In connection with cryptocurrency, one is faced with several different concepts. One of these concepts is the concept of gearing .
This is an expression most people know from driving and other vehicles, but of course that is not what we are referring to in this case. Here, of course, this term has something to do with cryptocurrency. Especially if the use of cryptocurrency is an investment for you .
In this article, we will take a closer look at gearing in connection with cryptocurrency. We will try to find out what this is all about, and help you a bit on the road to success in leveraging cryptocurrency.
What is gearing?
One of the most important questions we have to answer in connection with this is as follows: What is gearing? To be even more specific: What is cryptocurrency leverage?
Giring is a Norwegian translation for gearing , which is what it is called in English. If you are wondering which of these terms is the best to use, then it is fine to use both. In an all-Norwegian text, however, it is very likely that you see the term gearing being used.
In short, leverage or leverage is about making investments with borrowed money . In other words, this is an activity that is a bit on the borderline of what one should do. As most people know, there is no guarantee of success when it comes to cryptocurrency.
Giring means that you invest more than you have in equity. In other words, it is the opposite of what one is advised to do in connection with cryptocurrency. Another word for leverage is marginal trading.
Many people are engaged in leveraging cryptocurrencies
In the crypto market, there are very many who are engaged in leveraging cryptocurrencies. And we have no problem understanding that this is something many people are tempted to begin with.
As mentioned, leveraging cryptocurrency is about investing more money you actually have. Let’s say you have 50,000 kroner at your disposal, but then you have suddenly invested 100,000 kroner instead. Then you have the gear with cryptocurrency, whether you are aware of it or not.
There are also very many who choose to do it consciously. The reason for this is the hope that the value of the cryptocurrency in question will skyrocket and that the return on investment will be restored. But it is impossible to know whether this is what is happening or not.
Neither in connection with cryptocurrency nor the leverage of cryptocurrency, there is any guarantee that it will end in success. Most forms of cryptocurrency are characterized by high volatility, which means that the value jumps up and down like a yo-yo.
But is it wise to do so?
But even though there are many who engage in cryptocurrency leverage, it does not mean that it is wise to do so. So is it really wise to try your hand at leveraging cryptocurrencies?
We understand that it can be tempting for many, especially when you think about the great return opportunities that come with it. But it is important to keep in mind that the risk is as great as the possibility that the investment will provide some kind of return.
In connection with cryptocurrency and the leverage of cryptocurrency, there is no guarantee that the investment will end in success. If it does, then it’s all about having luck and nothing more. In other words, it is wise to act cautiously here.
Therefore, trading can be risky .
Shifting can give you big problems
It is easy to get carried away in connection with the shifting of cryptocurrency, but we can not stress enough how important it is to keep your tongue straight in your mouth. Wondering why we say that? Yes, because leveraging cryptocurrencies can actually cause you major problems.
As mentioned, it is not uncommon for those who leverage cryptocurrency to do so with money that is not theirs. In other words, they have borrowed money to do so.
If you are going to be so unlucky that the cryptocurrency drops right after you make an investment, then this is something that can have fatal consequences for your investment. Because you have not only lost what you invested, but you also owe money to the person who lent you the original money.
Can one minimize the risk of leveraging cryptocurrency?
If you do gearing, then of course you know a little about cryptocurrency in general. And then you know that there are things you can do to minimize the risk of losing on cryptocurrency. Here, investing in stack coins is a classic example.
But does gearing not work the same way? Most people know that it is not wise, but is there anything you can do to minimize the risk of it – if you presumably still want to try it? This question has a short and a long answer, and the former is yes!
There are several things you can do to minimize the risk of leveraging cryptocurrencies, and below we will take a closer look at some of these things.
Use the “Stop Loss” function
The first thing you can do to minimize the risk of leveraging cryptocurrencies is to take advantage of the feature called ” Stop Loss “. This is an English expression that can be translated into Norwegian, and then we get the following term: “Prevent loss”.
By activating this function, you do so. You prevent yourself from losing more than you want. This may sound too good to be true, but it’s actually not the case here.
Specifically, the “Stop Loss” function means that you enter the maximum amount you want to trade for. If the trade you are part of moves towards this amount, then this feature ensures that you stop and do not join the process.
If the trade is about something you really want or are quite fascinated by, then it is very easy to get carried away. And then a function like this is very convenient to have on the team.
Use “stop loss” to avoid losing everything – even this has its pros and cons.
Activate the “Take Profit” function
The next thing you can do to minimize the risk of leveraging cryptocurrencies is to activate a feature named ” Take Profit “. This too is an English expression. In the same way as the expression «Stop Loss», this expression can be translated into Norwegian, and then we get «Take the profit».
Take Profit is a feature where you can set how much you want in profit. Once you have done that, the function ensures that you are withdrawn from the trade when the profit has reached the given level. In other words, you throw in the towel and give while the game is good.
Activating this feature will be very beneficial for you. The reason for this is that by withdrawing from the process, you ensure that you do not lose at a later date. This is very convenient, especially if you have invested with money that was not yours in the first place.
Protect yourself from negative balances
Some crypto exchanges also give you the opportunity to protect yourself from negative balances. It is very rare for someone to end up with a negative balance, but that does not mean that it can not happen. Therefore, we recommend that you take advantage of this protection.
One of the crypto exchanges that has this protection is eToro, which is a very popular Norwegian crypto exchange. Therefore, it may be a good idea to consider using this crypto exchange – if you have a specific desire to take advantage of the protection for negative balances.
Should your equity, contrary to expectations, become negative, your crypto exchange (eg eToro) will absorb the loss. In practice, this simply means that your equity is set back to zero, and that you can continue where you left off.
Is cryptocurrency leverage suitable for everyone?
Are you unsure if cryptocurrency leverage is right for you? It is very wise to ask yourself that question, because it is actually not the case that leveraging cryptocurrency is suitable for everyone.
Cryptocurrency gearing is a game of chance, so this is not something you should consider if you do not have much experience. If you are relatively new to the game, it may be a good idea to leave the leverage of cryptocurrency alone for a while longer. Rather focus on gaining more experience first!
But it is not a matter of course that leveraging cryptocurrency is suitable for you even if you have many years of experience with cryptocurrency either. Because it is not certain that you are willing to take such a high risk as it is to engage in cryptocurrency leverage.
Before making the choice to start leveraging cryptocurrency, one should always reflect on how much risk one is willing to take. If you feel that you are not willing to play the game, then it just means that leveraging cryptocurrency is not for you. And of course it’s all right!
Maximum limit when shifting
If you are one of those people who thinks that leveraging cryptocurrency is interesting, then it is important that you reflect on where you stand in connection with how to do it.
An example is to find out what your maximum limit is when leveraging cryptocurrency. It is entirely up to you to decide how much you want to put into the gearing, but it is important to have a conscious relationship with it.
Even if it is your decision, it is important to emphasize that you should avoid very high gearing at all costs. The reason for this is that the risk increases the more you gear up for.
In practice, this simply means that you have to think logically. Although it can be tempting to shift for example 1: 500, it is not to be underestimated that 1: 5 is a much better choice when it comes to setting a maximum limit when shifting.
Choice of crypto exchange
Whether you are engaged in cryptocurrency in general or want to engage in cryptocurrency leverage, it is important to choose the right cryptocurrency exchange. The crypto exchange is the platform that enables you to do some of this.
Choosing the right crypto exchange can be very difficult, however, because there are very many crypto exchanges on the crypto market today. Therefore, it is important that you do thorough research before deciding which crypto exchange you want to use.
An example of a good (and Norwegian) crypto exchange is the one we mentioned above – eToro. This is a crypto exchange that is registered with Finanstilsynet.
If there is one thing you should always keep in mind when choosing a crypto exchange, it is that the crypto exchange should be registered with Finanstilsynet. Then you know for sure that this is a good player that it will be safe to use at any time!
Start leveraging cryptocurrency
It is very easy to get started with leveraging cryptocurrencies, especially once you have found out which crypto exchange you want to use.
If you have chosen to use eToro to engage in some cryptocurrency leverage, it means that you borrow money from eToro. This is a very popular crypto exchange that operates on good terms for its customers. For example, they operate with very low fees!
As I said, you borrow funds (ie cryptocurrency) from eToro, but for that to be possible, you have to have some cryptocurrency from before. This is what will be the security for your loan with eToro.
Getting started with leveraging cryptocurrencies is very easy. The only thing you need to do is create a user account on the relevant crypto exchange. If you have chosen eToro, then this will not take you more than a few minutes. Then just get started!