No you cannot lose money that you do not invest. The only exception to this rule is if you are trading on an exchange that offers the ability to short the market. (take a loan). May 28, · As Bitcoins rise in value, so do the prospective profits of those investing in them. However, many have warned that this is not investing, but gambling, and that if the "bubble bursts", it could. Aug 29, · As much as you can get to make a lot of money from bitcoin investment, you can also lose a lot of money if you don’t look before you leap. Here are some THINGS You Need To Know Before Venturing Into Bitcoin Investment Bitcoin might be the most talked about currency in the world, but it still remains an enigma to many. We want to change that.
Can you lose money on bitcoin tradingDummies Guide to Making Money from Bitcoin & Crypto | Steven Male
So this long intro leads me into explaining the 5 easy ways you can lose money trading Bitcoin and Crypto. It is only natural that when a market is flying that there are many new investors wanting to be part of it. When prices rally at parabolic rates there is a constant stream of news or dickheads like me posting videos on the beach saying how well I have done. This is how bubbles form, whether it is the Dot Com bubble, housing market bubble or those fucking Dutch Tulips people keep bringing up.
We all want an easy life, we all think that money will do this and when a bubble is forming people jump in. Crypto is not a get rich quick scheme. If too many people think it is, the prices will go up too quick and the bubble will eventually burst.
It is a highly speculative market where some people have got rich quick, and some have lost money quick. This isn't going to continue at this rate forever; there are not enough buyers.
It may continue for another week, maybe a month or even a year, but History will tell you that for it to keep going up, then it will need to crash at some point, shake out the weak hands and start another bull run.
Except it wasn't a little blip, it was a huge fucking crash. It just looks like a little blip compared to what is happening now. Look at the same chart now when I zoom into that period. Many claimed that this was the death of Bitcoin and Crypto, and it could have been.
It took nearly two years of bouncing around for it to get back into a bull market. It can because nobody knows what the fuck will happen. The market may be a very different place right now, the Crypto ecosystem may be more advanced, we may have more utility, but we are still in a speculative market. It can crash at any point.
As such, if you get involved, the golden rule is not to invest any more than you can afford to lose. If you have followed this rule then all your investments should be considered long-term, and by long-term, I mean years minimum.
Simply because the longest bear run we have experienced is two years. Those who invested in Bitcoin in December '13 and didn't panic sell during the crash had to wait until early '17 to be back in profit. Over three years. A bear market can hit us at any point and if it does then the longest we have experienced is two years and this is our benchmark. Crypto is not a get rich quick scheme, you might get lucky and hit a bull run, but there is no guarantee.
If you treat Crypto as a get rich quick scheme you will likely make poor unplanned decisions, lose money and chase. Most Crypto traders have considered day trading; many have tried, some with success and some with failure.
I have tried and failed and have written before about why I don't day trade Crypto. Firstly I am going to deal with lifestyle. I expect that most people who are reading this already have a job, therefore if you are going to day trade Crypto, then you are either going to do this while at work, hiding in the toilets or under your desk or you are going to be doing this in the evenings and on the weekends.
If you are doing this at work you are neglecting your job and ripping off your boss as you can't just dip in and out, it will be massively distracting. I did the same day trading tech stocks a few years back when I lost a fuck load of money. What will happen is your career will suffer, and your trading will likely be poor as you can't effectively do both.
If you are doing it in the evenings and weekends, then you are potentially neglecting your family or neglecting your health and life. Day trading is super fucking hard; you have to be glued to the markets and news, following trends and using technical analysis to make scalps. Even then, a quick change in the market can stop you out on all your investments. If you think you are smart and you can quit your job to do this, then you are taking a huge gamble if you do not have serious reserves.
Even if you are lucky enough to have made enough money and do not to need to work you are still entering a super hard market to day trade. I know of a trader this week who was stopped out of all of his investments because of the China news, where if he wasn't a day trader and held long positions on them all a bunch would have been close to recovery.
Each stop was executed at a loss. As such, all those losses need winning back. The problem with day trading is that markets can operate irrationally in the short-term, things happen which makes no fucking sense at all and you are battling the human emotions of fear and greed. The chart below perfectly demonstrates the experience the most day traders will go through at some point. We don't ever really know what the market is going to do in the short-term, so the emotions of fear and greed will cause us to buy and sell at exactly the wrong times.
You don't need to day trade Crypto. You don't need to give yourself the stress of finding coin scalps or the stress of huge losses when the market turns. While the market is highly volatile it also acts in predictable patterns. As I keep saying, investing in Crypto is speculative, what we are speculating is that the digital currencies will become forms of payment and the service based tokens will support systems and technology which will revolutionise markets.
If the speculation proves right then the investments will go up. As such, you don't need to day trade. You need to find technologies you believe in, find a good investment point and then hold your positions through the upwards waves. I have argued with traders on Reddit over this. Margin trading is whereby you are borrowing to invest because you are using leverage.
Margin trading breaks the golden rule of not investing more than you can't afford to lose, because if you could afford to lose this, then you would just make the initial 10x investment yourself. With margin trading, you are being greedy and borrowing to invest, and you, therefore, run the risk of a margin call. Margin calls suck ass big time.
From Investopedia :. A margin call is a broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when the account value depresses to a value calculated by the broker's particular formula. An investor receives a margin call from a broker if one or more of the securities he had bought with borrowed money decreases in value past a certain point.
The investor must either deposit more money in the account or sell off some of his assets. Also, read their article about The Dreaded Margin Call. If you can't cover your losses, your trade is closed, and you lose your initial investment. We already know that Crypto investment is highly volatile and super risky. If you are margin trading, you are therefore putting your money at risk.
If you are then given a margin call and can't add funds, then you lose your original investment if the price drops below a certain point. Philip Kour Philip Kour 1 1 gold badge 1 1 silver badge 3 3 bronze badges.
It concerns me that people who lack such basic knowledge of economy would invest in a cryptocurrency. Myridium OP has not stated that they have invested or is considering investing in a cryptocurrency. It's possible that they are merely asking the question in an attempt to learn. Myridium If anything, it should concern you that people who lack such basic knowledge of economics would invest in anything.
It's exactly as if you bought stock and its price went down. Myridium With people everywhere calling bitcoin a ponzi scheme or pyramid scheme, it's not actually that odd of a question for a newbie. They often don't realize it's just a simple thing you can buy and sell. Active Oldest Votes. Max Vernon Max Vernon 1, 13 13 silver badges 26 26 bronze badges. Your market view of trading any commodity stands true, but your key example is wrong. Bitcoin has no intrinsic value , and can become worth absolutely zero.
Tax law is a completely different area. Consult a tax attorney or accountant in you jurisdiction for details applicable to your scenario. Xen There is nothing fundamentally different in the intrinsic value of gold; if someone invented a machine that could fabricate gold out of thin air, your bar of gold would have zero value; if a replacement were found for all uses of gold, it would have a value very near zero.
The difference, I think, is one of risk: there is a higher risk of the bitcoin network becoming obsolete, and investments in it worthless, than all uses of gold becoming obsolete.
But that's just a more extreme version of the risk of fluctuation in value. JoseAntonioDuraOlmos I disagree. This is the correct viewpoint. This is the viewpoint that says "If I have an ounce of gold, I have an ounce of gold, no more, no less. Jestin Jestin 8, 1 1 gold badge 18 18 silver badges 32 32 bronze badges. It goes both ways, too. If the value of fiat currency goes up in the worst case via deflation , your money is worth more even though the amount you have doesn't change.
Groceries aren't a good comparison. If I buy a litre of milk, I only have a litre of milk for a week or so, regardless of what happens to the price. David, true. Groceries lack a property of money, namely durability. DavidRicherby I think everyone with half a brain can understand the relevant points of the analogy and discard the irrelevant ones like "milk goes off".
That's why it is getting a lot more attention than it probably deserves. Bitcoin's a capital asset at least conceptually; dunno about legally : A capital asset is defined to include property of any kind held by an assessee, whether connected with their business or profession or not connected with their business or profession.
Until you actually sell the Bitcoins, the loss is considered unrealized : What is an 'Unrealized Loss' An unrealized loss is a loss that results from holding onto an asset after it has decreased in price, rather than selling it and realizing the loss. Before you sell the Bitcoins, it's an unrealized capital loss. After you sell the Bitcoins, it's a realized capital loss. Nat Nat 2 2 silver badges 6 6 bronze badges.
Glad to see an answer which really hits the nail. Anyone who thinks there is no loss of capital till a sale should try to use assets to back a loan, no bank is going to accept the purchase value of those assets, they won't accept "you wouldn't actually lose any money at all unless you decided to sell your gold".
The bank will valuate the assets. MaxVernon Sure, your answer's conceptually correct and did a good job answering the question. I wrote this one up to provide the technical terminology since it's useful to have the vocabulary when engaging in stuff like this. I've upvoted. Deepak Deepak 1 1 silver badge 3 3 bronze badges. A very good example is stocks which can vary for reasons which don't have to do with "objective reality" of the state of the company, but fears, hopes or expectations, rumors, commercials, propaganda et.
Literally any other market is sensitive to the same things. Would you happen to know any relevant trading simulators someone might try online? Keep in mind that trading simulations have a different psychological effect on you than trading with real money does. Many a would-be trader has expected their simulated success to carry over to the real-world, and been deeply disappointed in the results.
Vadim Ponomarenko Vadim Ponomarenko 2 2 bronze badges. Isn't this the exact same point as in Vadim Ponomarenko's answer, from the day before yours? The first word of his and my answer suggest we make a different point. Yes and no, depends on your perspective. Peter Peter 3 3 bronze badges. JustCoding JustCoding 1. I want to add some thoughts: It seems you are rather new to trading.
Please understand that there is no "magic money making" machine, and that trading profits are often viewed as the compensation for accepted risks. So be cautions with investing money whose loss you cannot afford. Bitcoin is highly volatile, meaning that the price changes in rapid succession. It might be hard for a beginner to handle.
You can, of course, but be extra cautious compared to trading, say, Dow Jones values. Bitcoin has no intrinsic value. Gold can be used for making jewelry, Coca Cola can still produce more drinks, but for a Bitcoin you need someone else willing to pay for it. Without spreading too much fear and doubt, it bears some reminiscence to once highly-priced collector cards.
Zsolt Szilagy Zsolt Szilagy 3 3 bronze badges. But I would rather use the definition of money used by wikipedia: Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context.
If the answer is "I can buy the same" then no, you did not lose a quantity of your money. If the answer is "I can buy less for the same ammount of bitcoins than I could before the lowering" then yes, you did lose a quantity of your money. They are diminished as a medium of exchange, now you can exchange those bitcoins for less than you could before.
Anonymous Coward Anonymous Coward 2 2 bronze badges. ZOMG what kind of hyper pedantic answer is this. Of course he loses money if the price goes down. I think there is an interesting point here, although perhaps not well expressed: the bitcoins might be exchanged for something other than the original currency.
However, if it were possible to exchange Bitcoins valued at USD10 for USD20 worth of goods, this would be an anomaly that the market would correct for by adjusting one or both prices. Abdussamad Indeed, of course he does lose money.
Alas, the most voted answer claims "you wouldn't actually lose any money at all unless you decided to sell your gold at that time ". So I had to go the extra league. IMSoP - arbitrage is what happens when you trade a good or asset through multiple exchanges and make a profit.
And yes, normally the "market" will sort that out extremely quickly, since stakeholders take advantage of the arbitrage forcing equilibrium. The Overflow Blog.
Podcast A Very Crypto Christmas. Featured on Meta. New Feature: Table Support.