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Should You Hold Cryptocurrency Long-Term?


Investing in cryptocurrency for the long term can yield significant returns for investors who exercise patience. As virtual currencies are still in their early stages, they have the potential for continued growth in the coming years. However, it is important to weigh the pros and cons of holding cryptocurrency for an extended period. These include advantages such as tax benefits, but also risks associated with investments. It is advisable to consult a financial adviser before making any investment decisions to determine if cryptocurrency aligns with your investment goals.

Day Trading Cryptocurrency Vs. Holding Cryptocurrency Long Term

When considering investment options in the cryptocurrency market, it is crucial to carefully analyze the distinctions between day trading and long-term holding. Day trading involves executing short-term trades within a single day, emphasizing swift buying and selling. For novice investors, day trading can pose substantial risks due to the inherent volatility of cryptocurrency prices and market trends. On the other hand, long-term holding is a strategy that involves retaining specific cryptocurrencies for extended periods, often spanning multiple years. Opting for long-term holding has the potential to mitigate risk by leveraging the benefits of sustained market growth.

Benefits of Holding Cryptocurrency Long-Term

While holding cryptocurrency for the short term offers enhanced liquidity, there are notable advantages to keeping crypto assets for the long term, including increased stability and valuable tax benefits. Determining whether cryptocurrency is a suitable long-term investment depends on your individual needs and objectives.

  • Less Volatility: Holding cryptocurrency for the long term provides investors with the advantage of increased stability. Long-term trading is characterized by lower volatility, as it prioritizes gradual growth instead of capitalizing on short-term price fluctuations. Generally, both stocks and cryptocurrencies exhibit reduced volatility over an extended period, making it an appealing prospect for individuals seeking to avoid trading based on momentary price swings.
  • Tax Advantages: As per the IRS guidelines, in order for a cryptocurrency sale to be classified as a long-term gain or loss, it must be held for a period exceeding one year. Conversely, if a cryptocurrency is sold within a year of its purchase, it is generally considered a short-term transaction. One significant distinction between long-term and short-term holding of cryptocurrency is the greater range of benefits associated with the former. Holding cryptocurrency for an extended period allows individuals the opportunity to be taxed at a lower rate and be subject to long-term capital taxes, providing advantageous tax considerations.
  • Less Stress: Maintaining cryptocurrency holdings over an extended period has the potential to alleviate stress. When engaging in long-term cryptocurrency holding, the need to monitor its daily performance diminishes, as it becomes less susceptible to short-term volatility.

Drawbacks of Holding Cryptocurrency Long Term

Before deciding to hold cryptocurrency for the long term, contemplate the likely drawbacks, such as decreased liquidity and investment risk against the potential benefits.

  • Less Liquidity: One crucial factor to consider when making investments is the impact on liquidity. Liquidity refers to the ease with which assets can be converted into cash. Opting for long-term investments reduces liquidity, making it more challenging to access cash on short notice. Before making any investment decisions, it is prudent to assess the adequacy of your emergency fund. An emergency fund should ideally cover three to six months’ worth of expenses, ensuring that unforeseen events can be managed without needing to tap into long-term investments.
  • Security: Over time, there is a possibility of forgetting crucial information such as account keys or passwords. To ensure uninterrupted access to your account, it is advisable to collaborate with an account holder that provides robust customer service. It is essential to seek out an account holder that offers exceptional security features to protect against hackers and potential theft.

How to Know Whether Holding Cryptocurrency Long Term is Right for You

Holding cryptocurrency for an extended period can be a strategic decision for individuals seeking long-term portfolio diversification or more daring investment avenues. With the rapid expansion of cryptocurrencies, long-term holding provides believers with the potential to capitalize on significant financial growth.

  • You’re Planning Your Retirement: Including a carefully calculated portion of cryptocurrency in a robust retirement account promotes asset diversification. Companies like Bitcoin IRA enable customers to hold cryptocurrency within a designated crypto individual retirement account (IRA). An IRA is a type of account that is commonly classified into two categories: Roth IRA and traditional IRA. A Roth IRA entails using after-tax dollars, whereas a traditional IRA involves utilizing before-tax dollars.
  • You Believe in Crypto’s Future: Cryptocurrency has grown exponentially over the years. Virtual currencies offer a new and exciting opportunity given the understanding that the market has yet to reach its full potential.
  • You’re Looking to Diversify: Investing in crypto can improve a portfolio’s diversification and reduce risk exposure. It’s often recommended to have less than 5% of a portfolio placed into crypto.

What Is the Best Cryptocurrency To Invest In Long Term?

Choosing the most suitable cryptocurrency for a long-term investment is contingent upon various factors, encompassing personal preference and risk tolerance. Prior to making any investment decisions, it is advisable to consult with a financial professional to gain a more comprehensive understanding of the available options. In general, Bitcoin, Ethereum, and Litecoin are recognized as three of the leading choices for long-term investing.

  • Bitcoin: Bitcoin (CRYPTO: BTC) is widely recognized as the pioneering decentralized virtual currency. It boasts one of the highest market capitalizations (market caps) among all cryptocurrencies. Market cap is determined by multiplying the current coin supply by its price. Bitcoin retains its popularity among both novice and seasoned cryptocurrency investors due to its consistent upward trajectory in terms of price and widespread recognition.
  • Ethereum: Ethereum (CRYPTO: ETH) was launched in 2015 and has emerged as one of the most valuable cryptocurrencies in the market. Ethereum’s native cryptocurrency is called Ether, and it operates on a blockchain platform, serving as a decentralized virtual currency. Ethereum exhibits significant potential for long-term price growth.
  • Litecoin: Litecoin (CRYPTO: LTC) was initiated slightly over a decade ago, positioning itself as one of the earliest open-source altcoins. An altcoin denotes a coin that is distinct from Bitcoin. The cryptocurrency was specifically engineered with a strong emphasis on achieving remarkable transaction speed.

Cryptocurrency Offers Long-Term Growth Opportunity

In general, retaining cryptocurrency offers daring investors the opportunity to pursue long-term growth. The act of holding virtual currencies over an extended duration presents enticing advantages, spanning from favorable tax benefits to reduced stress. Prioritize assessing your risk tolerance to ensure comfortable and appropriate investment decisions.

Frequently Asked Questions

Q: Should I hold my crypto long-term?

A: Holding for the long term can prove a profitable strategy for individuals focused on future growth.

Q: Can you put cryptocurrency in a Roth IRA?

A: Yes, it’s possible to place cryptocurrency into a specifically created crypto Roth IRA account. Cryptocurrencies are not commonly accepted in typical retirement accounts. Fortunately, companies such as Bitcoin IRA allow individuals to hold crypto in a designated crypto retirement account.

Q: When should I sell my crypto?

A: The decision about when it’s best to sell crypto remains a personal choice, but like most assets, it’s recommended to sell high and buy low.

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