Go back just 10 years and trading was seen as a job solely for those working for the big financial institutions, in high profile places like New York, London, Singapore and Hong Kong. We have an image in our heads of these traders too, young/middle-aged guys, with 6 or 7 figure salaries in fancy suits, driving expensive sports cars.

Up until the financial crisis at least, despite their extremely large salaries, they were seen as well-educated and hard-working individuals who took care of our money and invested wisely enough to not just provide us with decent rates of interest on our savings and pensions, but also to keep the bank afloat and have something for themselves.

Even today, 10 years after the crisis, despite seeing these people in a more negative light, we still see them as well-educated individuals who have spent many years studying finance or economics in top universities and with years of experience on the markets.

However, cryptocurrency trading has created something entirely new. A chance for anybody with any amount – no matter how big or small – to begin trading. The meteoric rise in the price of the cryptocurrency has pulled many people with no prior financial or economic experience into trading in the hope of making their millions, but whatever goes up, must come down if it’s not built on a strong fundamental fuelled by usability.

In this week’s blog post we will talk about how traditional trading works, the pitfalls of cryptocurrency trading and how this can be improved.

Traditional Trading

Today, if you want to invest in stocks and shares, just like in years gone by, you will more than likely go to your bank or visit a broker. These trained individuals will either help you to purchase a certain stock you may have chosen or help guide you towards creating a bigger share portfolio, or even towards investing in funds dedicated to particular industries or regions of the world.

How they guide you will not just be based on the particular product or area you would like to invest in, but how long you would like to invest for, how much you would like to invest, and how much risk you are willing to take. Based on your answers to these questions, it will be possible for them to guide you towards creating a more diverse and safer portfolio, or to a higher yielding yet perhaps safer option than you were originally aware of.

Trading stocks is, by most people, seen as very risky and something is only done by those with a lot of money. This is why less than 10% of us actually own stock and why these trained brokers and bank officials are seen as important figures to invest our money in the wisest possible way, as one poor investment may drastically change our future.

Despite there now being a number of platforms online for individuals to trade on the stock market, the sums of money to begin are – for most people – still seen as too much. And, even if they do have the necessary funds, the sea of possible investment options are bamboozling to anyone without a deeper knowledge of the markets.

The Cryptocurrency Trading Trap

This is why crypto trading can be so tempting. As not only is it seen as simple because you are just buying or selling a chosen coin, but the potential sums of money you could gain are huge.

If you buy traditional stock or invest in a fund, you might, if you are lucky, see a yearly increase in the value of 5-10%. In the last two months alone Bitcoin has doubled in value. And this is just the tip of the iceberg. Coins can go up thousands of percent over similar and even shorter timeframes.

In many ways, crypto is today’s gold rush with people drawn by the chance to become millionaires, perhaps even overnight. And they come because there is some fact to it. This time 9 years ago, 1 Bitcoin was worth just 1 US cent. If you had bought just 1 dollars-worth – 100 Bitcoins – you would now have Bitcoin worth around $1,000,000.

No wonder it is so tempting. However, what goes up, must come down as they say. We all remember the excitement as Bitcoin headed from just under $1000 to almost $20,000 during 2017, many first time investors thought this was the time to make money fast and invested huge sums, for some their entire life savings. Only to lose nearly all of it as Bitcoin came crashing down to $4000 within just 2 months.

For a small group of experienced traders there was and still is the possibility to earn very well. For those without the education or experience, although you may strike it lucky, you may also lose everything.

A Better Way

Earlier we spoke how to become involved in the stock market. Almost all people invest through their bank or via a broker. These people providing information, insight and expertise to all those who wish to invest through them. Being able to invest in cryptocurrency this way would take a lot of the risk away for those who know very little or nothing about trading, but who are thinking of investing in crypto.

Likewise, at the same time, there could also be checks on the sums invested or the education level of the trader. Not being able to invest all you have, or just a small portion of that could remove a lot of potential heartaches. At the same time, if you had to prove some form of financial education or training to trade, this may at least push those who want to become involved to educate themselves first.

Conclusion

Cryptocurrency trading is today’s gold rush. Over the last 9 years, the value of Bitcoin has soared from $0.01 to $10,000 today. A $1 investment in 2010 would now be worth $1,000,000. It is this potential to earn something huge from almost nothing that draws people to begin trading crypto coins.

However, the road is not always paved with gold. And, this is what many millions of new and inexperienced people to the crypto market (and trading in general) found out at the end of 2017. When the price of Bitcoin came crashing down from almost $20,000 to just $4000. Many losing their entire life savings.

To trade stocks and shares we go through a knowledgeable bank advisor or stockbroker. If we could do the same with crypto, that potential heartache could be lost.