Disclaimer: This is for informational purposes and is not meant to serve as financial or investing advice.
The answer is that it depends. While there are no hard limits to crypto trades, read along with Pluto to learn what hidden restrictions you might encounter.
What Is Day Trading?
Day trading is intraday trading to make profits from short-term price fluctuations. In the United States, the SEC defines a day trade as “the purchasing and selling of the same security on the same day in a margin account.”
A “pattern day trader” places more than four intraday trades in 5 days. Brokerages require pattern day traders to keep specific account minimums and follow certain rules to meet FINRA requirements.
There can also be complicated tax implications for day traders.
All of the factors combined mean there is a practical limit to daily stock trades for most investors.
Of course, as with many other concepts in traditional finance, there is a robust market for day trading cryptocurrency. While it is high-risk, many crypto traders have seen high rewards day trading coins such as Ether (ETH) and Dogecoin over the past few years.
How Is Trading Crypto Different From Trading Stocks?
Trading crypto assets has many similarities to stock trading, but critical differences exist. Once being that cryptocurrency exchanges and the crypto market never close. The stock market opens at 9:30 AM and closes at 4:00 PM eastern time, but crypto traders can move digital assets around the clock.
Different trading hours have different characteristics. Examples are the Asia and European sessions during daytime hours for those respective regions.
Because of world events and differing economic conditions, one region’s session may be more bearish or bullish than another. Day traders can take advantage of these regional differences to make a profit.
24-hour trading volume for Bitcoin and Ethereum is typically billions of dollars. Some traders use BTC as an index of the entire crypto market, which contributes to BTC having a much higher volume than other cryptocurrencies.
Day trading crypto is widespread, and people use BTC to trade on the sentiment of the whole market.
Check out our Youtube channel for general information on trading crypto and financial markets. We post videos jam-packed with analysis of various cryptocurrency markets.
Where Can You Trade Crypto?
CEX
To trade crypto, one must use a crypto exchange. Crypto exchanges are typically less regulated than traditional stock brokerages.
There are no limits to crypto exchange trades except in rare cases where liquidity is low on a token. This can happen after high volatility for a particular token or if there’s a bank run and users are removing their tokens from an exchange. A high volume of trades can also cause an exchange to pause trading.
Another advantage to CEXs is they create an API for you that lets you use their platform to execute trades automatically. You can connect many simple trading bots to exchanges using your API.
DEX
Your other option is a decentralized exchange like Uniswap. Decentralized exchanges, or DEXs, are automated market-making (AMM) platforms built on the blockchain. All you need to trade unlimited crypto is a crypto wallet like Metamask and some starting capital.
The catch is that turning U.S. dollars or other fiat currency into crypto in a wallet can be challenging without using a centralized exchange. Some companies provide fiat on-ramping and off-ramping services. But the fees can be high.
IRL
The other alternative is to find a local P2P marketplace where you can exchange cash and crypto IRL.
Exchanging money with a stranger IRL can be dangerous, so taking precautions like using a vetted marketplace and meeting in public is recommended.
If a P2P exchange isn’t your style, you could find a Bitcoin ATM where you can trade Bitcoin for cash.
Apps
Aside from crypto exchanges, apps like Robinhood, Paypal, and Cash App are popular methods to buy and sell crypto. Most people probably already have their bank account connected to a payment or trading app, so it’s easy to start trading crypto there.
The downside is these apps aren’t as robust as trading platforms like Binance or Coinbase. You may not get the best market price, and the apps are subject to crash.
What Are Withdrawal Limits?
Once a trader takes profits, they usually convert it to USD and withdraw that to a bank account via ACH or wire transfer. This can take a few days and usually goes smoothly. But if you want to withdraw large amounts all at once, you might be in trouble.
All exchanges have set withdrawal limits to avoid bank runs and comply with anti-money laundering regulations. Depending on your account size, KYC level, and jurisdiction, they can range from $20,000 to $100,000.
For example, Coinbase’s daily withdrawal limit is $50,000 per day.
There are also deposit limits for exchanges. But as your account ages and you trade without problems, these limits can increase over time.
The Bottom Line
Whether a beginner or a pro in financial markets, you need to know the restrictions on trading digital currencies. The good news is there usually aren’t any!
The average trader just has to be mindful of deposit and withdrawal limits. But remember that trading on a centralized exchange means you are subject to the whims of the exchange.
They can pause trading at any time due to maintenance or technical glitches. It can be wise to trade on DEXs because the blockchain never stops.
Ready to get trading? Check out Pluto today!
Sources:
What are the limits on Coinbase Pro? | Coinbase
