Trying to understand what it means to enter a long position when trading crypto? Read ahead for a detailed explanation!
What Is A Long Position?
The term “long position” in cryptocurrency refers to an investment strategy where an individual or institution buys a particular digital asset with the intention of holding it for an extended period, with the expectation of making a profit from its appreciation in value.
What You Need To Know About Long Position
As the name suggests, the long position definition is the opposite of that of a short position, which is a strategy used by traders who believe that the value of a digital asset will decrease in the near future and aim to capitalize on this downturn.
Long positions are more common than short ones, mainly because the majority of traders wish to capitalize on the upward trend in crypto prices and are striving to avoid the fear of missing out (FOMO). This means that many traders opt for a long position due to significant advancements that boost their confidence in blockchain technology and crypto.
One example of a combination of such events is PayPal’s introduction of a service that enabled its users to buy, hold, and sell various cryptocurrencies, including BTC, in October 2020, followed by Bitcoin breaking its 2017 all-time high in November.
Such situations typically result in a surge in the number of users investing in crypto assets, many of whom decide to see if they can yield greater profits in the long run. In fact, some amateur crypto enthusiasts end up unintentionally taking a long position if they forget about their ownership of crypto for several years.
All in all, opting for a long position can be risky, as the crypto market is highly volatile and prices can fluctuate rapidly. Thus, it’s crucial to research the asset you are investing in and have a well-diversified portfolio to reduce financial risks. It’s also advisable to have a clear exit strategy in case the asset’s price drops unexpectedly.
