There are many ways to become indulged with crypto. However, two of the popular ways are crypto investing and crypto trading. They operate on the same fundamentals but have some key differences. It is the strategies that differentiate crypto investing from crypto trading.
Wondering what the difference between these two is? This article explains it.
What Is Crypto Investing?
Crypto investing represents the act of buying crypto and holding them for a really long time in the hope that the price of the coins will rise in the future. This is pretty similar to stock market investments.
But instead of holding stocks, you hold cryptocurrencies that you believe have a growth potential in the future.
The Money Mongers, a leading crypto publication says, “Crypto investing is an ideal choice for anyone who does not have enough time or expertise to analyze the crypto market.”
Instead, they prefer holding popular cryptocurrencies like Bitcoin, Ethereum, and other ones to get a great ROI in the future.
What Is Crypto Trading?
Crypto trading is the same as trading any other financial securities. In this, you speculate that the price of a cryptocurrency will go up or down. And depending on this, you place your trades. However, unlike crypto investing, crypto trading has a higher risk.
Since the crypto market is extremely volatile, the market does not always move as you expect it to. However, strong technical analysis and the use of different indicators would help you make money through crypto trading.
Also, there are different types of crypto trading out there. Such as:
- Day trading: You daily monitor the crypto market and place your trades. You usually place several trades in a day.
- Swing Trading: Unlike day trading, you don't trade daily in swing trading. Instead, you place trades hoping that the market will move in your favoured direction in the upcoming weeks. It is a short term crypto investing strategy.
- Scalping: Scalping is one of the popular trading choices. In this case, a trader executes several trades and makes small profits from them.
Key Differences Between Crypto Investing and Crypto Trading
In crypto investments, you don't really set a time period for your trades. You simply buy and hold a crypto asset for the long term depending on various factors. Such as what's the future of the crypto coin, what problem it solves, will people use the coin, and more.
But crypto trading requires you to buy and sell crypto frequently. You can buy and sell crypto on the same day or in a few weeks. In this case, the returns are faster but do not give you a huge profit. Also, it requires you to have a lot of trading knowledge, plus crypto trading is considered to be a risky thing. As any type of financial risk carries a loss risk, it may not be a bad idea to educate yourself on crypto insurance.
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Crypto Investing vs Crypto Trading - The Takeaway
Crypto investing and crypto trading are two popular ways to make money in the crypto industry. But both come with their own risks and rewards. As an investor, you should decide if you want to become a crypto investor or crypto trader, and depending on your choice, you need to walk on your preferred path.