It’s no secret that 2018 has been a tough year for cryptocurrency traders. Exchange hacks, regulation, price uncertainty – the list goes on. Many of these are the signs and symptoms of a sector that’s still in its infancy. It’s a frustrating game seeing so much profit potential bogged down by so many roadblocks. Here are some notes from the crypto trading trenches of 2018 (and partly 2017).
No Exchange To Call Home
Cryptocurrency is synonymous with profit potential. Buying a crypto asset in 2017 and seeing 100-300%+ profit in a matter of days was not uncommon.
The problem however, is the lack of a centralized exchange with all applicable assets. Many significant trading opportunities are coins or tokens that are only on minor exchanges with low volume. This requires the trader to send crypto funds to a small exchange, sometimes seeing difficulty getting larger orders filled due to lack of buyers and sellers.
Another exchange difficulty is that these exchanges can often be shady – potentially subject to exit scams. Some exchanges have simply vanished with all funds. Leaving crypto assets on lesser-known exchanges can significantly increase risk.
What about keeping those funds on a hardware wallet? Well, that can be safer for investing/hodling, but what if the coin or token starts to dump unexpectedly on a short-term trade? Good luck trying to send that asset to an exchange in time, and then get that sell order filled.
It’s also annoying to record all trade info for tax purposes. You need to account for all those separate exchanges, initial USD/FIAT cost basis, and then whatever that Bitcoin or Ethereum price was at the time of trade, as well as the purchased asset price and amount.
Larger exchanges like Binance and Bittrex are great for keeping trading records, providing a centralized trading platform. But what about all the recent regulation and Tether fears? If a government decides to look into them or take them down, all funds on the exchange could possibly be suspended during the investigation. Or the mass amount of people exiting the exchange could lead to assets stuck on said exchange.
Exchange Troubles – Part 2
There is currently a serious absence of viable options for U.S. residents wanting to trade Bitcoin (and others) with leverage, as well as shorting Bitcoin. Bitfinex, BitMEX, and Deribit are three of the best options for precision trading with leverage. But all those exchanges ban U.S. residents. Sure, many people use a VPN. But for someone trying to be honest and play by the rules, there currently aren’t any great options.
How about Kraken? Their fees are significantly higher than sites like Bitmex. It can also be tough to get orders filled without liquidity. Over the last 24 hours (as per time of this writing), Kraken has seen just over $7.7 million traded in Bitcoin/USD, while BitMEX has seen over $600 million in Bitcoin/USD trading.
Volatility Recently Gone Dry
As mentioned above, it’s no secret that crypto often sees dramatic price swings, giving potential for significant profit. But recent weeks have been the slowest in a long time. At times over the past two weeks, Bitcoin has actually seen less volatility than traditional financial markets.
Crypto has also lost significant liquidity over the past several months, sitting at just over $210 million via Blockmodo real-time data – down from over $800 million.
Taxes + Crypto = Headache
For an honest citizen seeking to pay crypto taxes, things are difficult. Cointracking is a service that can help track crypto assets. But once you factor in hardware wallets, dozens of wallet addresses, different exchanges, and cost basis, it becomes tough.
And as recently seen in the student who owes about $400,000 in taxes – you can get taxed on gains, even if you don’t sell into FIAT.
Tax laws are not currently favorable toward cryptocurrency trading or use – and it’s frustrating.
Hopefully, things will continue to move forward, while still providing a period for strong growth and potential for those currently involved in the crypto space. But early adopters have not been without their struggles.
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