Previously in Pt. 1, I attempted to give the fellow beginner a basic idea of what common misunderstandings tend to happen with people starting their journey in the crypto world, most importantly the "Get rich overnight" idea is most likely unrealistic. As well as the basic tips for beginners starting to invest and trade Bitcoin and crypto currency in general. Trying to help out at least one person out there that might be having any troubles and prevent any common errors beginners usually make in the beginning. Hopefully it was somewhat successful for someone, or anyone who stumbled upon it.
Here in Pt. 2 I'll explain different types of trading in a brief and simple way due to the confusion that it can cause to a beginner. Also what I believe and have come to realize as a smart and safe way to invest in crypto in general, as well as the reason to invest, even if it's not a large amount. Mainly because of the potential Bitcoin and crypto possess.
Once you start your journey in the crypto world, especially if you pursue it consistently, you'll run into the terms and see a type of trading called "Margin" or "Leverage". The sight of all the different things going on in the trading page can seem like a foreign language to a beginner, and it's very understandable it does.
To break it down in a simple way that's not so confusing, there's a good amount of different ways to trade Bitcoin or crypto. With the market very volatile (unpredictable, up and down), it opens up a gateway to margin or leverage trading. A very easy way to explain it is, borrow money to get a better chance at a larger profit, basically the ×5 or ×10 or ×100 you're seeing is what you choose on your borrowed amount (leverage), simply your money ×5 or ×10 or ×100, place your bet, short meaning your betting on the crypto's price to lower, long meaning your betting on it to rise. Bought Bitcoin at $18,500 to short with ×5 leverage, price dropped to $18,000, you win, get paid the difference with ×5 leverage. Profit plus able to pay back your borrowed money. But! Guess wrong? Go back to the steps and reverse the positive stuff and big profit with negative stuff and big loss.
Also don't forget, this was a very basic and simplified way to describe it. Do way more homework and trade at your own risk.
My personal conclusion after 6 months and what I've decided is the best thing for me, and possibly you too depending on your financial situation and feelings toward crypto currency, is that me not being a wealthy individual, I would say middle class or lower middle class, day/margin trading every once and a while is fine, but I've become a believer in the HODL stance and recurring purchase method. If you have the funds to day/margin trade often and consistently then by all means do what makes you happy. I'll be the first to admit that I think it's a awesome and very fun way to trade crypto currency, but for one, I can't afford the major losses that you risk especially if those losses are frequent, and two, I personally have acquired the sense of long term benefit and also the potential of Bitcoin to be very beneficial.
Are there flaws to Bitcoin and the crypto world? Absolutely. There are holders out there with such large amounts of Bitcoin, largely acquired before Bitcoin had a high value, such as the creator of Bitcoin Satoshi Nakomoto, believed to hold 1 million Bitcoins (4.75% of the total 21 million supply), that if he chose to dump those Bitcoins on the market it could potentially be a Bitcoin killer due to the immense supply suddenly on the market, making the price/value of Bitcoin plummet.
Personally though, I have a way more positive outlook on Bitcoin and crypto currency, and don't believe that would happen due to the potential loss of profit considering selling that amount of Bitcoin over periods of time would bring way larger benefits. With inflation already being a current issue in the U.S., not even including more negative effects of inflation if another stimulus package is passed, holding on to any amount of Bitcoin, even a small amount, might turn out to be beneficial. Considering inflation brings loss of value to a currency (U.S.D.) Do I think the U.S. dollar will fully collapse? Personally no, but after 2020.....wait....not even going to say it. We're almost to the end of it so let's not bring it up for a change. You get what I'm saying though. Also with the blockchain as well as the internet in general constantly growing and becoming stronger, and the never ending possibilities of electronic technology in the future, picturing Bitcoin and crypto mixed in with daily life seems like a very likely outcome in my opinion.
These are just my own personal thoughts and opinions after my first 6 months of learning about the crypto world. Hoping that it might help or let someone get a better idea of the journey they'll soon be taking. Have a good one and stay safe out there.
