[This is Part 2 of a two-part article. To read Part 1, click here.]
In Part One, we dipped our toes a bit into what long-term investing in Ethereum looks like. Now, let’s take a gander at short-term investing.
When it comes to Ethereum, the plan is to swap Ether multiple times within the span of a few months to a year for profits. Since the digital currency market is so unpredictable, the value of Ethereum fluctuates very frequently, leaving many openings for investors to make instant profits. The same opportunity exists for all other cryptocurrencies.
Timing is Crucial
If you purchased $1K of Ether back in March of 2017 and kept it till March of 2018, you’d have $25k of ETH by then. But, if you had unloaded the ETH in December of 2017, you’d have realized $45,000 in profits. Then, you could use a portion of that moolah to recommit to Ethereum and keep it for a future cycle of gains.
Timing is crucial in the cryptocurrency market, and those who are fortunate enough to time the market properly can realize massive gains.
Since so many ICOs launch their own tokens and coins on Ethereum’s network, people expect Ethereum will return to its valuation zenith or even rise above it. If this is the case, getting into ETH while it’s down in price might be extremely profitable. Bear in mind, however, the many variables that add to the volatility of a coin’s value including regulations, market manipulation, and competition which may cause prices to fall before climbing back up again. Additionally, when prices are going up, it is important to take some profits off the table because, as illustrated earlier, prices do not stay at all-time-highs forever.
The Drawbacks of Committing to Ether Short-Term
As demonstrated by Ethereum’s performance in 2017, short term investing can be quite lucrative. However, just as with long-term investing, there are many drawbacks to consider for short-term investing:
- With thousands of cryptocurrencies to choose from, Ethereum may not be the best choice.
- With governments all over the world establishing new policies for the digital coin market, a portion of these rules and regulations might influence the usability and price of Ethereum. A law that imposes a tax on the revenue of each trade you make can have an effect on your gains when investing short-term.
- With credit card companies and banks preventing people from utilizing their credit and debit cards to acquire cryptocurrency, the stream of fresh money going into the trade market has weakened. This results in a deceleration in market growth, reducing the profitability of short-term investing.
- Trading actively in digital currency markets is tricky if you aren’t a seasoned trader who has a great grasp of how the crypto market operates. Particularly with short-term trading where the volatility of the market can drive an amateur investor crazy.
When it comes to Ethereum, is now a good time to buy?
The short answer is yes. The values of most cryptocurrencies have plummeted as of late, and so has the value of Ether. If you are looking to invest, now would be a desirable time.
There are many interesting ICOs built on the Ethereum blockchain, and there is a high probability we will see the successful implementation of Proof of Stake on the platform as well. The Ethereum team is also hoping to launch new updates that could resolve scalability issues–a problem that affects nearly all cryptocurrencies today. For these reasons, Ethereum could be among the best cryptocurrencies to commit to presently.
When you’re considering whether to invest in Ether for the long-term or short-term you must consider your investment objectives (i.e. how long you plan to hold, how much return are you aiming for, etc). Investors have made money with both approaches. It is a good idea to consult with a financial advisor or investment professional for sound advice pertaining to your finances.
One crucial guideline for all investors is this: only invest what you’re prepared to lose. The world of cryptocurrency is unstable and unpredictable–anything could happen. Don’t make investments you cannot afford and do your research prior to investing. As stated in part one of this two part series: “knowledge will always be the best investment of them all”.