Trading cryptocurrencies is becoming a more and more popular way to invest and, in some cases, to make a quick profit. But is it profitable to trade cryptocurrencies in the UAE? And what are the risks involved?
What are cryptocurrencies?
It’s a digital or virtual currency using cryptography for security. Cryptocurrencies are decentralised, not subject to government or financial institution control, and Bitcoin is the first, most well-known crypto currency created in 2009 by an anonymous entity called Satoshi Nakamoto. Cryptocurrencies are often traded on decentralised exchanges and can also be used to purchase goods and services.
How have cryptocurrencies been performing in the UAE and globally?
Cryptocurrencies have had a volatile few years, with prices fluctuating wildly. In December 2017, Bitcoin hit an all-time high of almost $20,000 before crashing to around $3,000 in 2018. Prices have since recovered, and as of May 2021, Bitcoin is trading at around $40,000.
Other cryptocurrencies have also seen similar price swings. Ethereum, the second largest cryptocurrency by market capitalisation, has risen from around $100 in early 2017 to over $2,000 in early 2018 before crashing back down to around $200 in 2019. Prices have since recovered, and as of May 2021, Ethereum is trading at around $3,500.
The performance of cryptocurrencies has been closely linked to the development of the underlying blockchain technology, and the distributed ledger technology powers cryptocurrencies. When Bitcoin was first created, it was seen as a revolutionary way to send and receive payments without a third party such as a bank or financial institution.
However, blockchain technology has since evolved, and there are now many different applications beyond just cryptocurrencies. It has caused some investors to lose faith in cryptocurrencies and pull their money out of the market.
It has resulted in sharp price swings in the cryptocurrency markets. In December 2017, when Bitcoin was trading at its all-time high, there was widespread optimism about the future of cryptocurrencies and blockchain technology. However, this optimism quickly faded in 2018 when prices crashed, and many projects failed to deliver on their promises.
What risks are associated with trading cryptocurrencies?
The most significant risk when trading cryptocurrencies is that prices are highly volatile and can swing wildly from one day to the next.
Another risk is that any asset or government does not back most cryptocurrencies, and there’s no guarantee they will retain their value over time. It means that if Bitcoin were to lose all its value suddenly, there would be nothing to stop it from happening.
It’s vital to remember that cryptocurrencies are still a relatively new asset class, and there is a lot of uncertainty about their long-term future. Many experts believe that we are still in the early stages of the cryptocurrency market and that prices could rise or fall sharply in the years ahead.
What are some tips for trading cryptocurrencies profitably in the UAE?
If you’re considering trading cryptocurrencies in the UAE, there are a few things to keep in mind to maximise your chances of success.
First, it’s important to remember that the cryptocurrency markets are highly volatile, and prices can swing wildly from one day to the next. It means that you could make a profit one day and then lose money the next.
Second, you should always have a plan for how to exit a trade before you even enter it, and it will help you cut your losses if the trade goes against you and lock in your profits if it goes in your favour.
Finally, don’t forget to diversify your portfolio. Cryptocurrencies are just one asset class and should only make up a small portion of your overall portfolio. It helps protect you from any asset class’s downside risk and gives you a better chance of making capital in the long run.
Are there any special tools or software that traders should use when trading cryptocurrencies in the UAE marketplaces?
Traders can use many different tools and software when trading cryptocurrencies in the UAE.
One popular tool is a cryptocurrency trading bot. Trading bots are software programs that automatically place trades on your behalf based on specific criteria you set.
Another helpful tool is a crypto tracking app. These apps help you track the prices of all the significant cryptocurrencies to make informed decisions about when to buy and sell.
Finally, using a reliable and secure cryptocurrency exchange is also a good idea, and it will ensure that your money is safe, and you get the best prices for your trades.