In crypto and stock markets alike, a thorough knowledge of specific terms is essential to understand the functioning of the market. If you are a trader or investor, you would be familiar with “going short” and “going long,” words that are a part of market speak. Here, we will discuss “going long” in detail. Essentially, going long means buying an asset and owning it hoping its price will increase. Let’s understand what “going long” means and how it applies to the crypto market.
What is going long in cryptocurrency?
It is important to differentiate between “going long” and “going short” to understand the term better. The term “going long” in the crypto market means buying a crypto asset. And, the opposite of going long is going short, which means selling the crypto asset.
However, depending on the market conditions, the term “long” is used differently and can have different meanings depending on the context. For example, if someone asks you if you are going long on Bitcoin, he wants to know if you are buying Bitcoin. Likewise, if someone says, “I am long on Bitcoin,” it means the person owns Bitcoin.
In the market, whether it is a stock or crypto, going long indicates a prevailing bullish sentiment, and the price of the asset may experience an upside move in the short to mid-term. For example, Michael Saylor, an American entrepreneur and former CEO of MicroStrategy, is long on Bitcoin.
Can you go long on crypto?
Yes, you can. You can go long on crypto as it simply means buying and holding cryptos for as long as you want.
What’s more, one doesn’t need to learn any trading strategy to go long on crypto. Investors maintaining a long position means they are bullish on the near to long-term prospect of the crypto and that the price will rise eventually.
How to go long on cryptocurrency?
Going long simply means buying and holding assets in the market. However, there are two types of long positions depending on your status in the market: The long position holding as an investment and the long position holding as a trade.
Long position holding as an investment type
It refers to the conventional investing practice in the market, where one stands to gain from the long-term holding of the asset. Within this, there are two options you can consider: buy and hold and the systematic investment plan.
Buy and hold
One of the simplest ways to go long on Bitcoin and cryptos is to buy the crypto in a lump sum or at once at the market price and store it securely in the wallet until it reaches the target price. It is considered one of the most popular investing methods to invest in Bitcoin and cryptos. For example, buying ₹ 10,000 worth of Bitcoin on CoinSwitch is a buy-and-hold mode of holding a long position.
Systematic Investment Plan (SIP)
If you are positive about the long-term prospect of cryptos and want to take advantage of the growth of the crypto market, but cannot invest in a lump sum manner, then you can consider the SIP option.
SIP facility allows investors to invest a fixed sum of money in small chunks at predefined intervals in the selected crypto asset. For example, buying ₹ 1,000 worth of Bitcoin every month. SIP helps to reap the benefit of rupee cost averaging, which helps to smoothen the volatility curve in the market and reduce investors’ exposure to timing risk. This would help you build significant investments in Bitcoin or any other crypto over the long term.
Through CoinSwitch, you can start a SIP for any crypto asset listed on the platform with as little as ₹100 per transaction.
Long position holding as a trade
Under this, a long position in an asset is initiated to profit from the short-term upside volatility, where traders mostly use derivatives and margin trading as trading options. There are two options for traders who prefer to go long.
Crypto futures
Futures are derivatives contracts to buy or sell a specific asset/commodity for a fixed price on a set future date. Because the buy and sell contracts are settled on a set future date, they are called futures or futures contracts.
If you are expecting Bitcoin’s price to rise in the short term, you can buy a BTC futures contract at a lower premium. If the price of Bitcoin rises by the date of expiry of the futures contract, the premium will also rise. You can either take delivery of the Bitcoin or sell the contract and profit from the premium gain.
For example, for the 30 October 2022 expiry, the premium for BTC futures is ₹100. And you expect Bitcoin’s price to rise by 10% in the next one month and buy the BTC futures contract by paying a premium of ₹ 100. Bitcoin’s price witnesses a 15% gain, and the premium for the 30 October BTC futures contract increases by 50%. In this case, you can either sell the futures contract and pocket the premium gain or take delivery of Bitcoin at a lower price.
Margin trading
Also known as leverage trading, it allows you to borrow funds from your broker by keeping your holdings as collateral to initiate a trade. For instance, if you are expecting the price of Bitcoin to rise in the short term, you can initiate a “BUY” trade with the borrowed amount, and once the trading objective is met, you exit the trade and return the borrowed money. The difference between the buy and sell price minus the trading fee and other charges is your net profit from that trade.
Other trading options to go long in cryptocurrencies include Crypto Contract for Difference (CFDs), crypto binary options, prediction market, etc. However, these options are suitable for experienced traders.
Conclusion
If you are going long, buying and holding and the systematic investment plan (SIP) are two less complex, proven options you can consider to generate profit. The other two options discussed carry a higher degree of risk and require a good understanding of the market to profit consistently.
FAQs
How to do longs in crypto?
To earn longs in crypto, you can use margin trading or buy and hold a cryptocurrency for an extended period, anticipating its value to rise. However, beware of the risks involved.
What does going short mean in crypto?
Going short in crypto refers to selling a cryptocurrency you don’t own, aiming to buy it back at a lower price later. It profits from a decline in the crypto’s value. It’s high-risk and requires careful market analysis.
What is the difference between long and short in crypto market?
In the crypto market, going long means buying a cryptocurrency with the expectation that its value will increase over time, while going short involves selling a cryptocurrency, expecting its value to decrease so that you can buy it back at a lower price. Going long is a bet on a rising market, while going short is a bet on a falling market. Both strategies carry risks and require careful consideration of market conditions.
How long should you hold crypto?
The duration to hold crypto depends on your investment goals, risk tolerance, and market conditions. Long-term holding (years) can offer potential growth, while short-term holding (days/weeks) may suit traders aiming for quick gains. Always research and make informed decisions.
