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Scan your eyes over any news website and you’re bound to stumble on a story about cryptocurrency. Since Bitcoin reared its head back in 2009, cryptocurrency has grown in both popularity and usability. Here, Max Sapelov, CTO and Co-founder of CoinLoan, talks us through some of the common misconceptions associated with cryptocurrencies, and how to maximise your chances of trading success.

The barriers for entry into the cryptocurrency market have never been as low as they are today. A few years ago, buying bitcoins required at least a degree of tech-savviness. Nowadays, you can easily purchase tokens with a crypto wallet or on centralised platforms.

Despite a generally optimistic outlook, the crypto industry is criticised by regulators and self-proclaimed experts. But that’s nothing new - every young sector has had to face a certain degree of doubt and disbelief. 

Pretty much everyone who has some degree of interest in crypto has heard the claims of Bitcoin’s use as a money laundering and drug trafficking tool. Despite this rumour being debunked numerous times - Chain Analysis 2021 report stated that only 2.1% of all cryptocurrency volume was involved in criminal activity in 2019 – the myth unfortunately prevails. 

Another thing you see repeated is a sentiment about Bitcoin being a scam going down to zero. I’ve seen the exact expectations right at the beginning of my career in the crypto space. Yet, it has been over a decade since Bitcoin came into existence, and it is steadily growing in value. The “zero” prophecy remains unproven and will stay as so. Here’s why.

Firstly, Bitcoin is the industry’s gold standard and the first cryptocurrency ever created.

Secondly, Bitcoin dominates the market and is subject to limited supply and high demand. It is tradable and can be converted to fiat.

Thirdly, banks have finally turned to Bitcoin. Financial institutions recognised Bitcoin as a valuable asset and have started offering it to clients. Just recently, JP Morgan and NYDIG created a joint bitcoin fund and even granted their wealth management customers access to six crypto funds. In summary, Bitcoin isn’t going anywhere.

Trading cryptocurrency and buying it for long term investment are two different strategies for preserving and building capital. The former comes down to fundamentals and technical analysis - you must know the project you are investing your funds in, familiarise yourself with trading strategies, find the exit and entry points, and identify trends. This might looks easy but can be hard in practice.

The Crypto market is highly volatile and loves to play with our heads. If you have steel nerves, you’re likely to survive. But coming into crypto trading with zero or very little trading knowledge will most likely lead to a loss. That’s probably why newcomers very often lose all their money and never try again. From my perspective, crypto trading isn’t for everyone.

Holding is different from trading. “Hodlers” (people who adopt a buy-and-hold strategy) prefer to invest early and avoid risk. Just like stocks, they hold crypto for years, decades even, without ever checking wallets. They have a point - after the 2017-2018 bull market, while cryptocurrencies were rapidly falling, “hodlers” didn’t sell. In early 2021, their asset value skyrocketed. 

Yet, holding crypto is becoming obsolete. This year we saw a rise of DeFi, crypto lending protocols that brought crypto-backed loans and crypto savings accounts with high yields.

Now, you can manage your crypto tokens instead of just leaving them hanging - a much more innovative way to acquire more cryptocurrency without extra moves.

Crypto-backed loans are great if you want to withdraw funds in fiat without losing cryptocurrency.

To take out a loan, you need to provide collateral in fiat, stablecoins, or cryptocurrency. The tool is especially handy during a bull market - the higher the asset growth, the less collateral is required to cover a loan. 

Crypto savings accounts work similarly to their conventional counterparts, but the yearly interest ranges between 5% and 20%, depending on the chosen asset. In comparison, US banks offer 0.06% APY.

Proposed yields on crypto are higher because crypto platforms can’t create a money supply, so instead attract outside investors. Tokens deposited into savings accounts are then used to give out loans. In most cases, they don’t get locked, meaning users can take the assets out anytime with compound interest. 

Crypto management works in the same way as wealth management - you buy a range of tokens, take out a loan or deposit them into a savings account. Those who tried conventional financial tools should navigate easily through the options.

Some crypto-savvy users even borrow tokens to earn interest. However, beginners might struggle - you must be familiar with finance to manage well. But it isn’t hard to learn - most crypto management platforms have dedicated help centres where you can find all the information you need. I would say that the first step a newcomer should take is to use a crypto savings account. There is no risk associated with a crypto savings account, and while you learn, your portfolio grows. 

The crypto industry is changing the world of finance - banks are taking a closer look, and some countries, like El Salvador, have already started accepting Bitcoin alongside their national currency. This means that the demand for management tools will continue to grow. And, over time, the crypto industry will offer more options.

Whether you’re a beginner or a crypto veteran, I would recommend giving crypto management a go to see for yourself what cryptocurrency can do. 

Key takeaways

  • Bitcoin is here to stay, and while crypto trading can carry high risks, managing cryptocurrencies through things like loans and savings accounts can be a favourable choice for those looking to get started.
  • CoinLoan is a crypto lending platform that helps users borrow, swap and grow your assets.
  • For more advice on effectively managing your business finance, head over to the UMi Platform.
Ashleigh Smith
Article by Ashleigh Smith
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