Nearly one in three young people has already bought cryptocurrency. And while the recent drop in price has dampened the enthusiasm of some traders, others still see cryptocurrencies as a quick and easy way to get rich. Right or wrong?
Crypto is scary. Crypto fascinates. Especially among young people. According to a study (1) from the Paris agency Heaven, 32% of 18-25 year olds have already invested in this digital currency.
However, the life of cryptocurrencies is not a long, calm river. The most famous of these, bitcoin, is currently trading around $21000far from the historic peak of $69,044 reached on November 10, 2021. And its main rival, ethereum, lost 55% of its value within 6 months.
But nothing helps. Despite the price drop, more novice traders are joining every day. When they start, newcomers think they will soon make a fortune. Then reality catches up with them. Because very often the 1000% fantasy returns are turning to disappointment, notes YouTuber Owen Simonin, who was interviewed during the Surfin Bitcoin Biarritz show at the end of August.
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7800% increase in three days
And for good reason! The cryptocurrency market is still young and characterized by a high volatility. The upward and downward variations can reach astronomical amounts, especially since the capitalization of these assets is still relatively low, explains Nicolas Chron, strategist at Zone Bourse.
For example, the cryptocurrency Squid Game, launched after the success of the South Korean series of the same name on Netflix, saw its price explode from $0.20 $15.95, or 7800% increase in three days. Investing in these kinds of projects is like playing in the casino. The potential return is huge. But the risks are just as important, cautions Emilien Dutang, professional trader.
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It’s like a game
A lesson that novice investors often learn the hard way. People know that classical trading is a complicated subject. But many see crypto as a game, deciphers Nicolas Chron. They’re looking for quick profits and sensationbut are not always aware of the risks.
And it is not a danger. The applications of no brokersthese brokers of a new kind, give prominence to the user experience and are often inspired by the codes of the video game industry to facilitate trading more playful. Too much, maybe? Because for some, trading can become a real addiction, says Owen Simonin.
Anyway, the recipe works. According to a report by the Autorité des Marchés Financiers (2)the quarterly active clientele of the no-brokers was multiply by 12 since the third quarter of 2018. And some exchanges, these crypto buying and selling platforms, claim today several million userssuch as Binance, Bitpanda or Coinbase.
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To make matters worse, we hear a lot about the winners, but not the losers. The first are proud to announce their earnings on social networks. The latter are discreet, they do not talk about their losses. This helps reinforce the idea that you can easily make money with cryptos, notes Owen Simonin.
Without forgetting that some unscrupulous influencers take advantage of their fame to encourage young people to invest in crypto projects… Without necessarily specifying that they are paid to promote them. For example, in 2021 Nabilla had police of 20000 euro fine after being detained for deceptive business practices on Snapchat.
The truth is that in trading it is much easier to lose money than to win. According to the AMF, almost 89% individuals end up losing when they trade the stock markets. And the same goes for cryptocurrencies. Anyone can earn money for a running of the bullsie a bullish period. But only a handful of traders manage to win the hard way, says Emilien Dutang.
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So how do you put the odds on your side? A series of surveys conducted on tens of thousands of FXCM Broker accounts have identified the characteristics of successful traders. Review: The more a trader spends a large number of orders in the month and more he uses theleverthe more likely he is to lose.
To this have been added some golden rules. Cryptocurrencies Are A Risky Investment You Can Allocate 5 10% of your capital, for example. But make sure diversify your investments and only invest money you’re willing to lose, recommends Emilien Dutang.
Otherwise, avoid trading 1000 cryptos different. It’s best to focus on a few promising projects and analyze them in detail to fine-tune your strategy, continues Emilien Dutang. Before investing, for example, ask yourself: what is the vision behind the project? Does the team have other achievements to its credit? Is the capital letter big enough?
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In addition, take the time to train yourself before you start. And write down your mistakes in a diary to try and understand what went wrong each time, advises Owen Simonin. You can also set stop loss to limit your losses in the event of a price drop.
Moreover, if you are convinced that cryptocurrencies have a future, you can invest by betting that their price will increase in the long run. For this, the simplest method remains the DCA, or average cost in dollarsa technique where you invest a fixed amount at regular odds to smooth out your entry point.
In this case it may be interesting to separate your billsand to have one account for your long-term investments, which you don’t touch, and a second account dedicated to trading, where you can take more risks to try and generate short-term returns, suggests Emilien Dutang.
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(1) Study conducted by the Heaven agency among 538 young people aged 18 to 25, interviewed in France between 8 and 9 March 2022.
(2) AMF Study – Individual investors are more numerous, younger and have increasingly resorted to neo-brokers since the Covid crisis.