Many people don’t realize just how many trades are made between cryptocurrencies. The majority of investors, or early investors at least, did exchange their fiat money for Bitcoin and other cryptocurrencies.
But today, more and more trades are conducted from one crypto coin to another. There are pros and cons to doing this. And it’s not something that most novice investors should get into right off the bat.
The Three Ways to Get Crypto Assets
There aren’t many ways of getting your hands on cryptocurrency, short of someone just giving it to you. The first way to obtain it is by buying crypto off an exchange or from someone you know, using fiat money. This is usually the way everyone gets crypto the first time.
Next,you can buy cryptocurrencies using other cryptocurrencies. This is something reserved for people who already have crypto assets and are looking to invest in another coin.
Another way of getting your hands on cryptocurrency, such as Bitcoin, Ethereum, Stellar, and others is to accept crypto payments. If you set up a wallet, implement a crypto payment processor for your store, you can allow customers to pay you using the cryptocurrency of your choice.
Trading Crypto for Crypto – Why Do People Do It?
There are two main reasons for trading one cryptocurrency for another. The first one involves lower trading costs. When you trade crypto for crypto on exchanges such as Bitmain, you don’t have any deposit or withdrawal fees.
Crypto exchange platforms that accept fiat money deposits and withdrawals also impose fees on those transactions. But sending Bitcoin, or alt coins, from your private wallet to a dedicated exchange wallet isn’t taxed.
These fees aren’t massive. But they do add up and they tend to affect smaller investors the most. People that are just dipping their toes in the crypto water.
Another reason for trading crypto for crypto is the high entry cost of investing in Bitcoin or Ethereum. These two are the most valuable and most traded cryptocurrencies on the market. Bitcoin being the reigning king by far.
But it now costs thousands of dollars to buy just one Bitcoin. Of course, you can always just buy fractions of a Bitcoin. Exchange platforms aren’t unrealistic and they understand the need to open up the market to more people.
Yet not everyone is thrilled about the volatility of valuable cryptocurrencies. So, they try their luck with smaller ones first. Once some alt coins become more valuable it’s possible to trade them for more valuable ones, such as Bitcoin.
When done right and with a bit of luck, this method may be more lucrative and could earn you more in valuable crypto assets. For one, you’re not paying deposit and withdrawal fees. Secondly, say you invested $100 in an alt coin and it’s now worth three times more.
You can buy more fractions of crypto coin that’s valuable.
Crypto for Crypto Trading and Quick Profits
There are no quick profits when trading one crypto coin for another. Most investors that try to earn big on large trades take advantage of cheap alt coins, because they can buy a lot. Also, it’s easier to gamble on just how one coin does on the market.
For example, you buy $5,000 worth of Stellar Lumens. In two weeks’ time, those Lumens add up to $6,500. A long shot, right now. If that happens, there’s no guarantee that you can make a profit in Bitcoin.
While Stellar Lumens rise in value it’s possible, or almost a given, that Bitcoin also rises in value. In two weeks, you would have more money to invest in Bitcoin but there’s no guarantee that Bitcoin will be as valuable anymore. Especially when you want to buy something with it or convert it into fiat money.
So, there are ups and downs of investing in other crypto just so you can trade it for more crypto.
Crypto for Crypto Is Not Always Convenient
Whenever you hold lots of crypto assets, you need multi-currency wallets. Most wallets today do offer this function. However, the great ones are often paid wallets. If you’re just trading in cryptocurrency because you want to buy low and sell high and make a profit in fiat currency, you don’t really need hardware wallets.
What you need is something convenient to use with a friendly UI that lets you make quick transactions when the timing is right for you to profit. Crypto vs. Crypto trading may take more time, depending on the exchange, and isn’t always lucrative overnight. Also, it will require you to buy some crypto with fiat money at least once or twice, to have something to trade with.