Why and When to Swap?

Medium May 13, 2021 · 5 min read

Key Takeaways:
— As part of our goal to make Ledger the gateway to all your crypto services, we recently introduced a new feature known as Swap.
— Through Swap, you can easily and securely exchange one crypto for another, enabling you to potentially capitalize on opportunities or exit volatility as needed.
— With over 40 cryptocurrencies supported, Swap has something for everyone and couldn’t be any easier to use.

If you’ve loaded up Ledger Live at all in the last few months, odds are you’ve spotted one of our latest features— Swap

As you may have already deduced, Swap is a nifty feature that allows you to easily swap one supported cryptocurrency for another—all while benefiting the same security you expect when using your hardware wallet with Ledger Live

It’s similar to doing a currency conversion, except this conversion is between cryptocurrencies; like Bitcoin (BTC), Ether (ETH), and a whole bunch more.

Powered by our exchange partners Changelly and Paraswap, Swap has become one of our most popular new tools—largely due to the flexibility it offers for users using a Ledger device to store their assets. 

But are you using it to its full potential? Find out below!

Why you should use Swap

For the security conscious, Swap represents an easy way to gain access to a massive range of cryptocurrencies, without having to give up that oh-so-important security

Unlike when trading at one of the numerous centralized exchange platforms, you never lose control of your cryptocurrencies while using Swap—i.e. it’s completely non-custodial! This means you never have to trust anybody else with your funds.

Just the way it should be. 

This is made possible thanks to your Ledger hardware wallet, which securely stores and manages the private keys that allow you (and only you) to spend your funds. Exchanges, on the other hand, take full custody of these keys—leaving your funds at risk should their security fail and restricting how and when you can access your assets. 

For more on the importance of keeping custody of your private keys, see Crypto and Financial Freedom.

custodial vs non custodial

Want something new? Swap it

“But… what if I don’t know how to trade?”, we hear you say.

Don’t sweat it. If you’re baffled by the complexity that can come with regular cryptocurrency trading—like charts, limit orders, stop losses; and all that jazz, then you’ll find Swap to be a breath of fresh air. 

The process couldn’t be any easier. After loading up the swap feature, simply choose the cryptocurrency you want to swap and the cryptocurrency you want to receive in return, enter an amount to swap, and then simply click ‘Exchange’. You can then simply wait until the process completes, after which your newfound coins will be available in your wallet. 

All the technical wizardry that ensures the swap goes through smoothly occurs behind the scenes.

Keeping things simple

Swap also keeps things clear-cut by providing a fixed exchange rate each time. This means you can be sure exactly what you’re going to get—no need to factor in complex factors like spread or slippage. 

Or for those that want to try for a better exchange rate, there’s a floating rate option, which will automatically execute at the best price at the moment the order is validated rather than fixing it in advance. 

You’ll also be able to keep track of all your swaps through the history tab—helping you keep tabs on your profits with ease. 

With dozens of cryptocurrencies now supported, the opportunities are practically endless. Go on, give it a try. 

When to use Swap

When it comes to trading cryptocurrencies, time is money—quite literally. With many cryptocurrencies experiencing wild price swings at the drop of a hat, there’s always an opportunity to be had for the quick. 

Swap allows you to take advantage of rapid price changes without first needing to deposit to an exchange—saving you precious seconds and allowing you to quickly swap one cryptocurrency for another in just minutes. 

This is what makes it so powerful.

Own the market

If you’re more on the conservative side, you’ll be pleased to know that Swap also works in reverse! Sensing uncertainty in the market? No problem—swap your volatile cryptocurrencies for stablecoins like Tether (USDT) and you’ll be home and dry!

Let’s say you’ve got some Ether (ETH) and you think it’s going to temporarily drop in value, you can quickly exchange it for a price-stable asset like USDT to maintain the value of your balance even if the market turns sour. Once things start picking up again, you would then be free to convert your USDT back into ETH or anything else!

The capability to temporarily opt-out of volatility is regularly exploited by professional traders. Now, Swap makes it as simple as clicking a few buttons.

Worried about tax?

One of the biggest concerns with cryptocurrency holders is that they will be taxed if they exchange their assets.

It’s an understandable concern, but often an invalid one. While we can’t get around paying tax, usually simply converting one cryptocurrency to another is not considered a taxable event—since it’s not considered ‘disposing’ of your assets.  

That’s right, simply holding cryptocurrencies, whether they’re stablecoins or not, shouldn’t change your tax liabilities. So swap away without worries.

In most cases, this is more efficient than simply converting back to fiat, since it also lets you jump back in when the market starts picking up without skipping a beat.

Swap vs trade: what’s the difference?

swap vs trade

Now, you’re probably thinking, what’s the difference between swapping cryptocurrencies, and trading them? After all, don’t they achieve the same thing?

Well… The answer is ‘kind of’, the outcome is the same in that you exchange one cryptocurrency for another; but the process involved is different. 

When trading, you need to give up control of your cryptocurrencies by using an exchange platform. This usually means forking over your identity details and using a custodial platform that controls your private keys to let you trade using an order book (essentially a list of available bids and ask prices). 

They’re also largely built for professional traders that need to exchange their assets regularly — often using complicated trading strategies and charting tools to track and place their orders. 

Ledger’s Swap tool, on the other hand, is a more intuitive alternative that doesn’t require an account and never exposes your private information. Instead, you just pick a cryptocurrency you want to swap, and one you want to receive, and easily exchange them at the best available exchange rate!

With that in mind; like trading, swapping is an inherently risky practice. If the market is your favor you stand to net a potentially significant profit, whereas if it’s not, you can lose money. No tool can help you avoid this risk. While Ledger Swap ensures security and ownership of your funds, it’s on you to make informed choices before swapping. 

If this sounds like something you’d like to take a for a spin, check out our complete tutorial on using Swap — with our partners Changelly, Paraswap, and Wyre.

Knowledge is power – so keep on learning! If you enjoy getting to grips with crypto and blockchain, check out our School of Block video What is DeFi?

Disclaimer: Exchange, lend, and other crypto transaction services are provided by third-party partners. Ledger provides no advice or recommendations on use of these third-party services.

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