Like many people vaguely familiar with cryptocurrency I regret not buying Bitcoin pre-2017. I still remember the day it broke £1000 and thought the momentum would never continue only to be increasingly depressed until it peaked at £15,679.38 in December that year.
On the flip side, I wasn’t one of those people that mortgaged my property as it was booming only to have Bitcoin crash down to below £5k by February.
Since then, Bitcoin hasn’t dominated the news quite as much. Many people speculated that it would become a functional currency that can be used to pay for products at major retailers online and off, but due to its instability, many people dropped it.
However, other speculated that it is purely a bubble that will pop and Bitcoin will disappear into insignificance. In reality, while it is still quite volatile, it is no worse than many companies trading on the stock market, and it certainly hasn’t dropped into insignificance. This year alone Bitcoin has risen 46% by £2,254.76 currently trading at £7,180.76. While this is not as impressive as the 1400% and more gains that could have been made back in 2017 it is still good growth, and more importantly more stable.
If we compare this to Advanced Micro Devices, 12 months ago they were trading at $21, and they are currently at $36 with a 71% growth.
Bitcoin isn't the only crypto out there though, most trading platforms have 12 or more coins available, and as of 19 August 2018 there were over 1600 and growing most of these are destined to paid with trading prices at a fraction of a penny and a market caps well under £100k.
The few coins that sit at the top of this list and are commonly traded can still be good investments though. Litecoin this year has grown 19.60%, and there are multiple Bitcoin forks including Bitcoin SV which has seen a growth of 27.06% this year.
While mining coins is perhaps something that is out of reach for most people nowadays trading in them has become more popular and there various approaches to this. Margin trading is something that has grown in popularity with this industry allowing you to effectively buy crypto at a fraction of its value but trade as if you have paid full price.
This is done with the trading platform providing leverage with cryptocurrency trading platforms providing anything from 20 to 100x leverage, then charging a financing rate.
The advantage of this is that it can allow you to invest in a currency that is trading very high without committing that much money. For example, with Bitcoin sitting at over £7k with a 20x leverage you would only need to invest £140.
On sites like Monfex, you will trade against the Dollar, and you can opt to long or short a trade. With a long trade, it works as you normally expect things to work, you pay the £140 upfront for 1 Bitcoin then after the hold time you sell that Bitcoin and pay the company back plus its interest charge pocketing the difference between the initial trade price. In this case, this week if you had taken a long trade out on Bitcoin SV buying 100 shares for £10299, but with cash down of £102.99, you would have earned £434 minus interest.
Shorting is more interesting, it essentially works in reverse with you expecting Bitcoin to lose value. So while you still only pay £140 upfront for a Bitcoin, at the end of the contract, you owe a Bitcoin back rather than the USD value. So if Bitcoin has dropped in value, you bought high and sold low.
While margin trading can be risky, and you certainly should never trade more than you can afford, it can be one of the most profitable methods of investment.
This form of trading is potentially excellent for people that are familiar with cryptocurrency and regularly follow its trends and news. If you can buy low when rumours about movement come out you can then sell when news brakes and the value goes up.