Differences between Investing vs Trading
Differences between Investing vs Trading
IOTA is a cryptocurrency that exists on an open-source distributed ledger. The history of IOTA goes back to 2015. It was created by David Sønstebø, Dominik Schiener, Sergey Ivancheglo, and Serguei Popov. They partly funded the project through a public crowd sale. Crypto enthusiasts used other cryptocurrencies to raise 1,300 BTC (equivalent to $500,000, at the time).
IOTA launched a year later in 2016. Initial investors contributed 5% of the total IOTA token supply. This initial supply and, in turn, the investors became part of the IOTA Foundation, which is where improvements to the network now stem from.
Transactions on the network are validated by nodes that have previously approved two transactions. These nodes are overseen by a coordinator node, which removes the need for validation through miners. This removes transaction fees. That makes IOTAUSD an ideal solution for microtransactions and, therefore, the Internet of Things.
The history of IOTAUSD is interesting from a trading perspective because, unlike other financial instruments, it’s not been around for 50+ years. Instead, it’s a product of the cryptocurrency revolution and, therefore, prone to notable swings. However, unlike some cryptos, the price of IOTAUSD has fluctuated too significantly since it launched in 2016.
Having said this, the IOTA price tends to move in sync with Bitcoin and other major cryptocurrencies. This led to an unprecedented spike in 2018 when the value of IOTA coins increased by more than 1,300%. The IOTAUSD price can also be affected by improvements to the blockchain and mainstream adoption. With microtransactions a particular feature of this crypto, some believe it will become important within the Internet of Things. Finally, with a supply cap of 2,779,530,283,277,761 IOTA, rarity may also affect the price of IOTAUSD as more coins are created.
Why should you trade IOTA coins? The advantage of trading IOTAUSD, rather than investing, is that you can go long or short. CFDs make it possible to trade IOTA in both directions because you don’t own the underlying asset.
Therefore, you can speculate on the price increasing or decreasing, which can be useful in volatile markets, such as crypto. However, by investing, you have a direct stake in IOTA because you own the coins. This gives you the ability to store it in your crypto wallet. The downside to this strategy is that you’ll only make a profit when the price of IOTAUSD increases.
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* The spreads provided are a reflection of the time-weighted average. Though Skilling attempts to provide competitive spreads during all trading hours, clients should note that these may vary and are susceptible to underlying market conditions. The above is provided for indicative purposes only. Clients are advised to check important news announcements on our Economic Calendar, which may result in the widening of spreads, amongst other instances.
The above spreads are applicable under normal trading conditions. Skilling has the right to amend the above spreads according to market conditions as per the 'Terms and Conditions'.
What is the historical context of IOTA's technology, and why should it be considered as a trading instrument?
Founded in 2015, IOTA introduced a novel distributed ledger technology, the Tangle, designed to address scalability and transaction fee issues common with blockchain-based cryptocurrencies. Using a directed acyclic graph (DAG) structure, IOTA aims to enable secure, feeless microtransactions for machine-to-machine transactions within the Internet of Things (IoT) ecosystem.
As a trading instrument, this crypto presents potential due to its revolutionary approach that could disrupt industries, thus attracting investors seeking early exposure. Partnerships with notable companies also boost its market appeal.
However, there are concerns, notably about centralization due to its Coordinator node, which some believe undermines its decentralization aim. Security vulnerabilities and scalability challenges have been identified, casting doubts on its long-term viability. These cons underline the investment risks and emphasize the importance of careful evaluation before trading this crypto.
Why is the supply and demand dynamics of the IOTA instrument important for investors?
Understanding the supply and demand dynamics of any investment instrument is crucial, and IOTA is no exception. It has a fixed supply of 2.78 billion MIOTA tokens, all created at the network's inception. This fixed supply eliminates inflation risk due to new token creation, a characteristic that sets this crypto apart from many other crypto instruments.
Demand for IOTA is largely driven by its utility in the IoT ecosystem, where it facilitates seamless data and value transfers between machines. As the IoT industry continues to grow, it could potentially drive higher demand for IOTA tokens, impacting their market value. Investors looking to diversify their portfolio might consider adding a share of this crypto due to these unique dynamics.
What are the key risks associated with the IOTA instrument and how do they impact its share in an investment portfolio?
Like any investment instrument, IOTA carries a degree of risk. First, its relatively new Tangle technology, while offering many benefits, is less tested than traditional blockchain, suggesting potential unknown risks. Second, security risks exist. As evidenced in 2020 when the network was temporarily shut down due to a hack, vulnerabilities can be exploited, causing disruptions.
Lastly, the value of IOTA, like other cryptocurrencies, can be highly volatile, leading to significant price swings. These factors highlight the importance of thorough research and risk assessment before adding a share of this crypto to an investment portfolio. Investors should always balance these risks against their overall investment strategy and risk tolerance.
Why Trade [[data.name]]
Make the most of price fluctuations - no matter what direction the price swings and without capital restrictions that come with buying the underlying crypto asset.