 EASY! HURRAY!
This is typical of someone new to trading Crypto. Now, Coin X may indeed reach the projected $30 price point with ease, but the reality is, most trades won’t work out like that. What isn’t considered is what if Coin X crashes all the way down to $2 and you’re now in loss. That $500 you put in to buy those units is now worth $100. Ouch.
Well. If you’re in it for the long ride, then it won’t matter. A lot of people simply throw their cash at some crypto and come back months/years later when their money has multiplied to then sell.
On the other hand, I don’t believe that is an optimal strategy for most who are looking to accumulate the kind of wealth they’d expect to retire on. Sure, it works nicely if you’re already rich and you throw a cool million on some coin to come back months later and cash out with $5 million or more. But most traders don’t have that luxury and know that they need to continuously grind and trade to generate the kind of wealth to make all of this worthwhile in the long term. The HODL wait game just doesn’t work for their aspirations.
What Should You Be Doing?
You should of course consider trading Crypto vs. Crypto. Why? Because, when you get into Cryptocurrency trading, your goal for the long term should be to accumulate more and more crypto. You can take small USD profits for each successful trade you’ve made, and put them in a saving account in your wallet or secure exchange to allow it to grow more and more as time goes by — that is essentially your future end game stash which you’re growing and which will allow you to eventually retire.
Why Should You Consider Crypto Vs. Crypto?
Simply because, USD is static and inflexible. Considering the above scenario, where coin X has crashed by 80% and your initial investment of $500 has downsized in value to $100. What are your options?
1. You can wait it out until the price recovers and you make back your $500, but then you’ll need to wait longer to profit and that means a lot of time is wasted to make that investment worth it.
2. You could sell and at least you’d be saving that $100 in you have left —but for the love of God don’t do this. The only time you should be selling at such a huge loss is if you’ve confirmed that a project is a rug pull (scam) and need to exit ASAP before the coin has completely tanked in value.
3. You could throw more money at lower prices of the same coin and any upward movements in price that will help to balance out the loss in value on your initial investment. It’s a valid strategy, but it means you’ll have to cough up more money to buy at lower prices.
So Why Does Crypto Vs Crypto Work?
Because Crypto prices are constantly moving and so trading between them gives you options and flexibility. Instead of waiting for a coin to be profitable in USD, you could look to profit in Crypto instead. How would that work?
Going back to the above scenario. You bought coin X but it has dumped badly. But instead of just sitting and waiting for months to regain some value, you have coin Y that has also tanked. Let’s consider the following:
Current Price — -> $2 (Tanked from $10)
All Time High —-> $50 (Target to sell is $40)
Current Price —-> $2 (Tanked from $12)
All Time High Price — -> $70 (Target to sell is $40)
The example above is simplified, but taking into consideration the current price and their ATH price, you could sell your 50 coin X units and buy 50 coin Y units. Both coins’ prices will be moving according to market factors.
Let’s say the following happens:
coin Y Price moves up to $2.70
coin X moves up to $2.20
50 Units of coin Y x $2.70 = $135
You then buy coin X units at $2.20 with the $135 you gained — that is 61.36 Units of coin X. You’ve profited 11.36 units in addition to gaining back and still having the 50 coins from your initial $500 investment. You can continue holding those 11.36 units you’ve gained (Put them to work through staking!) and sell them later when their USD value has grown further.
But What If It Doesn’t Work Out That Way!
What if you sold your coin X units and moved into coin Y, but then coin X’s USD value moves way past coin Y to $4. Now what?!
Yes, there is a big possibility that could happen, but having carefully chosen coin Y, and based on it’s ATH price being even higher than X, it is as likely to give you back that $500 initial investment as coin X is, so it’s not a huge issue if coin Y is now the one you continue to hold.
And coin X should be completely priced out of your reach and you want to continue trading to accumulate more crypto, then have a look at coin Z! There will always be flexibility and options to move when you’re trading between crypto then if you were only trading vs. USD!
The main thing you need to consider when trading between cryptos is the ROI from the transaction, if both are close or one has slightly better ROI than the other, than the risk to switching is significantly minimized.
Don’t swap a quality coin for a shit coin — You’re only asking for trouble.
When It Comes Down To It.
Crypto trading is very risky, that’s why you’ll always hear the same mantra echoed over and over again — Only invest money you can afford to lose!
It is an unpredictable field where a seemingly quality project (Think Terra) can have disastrous consequences. Some projects if not researched properly can turn out to be scams. And sometimes you do your homework but shit happens and a project fails. It’s important to consider your decisions from the project, to price entry point (DCA is your friend) and to always keep your diverse portfolio to mitigate bad luck.
Note: The above refers to Spot trading. I do not participate in any sort of Margin or Futures trading. The above is a shared idea which works for me and there are many factors to carefully consider when applying the strategy. Also:
The above is not financial advice! You may utilize the above information at your own discretion, however, I am not responsible for any financial losses you may incur.
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