How Much Do You Need to Day Trade Crypto?

Day trading is an opportunity for those who do not want to do traditional buy and hold investing. Intraday strategies apply to the crypto market because the space is filled with short-term swings and patterns. You can benefit significantly by using these fluctuations and adopting short-term positions since the crypto market is highly volatile.

Like any other line of investment, you need to know how much to invest. You may be wondering, how much do you need to day trade crypto? The answer is right here in this article. Plus, we’ll show you how to choose the right platform and determine your tax payments to help boost your profits.

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How Much Should I Put in?

It depends on your ambitions, objectives, and your desired timeframe. The good news is you can start small, say $500. Of course, the journey would be much shorter if you invest more.

There’s nothing wrong with starting small, and in time, it will likely translate into decent returns. However, If you lean towards a low-risk strategy and risk only 1% of your balance, your daily earnings won’t be that high. 

If you intend to make profits on an accelerated timeline, putting more capital will drive you further forward.

However, your ultimate success in making significant profits in the crypto space isn’t dependent on the initial capital. Whether you start small or big, the rules of success in crypto trading are the same. What matters more to hitting daily numbers is how you manage your balance, and choosing a suitable trading platform is a significant part of that.

Where to Start Day Trading Crypto?

While some might choose traditional crypto exchanges, trading with OTC desks offers significant benefits. Here’s why:

1. No Middleman

Traditional exchanges involve three parties in every transaction, meaning in addition to the buyer and seller, there’s an exchange in between, acting as an intermediary between two parties.

However, there’s no third party involved with OTC desks. Hence the deal will go through much faster, and you’ll logically pay less commission.

2. Anonymous

One of the primary concerns for crypto traders is protecting personal and financial details. Fortunately, OTC crypto traders aren’t required to share personal information on OTC desks since they can directly contact the other party via phone, email, online chat, or any other method they prefer.

3. No Liquidity Problems

Crypto exchange users constantly grapple with low liquidity, leading to slippage and delayed execution time. However, that’s a non-issue with OTC because you can trade large volumes in far less time, with far less effort.

4. No Limits

The whole point of trading crypto is to gain more profit. Plus, sometimes day trading requires adopting high-risk strategies where you don’t want to constantly struggle with order and withdrawal limits. That’s what crypto exchanges lack and why many have shifted towards using OTC desks where they can comfortably trade assets. 

Paying Taxes

Any smart trader wants to keep as much profit as possible to reinvest them and hit higher numbers. To do that, one of the most important questions your need to answer is: how much tax do I pay on crypto gains? 

The answer can differ based on your country of residence. For instance, US residents must consult with the IRS to determine how much tax applies to them. People living in Canada should refer to CRA guidance to see how crypto is taxed in Canada. 

Canada’s Taxation Policy 

How is crypto taxed in Canada? The Canada Revenue Agency views cryptocurrency as a commodity and not as a legal tender. Depending on the nature of your activity, you’re required to either pay income tax (100% taxable) or capital gains tax (50% taxable).

To calculate the capital gains tax, you need to consider the adjusted cost basis for every cryptocurrency traded. An adjusted cost basis is a number used in the estimation of the loss or gains you made by buying and selling an asset. Of course, as a trader, you may have purchased a cryptocurrency at different prices in various periods. In that case, you need to calculate the average cost of all those purchases and use it as the basis.

In most cases, the CRA considers mining and trading cryptocurrency to be examples of commercial activity where you buy crypto with the intention of turning a profit by selling it at a future date. If that’s the case, you have to pay tax on your income (100% taxable). Of course, we strongly advise you to consult with a professional as every situation is different.

Bottom Line

So, how much do you need to day trade crypto? There’s no argument that raising more capital can put you on a faster track to making profits. However, that’s only one piece of the puzzle. Your strategy, time frame, platform, and choice of crypto play a far bigger role than your capital. Your choice of platform is of great importance because using the right platform, you can stay away from problems like limited liquidity, unnecessary hangups, and order/withdrawal limitations. The good news is that OTC desks like Secure Digital Markets can provide you with low-latency software and help you make traders faster and at highly competitive prices. Hence, don’t hesitate and contact us right now! We’ll get you onboard in no time and take care of everything.