What is the implicit cost vs explicit cost in the context of cryptocurrency trading?

1 answers

• Nikki KJul 15, 2022 · 3 years ago
  Implicit cost and explicit cost are two important factors to consider in cryptocurrency trading. Implicit cost refers to the opportunity cost of using your own funds for trading instead of investing them elsewhere. It includes the potential gains that could have been made if the funds were invested in other assets. On the other hand, explicit cost represents the actual expenses incurred in trading, such as transaction fees and exchange fees. Both implicit and explicit costs can have a significant impact on a trader's profitability. Traders need to carefully evaluate these costs and consider them when making trading decisions. For example, if the implicit cost of holding a particular cryptocurrency is high due to missed investment opportunities, it may be more beneficial for a trader to sell it and invest in a more profitable asset. Similarly, if the explicit costs of trading on a specific exchange are too high, a trader may consider switching to a platform with lower fees. By managing both implicit and explicit costs effectively, traders can improve their chances of success in the cryptocurrency market.
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