You were right. Cryptocurrency was not just a passing fad.
Despite heightened regulatory scrutiny — with major crypto firms being hounded by regulators for alleged illegal activity — and crypto trading volumes witnessing a free fall, the enthusiasm of crypto investors has refused to die down.
India’s cryptocurrency craze appears to be at an all-time high, with the South Asian country ranking first in Chainalysis’ 2023 Global Crypto Adoption Index. Some reports suggest that around 20% of Indians own some cryptocurrency, with Bitcoin and Ether emerging as their top picks. Another study says at least 10% of Indian women have invested in digital assets.
Here’s the true head-turner: India’s cryptocurrency boom — after the doldrums of 2022, fueled by the collapse of billionaire Sam Bankman-Fried’s FTX — comes in the face of the government’s strict taxation regime. Even as the industry faces a double whammy of capital gains tax on crypto and TDS, people keep buying cryptocurrency.
And it’s not just India that is seeing a renewed interest in crypto. Low-income countries, especially in the Sub-Saharan Africa region, prefer using Bitcoin as a form of payment. Meanwhile, crypto adoption in the US and Europe continues to remain strong—though it is not as high as the peak levels.
The simplest explanation for why investors still find the allure of crypto promising is the expectation of high returns. Bitcoin had a roaring rally from early 2019 to early 2021—giving investors ten-fold returns. But there’s no sugarcoating this: chances of that happening again are very slim. Some would argue that the small number of people who made those profits were extremely lucky. This is because cryptocurrency is a highly volatile investment.
The ABCs of crypto day trading
Whether you win or lose depends largely on timing. But if you have skills (check out crypto trading analysts at Todayq), crypto can be a lucrative investment. In this guide, we look at the basics of crypto day trading — a strategy that involves taking positions in the market and exiting within a single day. The goal here is to take advantage of the volatility in coin prices and book profits by making small moves in the market.
Crypto day trading strategies
This trading strategy involves capitalizing on increased trading volumes. Investors can take a position in the market, and then exit minutes later, realizing small gains on the way. To make informed investment decisions, a scalper analyzes price action, volumes, chart patterns, and more.
They also keep an eye on news updates that could impact the price of cryptocurrency, especially in the short term.
Traders often heed the advice of experienced analysts, who announce support and resistance levels each day. ‘Resistance’ is the level up to which a digital asset’s price may climb while ‘support’ is the point below which the price of a cryptocurrency is not expected to slide.
High-frequency trading (HFT)
Some traders use algorithms and trading bots to identify exit and entry points in the market. This crypto day trading strategy is more convenient for advanced traders than beginners as it requires a deep understanding of complex market concepts and a good grasp of mathematics and computer science.
Dollar-cost averaging (DCA)
There is no such thing as a perfect entry or exit point in the crypto market. Rather than infusing a massive amount of capital, traders can invest a fixed amount at regular intervals. This strategy is called ‘Dollar-cost averaging.’ Timing the markets is next to impossible, so investors can rely on this style of investment to build wealth in the long term.
However, exiting the market at an appropriate time is crucial. To use DCA to your advantage, analyze market trends and understand the market cycle. Furthermore, read technical charts and monitor oversold and overbought regions prior to making a call.
Arbitrage is a crypto day trading strategy where traders look to take advantage of the price disparity between cryptocurrencies across platforms, buying a token on one and then selling it on another. However, profit margins in this strategy are usually very small, so take note of the amount you’re investing.
Other investment strategies
Use Bitcoin’s volatility to your advantage
Cryptocurrencies can be an incredibly topsy-turvy investment. This is not breaking news. For instance, it’s rare for a traditional stock or even a commodity to surge 10% in a single session. In crypto, however, jumps like these are a common occurrence. Given its volatility, Bitcoin prices have a tendency to fluctuate. You could make the most of this volatility by trading in Bitcoin futures.
Balance risk and return
While cryptocurrencies have grown in popularity in recent years, the market has been under intense pressure due to the SEC’s crackdown on the industry and the global inflation scenario. A surge in crypto-related crimes has made traders more skeptical. Therefore, one ought to build a diverse portfolio comprising a range of virtual currencies – such as Bitcoin, Ether, Dogecoin, etc. — to avoid the risks associated with extreme volatility.
How can I day trade crypto?
First, open an account on a crypto trading platform of your choosing. Then load your account with fiat money and buy some cryptocurrency. Decide on a crypto day trading strategy that suits your needs. To safely store your crypto, pick between a hot wallet and a cold wallet. (Learn crypto trading here).
Day trading crypto can be an enticing money-making gig but it comes with its risks and pitfalls. Before investing your hard-earned money in any cryptocurrency, conduct primary research on the value of that asset. The way to go about this is to be up to date with all the news related to crypto. Apart from this, you need to take a long, hard look at your finances and set an investment goal before betting on volatile assets such as crypto.