The cryptocurrency space refers to the financial market where cryptocurrencies are the primary trading objects. It is a field filled with innovation and transformation, as well as opportunities and challenges. Over the past decade, the cryptocurrency space has evolved from inception to development, from troughs to peaks, and from the fringes to the mainstream. It has attracted countless investors and entrepreneurs and has birthed numerous fortunes and legends. However, the cryptocurrency space is not a utopia; it also contains significant risks and uncertainties. Many chase dreams in the cryptocurrency space but face painful failures.
So, how can one steadily earn their first pot of gold in the cryptocurrency space? This is a question many want to know. This article will explore this topic in hopes of providing some assistance.
Fundamental Knowledge and Common Sense in the Cryptocurrency Space
To earn stable profits in the cryptocurrency space, one must first understand the basic knowledge and common sense of the cryptocurrency space. This includes the history and development of cryptocurrencies, the major participants and roles in the cryptocurrency space, the market laws and operational mechanisms, and the risks and challenges within the cryptocurrency space.
The history and development of the cryptocurrency space
The origin of the cryptocurrency space can be traced back to 2008, when a mysterious figure using the pseudonym Satoshi Nakamoto published a paper titled 'Bitcoin: A Peer-to-Peer Electronic Cash System,' proposing a decentralized, secure, anonymous, trusted, traceable, immutable, and forgery-proof digital currency based on blockchain technology—Bitcoin. Bitcoin is regarded as the first generation of cryptocurrency and is currently the largest, most well-known, and most influential cryptocurrency.
On January 3, 2009, Satoshi Nakamoto mined the Genesis Block of Bitcoin, marking the official launch of the Bitcoin network. Since then, Bitcoin has begun circulating on the network and gradually attracted a group of early believers, enthusiasts, developers, miners, traders, and others. With the expansion and improvement of the Bitcoin network, Bitcoin has begun to be recognized and accepted by more people, leading to the emergence of related applications and services such as exchanges, wallets, and payment platforms.
On May 22, 2010, a historic moment known as 'Bitcoin Pizza Day' occurred when a programmer named Laszlo Hanyecz purchased two pizzas worth $25 for 10,000 Bitcoins. This is regarded as the first instance of Bitcoin being used as a medium of exchange in the real world. Based on that time's Bitcoin price, it was equivalent to spending $41 million on two pizzas. This also reflects Bitcoin's enormous appreciation potential.
In 2011, as Bitcoin's popularity and influence increased, other cryptocurrencies emerged that mimicked and improved upon Bitcoin, such as Litecoin, Namecoin, and Peercoin. These cryptocurrencies are referred to as altcoins; they share similar principles and structures with Bitcoin but also have their own characteristics and advantages. This marked the beginning of diversification and competition in the cryptocurrency space.
In 2012, the Bitcoin Foundation was established to promote the standardization, protection, and promotion of Bitcoin. In the same year, a protocol called Colored Coins, based on the Bitcoin network, emerged. Colored Coins allow any Bitcoin on the network to be assigned different colors and meanings, thus enabling the representation and management of physical assets, financial assets, smart contracts, etc. This opened possibilities for functional expansion and application innovation within the Bitcoin network.
In 2013, Bitcoin experienced its first large-scale bull market. During this year, Bitcoin's price surged from $13 to $1,200, an increase of 9,000%. This sparked global attention and debate, attracting more investors and institutions into the cryptocurrency space. At the same time, significant events and changes occurred, such as the seizure of Silk Road by the FBI, the People's Bank of China issuing risk warnings regarding cryptocurrencies, and the U.S. Senate holding hearings on cryptocurrencies. These events and changes had a profound impact on Bitcoin and the cryptocurrency space.
In 2014, the Ethereum project was officially launched. Ethereum is an open-source, decentralized smart contract platform based on blockchain technology that supports any application or service based on blockchain technology and provides a universal programming language - Solidity. Ethereum is considered a second-generation cryptocurrency and is currently the largest, most active, and innovative cryptocurrency platform.
In 2015, the Ethereum network was officially launched and conducted its initial coin offering (ICO), selling Ethereum tokens to the public. Ethereum tokens not only serve as a medium of exchange but also as payment for the fees required to operate smart contracts on the Ethereum network - Gas. As the Ethereum network developed and improved, various applications and services based on the Ethereum platform, such as decentralized applications (DApps), decentralized autonomous organizations (DAOs), and decentralized exchanges (DEXs), emerged.
In 2016, Bitcoin experienced its second halving event. The halving event refers to the mechanism where the reward for each block mined on the Bitcoin network is halved every 210,000 blocks produced. This is a mechanism set by Bitcoin's creator to control the total supply and inflation rate of Bitcoin. The total supply of Bitcoin is limited to 21 million, and each halving event reduces Bitcoin's production by half, thereby increasing Bitcoin's scarcity and value. The first halving event occurred in 2012, when the reward for each block fell from 50 Bitcoin to 25 Bitcoin. The second halving event occurred in 2016, reducing the reward from 25 Bitcoin to 12.5 Bitcoin. The third halving event occurred in 2020, reducing the reward from 12.5 Bitcoin to 6.25 Bitcoin. Generally, each halving event positively impacts Bitcoin's price as it increases Bitcoin's scarcity and demand.
In 2017, the cryptocurrency space experienced unprecedented prosperity and frenzy. During this year, Bitcoin's price surged from $1,000 to $20,000, an increase of 1,900%. Simultaneously, new cryptocurrencies and concepts emerged, such as fork coins, privacy coins, stablecoins, tokens, token economies, token issuance (ICOs), token exchanges (IEOs), and token burning. These cryptocurrencies and concepts added more diversity and creativity to the cryptocurrency space and provided investors with more choices and opportunities. However, these cryptocurrencies and concepts also posed many issues and risks, such as technical flaws, security vulnerabilities, legal disputes, market manipulation, and project fraud. These problems and risks caused significant losses and troubles for investors.
In 2018, the cryptocurrency space experienced a massive bear market. During this year, Bitcoin's price fell from $20,000 to $3,000, a decline of 85%. Many other cryptocurrencies also saw price drops exceeding 90%. This led to the breakdown of funding chains and psychological collapse for many investors and project teams, as well as the closure and failure of many exchanges, wallets, media, and related services. This was a severe test and profound baptism for the cryptocurrency space.
In 2019, the cryptocurrency space began to gradually recover and warm up. During this year, Bitcoin's price rose from $3,000 to $13,000, an increase of 330%. At the same time, some new cryptocurrencies and concepts emerged, such as decentralized finance (DeFi), cross-chain technology, lightning networks, side-chain technology, sharding technology, and zero-knowledge proofs. These cryptocurrencies and concepts added more technology and value to the cryptocurrency space and provided investors with more possibilities and expectations. Additionally, some significant events and changes occurred, such as Facebook releasing its own cryptocurrency project - Libra, the People's Bank of China announcing its own digital currency project - Digital Renminbi (DCEP), and the U.S. Securities and Exchange Commission (SEC) investigating and sanctioning some token issuance projects. These events and changes had positive or negative impacts on Bitcoin and the cryptocurrency space.
In 2020, the cryptocurrency space experienced its third halving event and the second large-scale bull market. During this year, Bitcoin's price rose from $13,000 to $28,000, an increase of 115%. Additionally, new cryptocurrencies and concepts emerged, such as non-fungible tokens (NFTs), liquidity mining, governance tokens, social tokens, and the metaverse. These cryptocurrencies and concepts added more creativity and interest to the cryptocurrency space and provided investors with more opportunities and experiences. Significant events and changes also occurred, such as Bitcoin being recognized and held by well-known institutions and individuals like MicroStrategy, Square, PayPal, Grayscale, and Paul Tudor Jones, Ethereum undergoing a 2.0 version upgrade and transformation, and the U.S. presidential election causing market fluctuations and expectations. These events and changes had a tremendous impact and influence on Bitcoin and the cryptocurrency space.
In 2021, the cryptocurrency space continued to maintain strong upward momentum and an active atmosphere. During this year, Bitcoin's price reached an all-time high of approximately $69,000. At the same time, some new cryptocurrencies and concepts emerged, such as decentralized storage, decentralized identity, decentralized social media, decentralized organizations, and decentralized media.
These cryptocurrencies and concepts have added more functions and meanings to the cryptocurrency space, providing investors with more choices and value. At the same time, there have been some significant events and changes, such as Tesla announcing the purchase of $1.5 billion in Bitcoin and accepting Bitcoin as a payment method, Coinbase becoming the first cryptocurrency exchange to be listed on the NASDAQ in the United States, China strengthening its regulation and crackdown on cryptocurrencies, and Bitcoin and Ethereum facing some technical and security issues and challenges. These events and changes have had varying impacts and responses on Bitcoin and the cryptocurrency space.
From the history and development outlined above, it is clear that the cryptocurrency space is a field filled with changes and innovations, as well as opportunities and challenges. It continuously evolves and adapts, influenced and impacted by both external and internal factors. To earn stable profits in the cryptocurrency space, one must keep pace with its development and changes, understand its history and present conditions, and grasp its trends and directions.
Key participants and roles in the cryptocurrency space
To earn stable profits in the cryptocurrency space, one must also understand the key participants and roles within it. This includes developers, miners, traders, investors, project teams, exchanges, wallets, and media.
Developers: Developers are individuals involved in the design, development, maintenance, and improvement of cryptocurrencies. They are the creators and promoters of cryptocurrencies and are also a core force within them. They implement the functions and features of cryptocurrencies by writing code, release updates to fix issues and flaws, and provide suggestions to optimize performance and efficiency. They typically collaborate and contribute in an open-source manner and are usually organized and managed in a community format. They possess a deep understanding and belief in cryptocurrencies and hold a high degree of responsibility and mission.
Miners: Miners are individuals who use computer hardware and software to participate in the operation and maintenance of cryptocurrency networks. They are the producers and protectors of cryptocurrencies and are also an important force in the cryptocurrency space. They compete to solve complex mathematical problems through specific algorithms to gain the right to validate and package transaction records onto the blockchain, while also receiving a corresponding amount of cryptocurrency as a reward. They ensure the security and stability of cryptocurrency networks by providing computing power and adjust difficulty coefficients to maintain the total supply and inflation rate of cryptocurrencies. They typically participate and compete as individuals or teams and often cooperate and allocate resources within pools or alliances. They have direct interests and motivations regarding cryptocurrencies and wield significant influence and power over them.
Traders: Traders are individuals who buy and sell in the cryptocurrency market. They are the circulators and valuers of cryptocurrencies and are also active forces within the cryptocurrency space. They formulate trading strategies and plans by analyzing market supply and demand, price, trends, sentiment, and other factors, aiming to buy low and sell high or sell high and buy low across different times, places, platforms, and currencies to seek profits. They promote the trading and development of the cryptocurrency market by providing liquidity, while also reflecting value to influence cryptocurrency market prices and volatility. They typically trade and speculate as individuals or institutions and often analyze and judge using technical or fundamental approaches. They have a flexible attitude and goals towards cryptocurrencies and possess keen observation and judgment.
Investors: Investors are individuals who hold or increase their positions in the cryptocurrency market. They are the custodians and supporters of cryptocurrencies and are also a stabilizing force within the cryptocurrency space. They formulate investment strategies and goals by studying the potential, advantages, development, and prospects of cryptocurrencies, allowing them to buy or increase their holdings across different times, places, platforms, and currencies, aiming for returns. They support the price and growth of cryptocurrencies by providing demand while also influencing market sentiment and expectations through their confidence. They typically invest and hold as individuals or institutions and often consider and decide on a long-term or mid-term basis. They have a firm belief and goals regarding cryptocurrencies and possess a profound understanding and evaluation of them.
Project Teams: Project teams are personnel or groups that initiate or participate in cryptocurrency projects. They are the innovators and leaders of cryptocurrencies and constitute a core force within them. They build or improve cryptocurrency projects by proposing or implementing the ideas, goals, functions, and features of cryptocurrencies, thereby providing more choices and value to the cryptocurrency market. They raise or allocate the funds and resources needed for cryptocurrency projects through token issuance, token exchanges, token destruction, etc., thus providing more opportunities and momentum to the cryptocurrency market. They typically operate and manage in the form of companies or organizations while often collaborating and competing in community or ecosystem formats. They have unique perspectives and contributions regarding cryptocurrencies and bear significant responsibilities and challenges.
Exchange: An exchange refers to platforms or institutions that provide trading services between cryptocurrencies or between cryptocurrencies and fiat currencies. They are connectors and intermediaries for cryptocurrencies and are also an important force in the cryptocurrency space. They facilitate and promote the buying, selling, and exchanging of cryptocurrencies by providing trading functions, tools, and information, thereby offering more convenience and efficiency to the cryptocurrency market. They generate income and profit by charging trading fees, providing leverage, and market making, thus providing more funds and liquidity to the cryptocurrency market. They are typically built and operated in either a centralized or decentralized manner and are often subject to legal or illegal forms of regulation and risk control. They have a direct impact and role in cryptocurrencies and also have complex interests and relationships with them.
Wallets: Wallets refer to software or hardware that provide storage, transfer, and query services for cryptocurrencies. They are custodians and users of cryptocurrencies and are also a significant force in the cryptocurrency space. They ensure and manage the ownership and control of cryptocurrencies by providing private keys, public keys, addresses, etc., thereby offering more security and trust to the cryptocurrency market. They facilitate and promote the sending and receiving of cryptocurrencies by providing transfer functions, tools, and information, thus providing more convenience and practicality to the cryptocurrency market. They are typically developed and used in software or hardware forms and are often classified and selected as hot wallets or cold wallets. They have fundamental needs and functions regarding cryptocurrencies and exert significant influence and effects on them.
Media: Media refers to platforms or institutions that provide news, commentary, analysis, education, and other content related to cryptocurrencies. They are disseminators and interpreters of cryptocurrencies and are also an important force in the cryptocurrency space. They increase and expand the awareness and influence of cryptocurrencies by providing the latest, most comprehensive, most accurate, and most in-depth information and knowledge related to cryptocurrencies, thus offering more support and momentum to the cryptocurrency market. They generate income and profit through advertisement fees, paid content, and content partnerships, thus providing more funds and resources for the cryptocurrency market. They typically operate as websites or applications and often report and comment objectively or subjectively. They have a broad focus and expression regarding cryptocurrencies and hold various attitudes and positions.
The major participants and roles in the cryptocurrency space also include other participants and roles, such as regulatory agencies, legal institutions, research institutions, and community organizations. They also play different roles and have varying impacts on cryptocurrencies. To earn stable profits in the cryptocurrency space, one must understand these participants and roles, find their suitable positions and roles, and collaborate or compete with other participants and roles.
The market laws and operational mechanisms of the cryptocurrency space
To earn stable profits in the cryptocurrency space, one must understand the market laws and operational mechanisms. This includes the supply-demand relationships, price formation, trend changes, emotional influences, risk factors, and more.
Supply and Demand Relationships in the Cryptocurrency Space
The supply and demand relationship in the cryptocurrency space refers to the relationship between the market supply and market demand for cryptocurrencies. It is the most fundamental and important factor affecting cryptocurrency prices. Generally, when the market supply exceeds market demand, the price of cryptocurrencies tends to fall; when the market supply is less than market demand, the price tends to rise. Market supply and demand are influenced by many factors, such as total cryptocurrency supply, circulating supply, issuance amounts, destruction amounts, locked amounts, trading volume, and holding amounts. To make stable profits in the cryptocurrency space, one must understand the changes and impacts of these factors and grasp the supply-demand balance and imbalance of cryptocurrencies.
Price Formation in the Cryptocurrency Space
The price formation in the cryptocurrency space refers to the process by which the market price of cryptocurrencies is generated and determined. It is the most direct and important indicator reflecting the value of cryptocurrencies. Generally, the market price of cryptocurrencies is determined by the trading behavior between buyers and sellers on exchanges. There is a tool called Depth Chart on exchanges that displays the number of buy and sell orders at different price levels. The buy and sell orders form upward and downward sloping curves, and the point where these two curves intersect is the current market price. When buyers or sellers increase or decrease their orders, it affects the shape and position of the curves on the Depth Chart, thereby influencing changes in market prices. To make stable profits in the cryptocurrency space, one must understand the motivations and impacts of these trading behaviors and grasp the price trends and changes of cryptocurrencies.
Trend changes in the cryptocurrency space
The trend changes in the cryptocurrency space refer to the upward or downward direction and magnitude of the market price of cryptocurrencies over a certain period. It is the most commonly used and important method for measuring the status of the cryptocurrency market. Generally, the market price of cryptocurrencies will fluctuate within a certain range, forming a tool known as a candlestick chart that displays the opening price, closing price, highest price, and lowest price of cryptocurrencies for each time period. There is also a tool called moving average on the candlestick chart that shows the average price of cryptocurrencies over a certain period, reflecting trend changes. When the price of cryptocurrencies is above the moving average, it indicates an upward trend; when the price is below the moving average, it indicates a downward trend. When moving averages of different time periods intersect, it suggests a potential trend reversal for cryptocurrencies. To earn stable profits in the cryptocurrency space, one must understand the reasons and influences behind these trend changes and grasp the trend direction and strength of cryptocurrencies.
Emotional Influence in the Cryptocurrency Space
The emotional influence in the cryptocurrency space refers to how the market price of cryptocurrencies is affected by investors' psychology and emotions. It is one of the most challenging and unpredictable factors influencing market volatility and expectations. Generally, investor psychology and emotions are influenced by many factors, such as market information, media reports, social networks, personal experiences, group behavior, etc. When investors hold positive, optimistic, trusting, and anticipatory emotions toward cryptocurrencies, it promotes buying and upward movements in the cryptocurrency market; when they hold negative, pessimistic, fearful, and doubtful emotions, it promotes selling and downward movements. Investor psychology and emotions often exhibit a phenomenon known as the herd effect, where investors tend to follow the behavior and judgments of the majority or authoritative figures, amplifying or perpetuating the volatility and expectations of the cryptocurrency market. To earn stable profits in the cryptocurrency space, one must understand the sources and manifestations of these emotional influences and grasp the emotional state and changes in the cryptocurrency market.
Risk factors in the cryptocurrency space
Risk factors in the cryptocurrency space refer to the events or factors that unpredictably or uncontrollably affect the market price of cryptocurrencies. They are the most dangerous and deadly factors influencing the stability and security of the cryptocurrency market. Generally, these events or factors can be categorized into internal risks and external risks. Internal risks refer to technological flaws, security vulnerabilities, operational failures, and human errors associated with cryptocurrencies or related services, such as code errors, hacking attacks, 51% attacks, double spending attacks, fork events, exchange thefts, and wallet losses. External risks refer to legal disputes, policy changes, market manipulation, and competition faced by cryptocurrencies, such as legal bans, regulatory restrictions, fake news, malicious speculation, and disruptions from new projects. Such events or factors can have a significant impact on the cryptocurrency market, leading to violent price fluctuations or even crashes. To earn stable profits in the cryptocurrency space, one must understand the potentiality and consequences of these risk factors and grasp the risk levels and response measures in the cryptocurrency market.
The above describes the market laws and operational mechanisms of the cryptocurrency space; there are also other laws and mechanisms, such as market cycles, market structure, and market efficiency. They have different roles and impacts on cryptocurrencies. To earn stable profits in the cryptocurrency space, one must understand the existence and operation of these laws and mechanisms and grasp the regularities and changes in the cryptocurrency market.
Risks and Challenges in the Cryptocurrency Space
To earn stable profits in the cryptocurrency space, one must also understand the risks and challenges within it. This includes technical risk, security risk, legal risk, policy risk, market risk, moral hazard, and more.
Technical Risk: Technical risk refers to the deficiencies or inadequacies in the technology that cryptocurrencies rely on, leading to the inability of cryptocurrencies to operate normally or achieve intended effects. For example, cryptocurrencies may encounter code errors, algorithm vulnerabilities, network failures, etc., causing them to fail to generate or validate transactions or leading to the potential for manipulation or forgery. Technical risks can affect the functionality and performance of cryptocurrencies, as well as their trustworthiness and value. To address technical risks, it is essential to continuously improve and update the technology supporting cryptocurrencies and to choose those that are mature and stable.
Security Risk: Security risk refers to the risk that cryptocurrencies or related services are attacked or compromised by hackers or malicious actors, leading to theft or loss of cryptocurrencies. For example, cryptocurrencies may face issues such as 51% attacks, double spending attacks, replay attacks, etc., resulting in altered or duplicated transactions; cryptocurrency exchanges, wallets, payment platforms, etc., may be susceptible to hacking attacks, phishing scams, or internal collusion, leading to the theft or loss of cryptocurrency funds. Security risks can affect the safety and stability of cryptocurrencies and can also impact users and investors. To mitigate security risks, it is essential to enhance protection and defense for cryptocurrencies or related services and to choose safe, reliable, and reputable cryptocurrencies or related services.
Legal Risk: Legal risk refers to the risk that cryptocurrencies or related services are restricted or prohibited by law, leading to the inability to use or trade cryptocurrencies legally. For example, some countries or regions may consider cryptocurrencies to be illegal currencies or assets, prohibiting their issuance, circulation, and trading; some countries or regions may view cryptocurrencies as legal goods or securities, requiring them to undergo registration, filing, regulation, and other processes within their jurisdictions. Legal risk can affect the legality and compliance of cryptocurrencies, as well as their market and users. To mitigate legal risk, it is essential to understand and comply with the legal stipulations and policy orientations regarding cryptocurrencies or related services in different countries or regions, while also choosing those that are legal and compliant and conducive to development.
Policy Risk: Policy risk refers to the risk that cryptocurrencies or related services are affected or interfered with by governments or regulatory agencies, leading to adverse changes or outcomes for cryptocurrencies. For example, some governments or regulatory agencies may implement restrictions, regulations, or crackdowns on cryptocurrencies or related services to maintain financial stability, combat crime, or protect consumers; others may support or encourage cryptocurrencies or related services to foster innovation, promote development, or increase competition. Policy risk can affect the development and competition of cryptocurrencies and also impact the opportunities and challenges they face. To cope with policy risk, it is crucial to monitor and analyze the attitudes and intentions of different governments or regulatory agencies toward cryptocurrencies or related services while also choosing countries or regions that are policy-friendly and conducive to development.
Market Risk: Market risk refers to the risk that the market price of cryptocurrencies is affected by market factors, leading to adverse changes or outcomes for cryptocurrencies. For example, the market price of cryptocurrencies may be influenced by supply and demand relationships, price formation, trend changes, sentiment influences, etc., resulting in phenomena such as price increases or decreases, volatility or stability, bull markets or bear markets; the market price of cryptocurrencies may also be affected by other financial markets, other cryptocurrency markets, major events, etc., leading to phenomena such as correlation or inverse movements, magnification or attenuation, synchronization or lag. Market risk can affect the earnings and losses of cryptocurrencies and can also impact investors and traders. To cope with market risk, one must understand and grasp the changes and influences of different market factors while also choosing cryptocurrencies that suit their risk preferences and investment goals.
Moral Hazard: Moral hazard refers to the ethical deficiencies or misconduct associated with cryptocurrencies or related services, leading to adverse changes or outcomes for cryptocurrencies. For example, some cryptocurrencies or related services may involve fraud, forgery, manipulation, etc., causing users or investors to be deceived or harmed; some cryptocurrencies or related services may involve money laundering, tax evasion, smuggling, etc., leading to cryptocurrencies being used for illegal or criminal purposes. Moral hazard can affect the credibility and reputation of cryptocurrencies, as well as their legality and compliance. To address moral hazard, it is necessary to strengthen the review and supervision of cryptocurrencies or related services, while also choosing those that are honest, upright, and have a good reputation.
There are also other risks and challenges, such as knowledge risk, skill risk, and time risk. They also have different effects and influences on cryptocurrencies. To make stable profits in the cryptocurrency space, one must understand and guard against these risks and challenges while seizing opportunities and advantages.
Opportunities and advantages in the cryptocurrency space
To make stable profits in the cryptocurrency space, one must also understand the opportunities and advantages within it. This includes innovation, diversity, global reach, decentralization, transparency, and inclusiveness.
Innovation: Innovation refers to the ability of cryptocurrencies to create new values and solve new problems. Cryptocurrencies are a new type of currency and asset based on blockchain technology, possessing many characteristics and advantages that traditional currencies and assets do not have, such as decentralization, immutability, programmability, and traceability. Cryptocurrencies can serve not only as mediums of exchange and stores of value but also as carriers of smart contracts and digital rights, thereby representing and managing various physical assets, financial assets, knowledge assets, etc. Cryptocurrencies can provide more innovations and solutions across various fields and industries, such as finance, payments, social interaction, entertainment, education, healthcare, and public welfare. Cryptocurrencies are a type of currency and asset filled with innovation and potential, as well as opportunities and challenges.
Diversity: Diversity refers to the ability of cryptocurrencies to provide various choices and values. Cryptocurrencies are highly diversified and competitive forms of currency and assets, including many different types and varieties, such as Bitcoin, Ethereum, Litecoin, Ripple, Tether, Dogecoin, etc. These cryptocurrencies have their own characteristics and advantages, as well as their respective functions and uses, thereby meeting different needs and goals. Cryptocurrencies can provide investors with more choices and value and can offer users more functions and uses. Cryptocurrencies are a type of currency and asset filled with diversity and competitiveness, and they are also filled with opportunities and challenges.
Global Reach: Global reach refers to the ability of cryptocurrencies to transcend borders and regions. Cryptocurrencies are a type of internet-based currency and asset that are not controlled or interfered with by any government or central bank of any country or region, nor are they restricted or prohibited by the laws or policies of any country or region. Cryptocurrencies can circulate and trade freely worldwide and can be used and consumed freely globally. Cryptocurrencies can provide investors with more markets and opportunities, as well as provide users with more convenience and efficiency. Cryptocurrencies are a type of currency and asset filled with global reach and freedom, and they are also filled with opportunities and challenges.
Decentralization: Decentralization refers to the ability of cryptocurrencies to break free from centralized power and institutions. Cryptocurrencies are a type of decentralized currency and asset based on blockchain technology that does not rely on any centralized power or institution to issue, manage, maintain, or supervise; rather, they depend on distributed network nodes to work collaboratively. Cryptocurrencies can resist and counter centralized power or institutions while incentivizing and collaborating among distributed network nodes. They can provide investors with more security and trust and offer users more rights and participation. Cryptocurrencies are a type of currency and asset filled with decentralization and democratization, as well as opportunities and challenges.
Transparency: Transparency refers to the ability of cryptocurrencies to provide publicly verifiable information. Cryptocurrencies are a type of transparent currency and asset based on blockchain technology that can publicly store all transaction records and status information on the blockchain, allowing anyone to view and verify them, making them immutable and unverifiable. Cryptocurrencies can achieve transparency and traceability of transactions as well as transparency and auditability of assets. They can provide investors with more information and knowledge and offer users more credit and security. Cryptocurrencies are a type of currency and asset filled with transparency and trustworthiness, as well as opportunities and challenges.
Inclusiveness: Inclusiveness refers to the ability of cryptocurrencies to serve a broad population and society. Cryptocurrencies are an inclusive currency and asset based on the internet, allowing anyone to easily access, use, trade, and consume them without any barriers or conditions. They can promote the popularization and extension of financial services and support and contribute to social welfare. Cryptocurrencies can provide investors with more users and markets and offer users more services and value. Cryptocurrencies are a type of currency and asset filled with inclusiveness and social impact, as well as opportunities and challenges.
The above describes the opportunities and advantages in the cryptocurrency space; additionally, there are other opportunities and advantages such as flexibility, efficiency, and value appreciation. They also have different roles and impacts on cryptocurrencies. To earn stable profits in the cryptocurrency space, one must understand and utilize these opportunities and advantages, grasp the characteristics and values of cryptocurrencies.
Strategies and methods in the cryptocurrency space
To earn stable profits in the cryptocurrency space, one must also understand the strategies and methods within it. This includes investment strategies, trading strategies, risk management, capital management, and information acquisition.
Investment Strategies: Investment strategies refer to the strategies and methods for holding or increasing positions in the cryptocurrency market. They mainly include the following types:
Long-term Investment: Long-term investment refers to a strategy of holding or increasing positions in the cryptocurrency market over an extended period (generally over a year). It is suitable for investors who have firm beliefs and goals regarding cryptocurrencies as well as sufficient time and patience. Its advantages include enjoying long-term appreciation and dividends from cryptocurrencies while avoiding short-term fluctuations and disturbances. Its disadvantages include occupying substantial funds and opportunities while also bearing higher risks and uncertainties.
Mid-term Investment: Mid-term investment refers to a strategy of holding or increasing positions in the cryptocurrency market over a medium duration (generally between a few months to a year). It is suitable for investors who have clear judgments and expectations regarding cryptocurrencies and possess appropriate time and flexibility. Its advantages include capturing mid-term trends and opportunities in cryptocurrencies and adjusting positions and ratios accordingly. Its disadvantages include requiring more effort and attention while also bearing more fluctuations and changes.
Short-term Investment: Short-term investment refers to a strategy of holding or increasing positions in the cryptocurrency market over a short period (generally between a few days to a few months). It is suitable for investors with keen observation and judgment regarding cryptocurrencies, who can respond and execute quickly. Its advantages include leveraging short-term fluctuations and arbitrage opportunities while controlling risks and returns in cryptocurrencies. Its disadvantages include incurring higher trading costs and taxes and facing greater competition and pressure.
Trading Strategies: Trading strategies refer to the strategies and methods for buying and selling in the cryptocurrency market. They mainly include the following types:
Trend Trading: Trend trading refers to a strategy of buying and selling based on the direction and strength of cryptocurrency trends in the market. It is suitable for traders who have clear analysis and judgments about cryptocurrency trends and have stable execution and following. Its advantages include aligning with cryptocurrency trend movements and avoiding counter-trend operations. Its disadvantages include the need to identify and grasp trend reversals and to endure trend pullbacks.
Reversal Trading: Reversal trading refers to a strategy of buying and selling based on the trend reversal points of cryptocurrencies in the market. It is suitable for traders who have keen observation and judgment regarding cryptocurrency trend reversals and possess decisive execution and risk-taking abilities. Its advantages include seizing opportunities for trend reversals and capturing profits from trend reversals. Its disadvantages include the need to judge and confirm trend reversal signals and to bear the risks of trend reversals.
Swing Trading: Swing trading refers to a strategy of buying and selling based on the volatility range of cryptocurrencies in the market. It is suitable for traders who have thoroughly researched and calculated the volatility patterns of cryptocurrencies and can flexibly adjust and utilize them. Its advantages include leveraging the magnitude and frequency of cryptocurrency volatility and controlling the volatility risk and cost. Its disadvantages include the need to determine and adhere to the volatility boundaries of cryptocurrencies and to cope with volatility breakthroughs and changes.
Risk Management: Risk management refers to the preventive or risk-reducing measures and methods taken when investing or trading in the cryptocurrency market. It mainly includes the following types:
Stop Loss: Stop loss refers to the practice of pre-setting a maximum acceptable loss amount or percentage when investing or trading in the cryptocurrency market. If the price of the cryptocurrency reaches or exceeds this amount or percentage, it triggers an immediate sell-off or closure of the position to prevent further loss. Stop loss is a fundamental and crucial risk management method that can protect the principal and profits of investors or traders and can also avoid emotional control and decision-making errors.
Diversification: Diversification refers to allocating funds or positions across different cryptocurrencies or related services to reduce the risk of any single cryptocurrency or related service. Diversification is a commonly used and effective risk management method that can enhance the stability and security of returns for investors or traders, as well as increase their choices and opportunities.
Hedging: Hedging refers to the practice of simultaneously making opposite or correlated trades in the cryptocurrency market to offset or reduce the risks of existing trades. Hedging is an advanced and complex risk management method that can protect the profits and expectations of investors or traders while leveraging their judgments and skills.
Coping with Market Fluctuations and Emotions
In cryptocurrency investments, one inevitably faces market fluctuations and emotional influences. Market volatility may lead to changes in our profits and losses, while emotional influences may cause deviations in our decisions and actions. Therefore, we need strategies and techniques to cope with market fluctuations and emotions, maintain rationality and stability, and improve investment efficiency and returns.
Here are some commonly used methods to cope with market fluctuations and emotions:
Set stop-loss and take-profit points
Stop-loss and take-profit points refer to the maximum expected profit and loss price points that we set before entering a trade. When the market price reaches these points, we automatically close the position to lock in profits or minimize losses. This can prevent us from being swayed by greed or fear during market fluctuations, missing the best exit opportunities, or incurring unnecessary risks.
Using Technical Analysis Tools
Technical analysis tools refer to indicators and charts based on historical data and mathematical models that can help us analyze market trends, supports, resistances, shapes, signals, etc., thus judging the strength, direction, and reversals of the market. This can increase our predictive ability regarding market fluctuations and improve our trading confidence and accuracy.
The methods for using technical analysis tools include the following:
Choose appropriate trading cycles and tools. Different trading cycles and tools are suitable for different trading styles and goals. Generally speaking, the shorter the trading cycle, the more suitable it is for short-term traders, requiring more sensitive and timely tools; the longer the trading cycle, the more suitable it is for medium to long-term traders, requiring smoother and more stable tools. For example, a 5-minute candlestick chart and a 5-day moving average are suitable for short-term traders, while daily charts and 20-day moving averages are suitable for medium to long-term traders.
Combine various tools and indicators. Single tools and indicators often cannot fully reflect the complexity and variability of the market, easily leading to misleading and false signals. Therefore, we need to combine various tools and indicators to analyze the market from different angles and levels, such as trends, volatility, strength, overbought and oversold conditions, etc. For instance, we can simultaneously use moving averages, Bollinger Bands, MACD, RSI, etc., to assess the market's trend, volatility, momentum, and relative strength.
Determine entry and exit points. When using technical analysis tools, we need to clarify our entry and exit points, that is, at what price or signal to open or close positions. This can prevent us from hesitating or blindly following the market during fluctuations, enhancing our trading efficiency and profits. For example, we can determine entry points based on moving average crossovers and exit points based on Bollinger Band breaks or retracements.
Validate and optimize tools and indicators. Technical analysis tools and indicators are not infallible; they have their own limitations and defects and may fail or deviate. Therefore, we need to continuously validate and optimize the tools and indicators we use, checking whether they are suitable for the current market environment and conditions, whether they can provide effective and accurate signals, and whether adjustments to parameters or changes to other tools are necessary. For instance, we can validate our tools and indicators' performance and effectiveness through backtesting or simulated trading.
Control position and leverage
Position refers to the proportion of funds invested in a particular cryptocurrency or trade, while leverage refers to the funds borrowed from platforms or other channels to amplify our trading capacity. The higher the position and leverage, the stronger our expectation of the market, but it also means we bear greater risks. Therefore, we need to reasonably control position and leverage based on our risk tolerance and market conditions, avoiding excessive greed or excessive caution.
Adjusting Mindset and Emotions
Mindset and emotions are crucial factors affecting our investment outcomes. Greed and fear are among the most basic human emotions, and they are significant obstacles to our investment results. In cryptocurrency investments, we often encounter significant market upswings and downturns, making it easy to be controlled by greed or fear, leading to irrational or inappropriate decisions. For example, during a market surge, we might be driven by greed to chase prices blindly or hesitate to take profits; during a market downturn, we might be overwhelmed by fear, panic-sell, or hesitate to average down. This can lead to missed opportunities or increased losses. Therefore, it is essential to adjust our mindset and emotions promptly, remain calm and objective, and follow our investment plans and strategies.
Summary
The above are some fundamental knowledge about cryptocurrencies and some stable investment strategies suitable for beginners. In cryptocurrency investments, it is necessary to have basic knowledge and common sense, reasonable investment plans and goals, effective investment strategies and techniques, a good mindset and emotions, and disciplined risk control and position management. This will enable you to steadily earn your first pot of gold in the cryptocurrency space and even achieve financial freedom. It is also crucial to note that various risks and challenges exist in cryptocurrency investments, such as market volatility and uncertainty, platform security and credit issues, and legal regulations and compliance problems. Therefore, adequate preparation and research are essential, along with adherence to relevant laws and regulations, and the assumption of corresponding responsibilities and obligations. Finally, I hope everyone actively learns and practices, continually explores and progresses in the cryptocurrency space, and realizes their wealth dreams.
I hope my article can provide you with assistance; feel free to leave your comments in the comment section.
