If you’re just starting out it’s easy to not realize what trading really costs you.
In a bull market a lot of people want to use blockchains, so the transactions fees go up a lot. If you’re thinking of trading on an Ethereum DEX you should probably have atleast $2000 – 3000 since the fees are $20 – 100 per trade. Consider using a Layer 2 sidechain or normal centralized exchange if you’re starting with a small amount.
Obviously not tax advice. And this is different in every country. But in general you need to calculate your cost basis for every trade. So lets say you trade for 2 months.
- Buy some ETH
- Sell for shitcoin A
- Buy back ETH
- Shitcoin B
- Shitcoin C
- Back to ETH
During this time ETH goes from $300 – $1500.
For every sell your cost basis for ETH is lower than the current price. And you need to pay taxes on the difference (country specific).
In some countries your cost basis is a median of your buys, in some you sell from last purchased, in some from first purchase. But the idea in terms of cost basis relative to price is the same. So just realize it might cost you alot in taxes just to make the trade.
When you put a lot of money into crypto you put a lot of your attention there aswell. Checking the price every 5 minutes. Worrying. Looking for the next investment idea.
It can take a lot of time. And probably should if you want to do it right.
This is time that could be spent doing <useful thing>.
It’s boring but buying and HODLing is not a bad strategy.
It’s kind of like the ultimate computer game where the end game is making a lot of money.
This also means it’s addictive as hell. We call it a game, someone else might call it a giant casino. Just be aware of it. A lot of it is similar to gambling.