Crypto Investing vs. Crypto Trading: 3 Major Differences
Updated · Nov 18, 2023
WHAT WE HAVE ON THIS PAGE
When you first enter the crypto space, you will need to decide if you will trade on the cryptocurrency markets or hold onto your assets and invest. These two approaches might sound similar, but there are some significant differences between the two that you should consider. The purpose of this article is to help you understand these two popular ways of earning crypto, their differences, and which one will suit you best.
What Is Crypto Trading?
First things first, what is crypto trading? It’s the process of selling digital assets for fiat money or other assets. You can do this either at a crypto exchange or via a crypto brokerage. The idea of trading is that you try to make money in the short term by benefiting from the market’s volatility.
Crypto trading is an active strategy that requires that you keep an eye on market trends. Moreover, you keep a close eye on how the market moves, and you employ technical and fundamental analysis to execute successful trades. Additionally, you can employ various other crypto trading strategies, which can help you become a better trader. Don’t worry; we list a few of these further down the article.
Crypto trading has several perks – those who participate in it can reap immense rewards if their trades are successful. Additionally, trading cryptocurrency may be a thrilling and thought-provoking activity for many people. At the same time, it comes with several risks that you need to consider before you begin crypto trading.
For instance, trading cryptocurrency does not ensure financial success. Unless you spend a significant amount of time researching and monitoring the underlying market, chances are you won’t make profitable trades. For this reason, crypto trading may be stressful for some and may impact people’s emotional well-being.
What Is Crypto Investing?
While there is still some trading involved in crypto investing, it focuses more on long-term investments. The idea behind crypto investing is that you would hold on to your asset for a long time, expecting to benefit from future price increases.
The goal of investing is to find technologies and coins that have the potential to yield big returns over an extended period of time. While most traders focus on long-term Bitcoin trading when crypto investing, it’s also possible to explore ICO projects and other underlying coins for your trades.
Unlike cryptocurrency trading, investing isn’t demanding. You won’t have to be glued to a cryptocurrency exchange monitoring market price fluctuations constantly. Instead, you can check in on the current market cap every few weeks. It might take months or even years to reap the rewards of crypto investing, but that is the point – to generate long-term profits.
It’s an excellent strategy for those who prefer a less risky form of trading. It also allows you to enjoy passive rewards if you decide to stake your investment and earn dividends.
Of course, much like crypto trading, crypto investing isn’t perfect and comes with a few setbacks of its own. This is probably not the best crypto strategy for you if you’re trying to make a rapid profit. There also isn’t a guarantee that a project will return great rewards in the future, so there is still a risk level to consider.
The 3 Big Differences Between Crypto Trading and Crypto Investing
By now, you should be able to understand some of the differences between trading digital currencies and investing in them. To sum up, here are the three biggest distinctions:
- Time Range: As you can see, crypto trading is mostly a short-term method where you can make a profit within a few days, weeks, or months. On the other hand, investing typically indicates you are chasing after long-term profits.
- Method: Trading requires that you actively monitor price movements and trading volumes within the crypto financial markets. Investing isn’t as demanding, and investors can be more passive. You might not need to employ technical and fundamental analysis when investing, but you should still have a strategy.
- Risk Type: When you trade crypto, you are choosing a highly risky method of earning money. If you are risk-averse, investing might be a safer option for you.
Considering the above, you can determine which method suits you best. Try to answer the following questions:
- Do you have time to monitor the markets day and night for favourable price increases?
- Are you comfortable risking your assets when trading short-term?
- What is your main goal when acquiring crypto? Are you looking to make a minor or major profit?
Answering these questions can help you determine which approach will suit you better. Once you decide, you can move on to acquiring digital assets. It’s essential to choose a safe and reliable place to purchase crypto.
Where to Safely Acquire Crypto
Buying cryptocurrencies is no longer a niche way to make money. In fact, it’s one of the most mainstream methods of earning a passive income. Therefore, no one was surprised when the online space was filled with hundreds of fake websites trying to scam investors.
In 2023, it’s getting increasingly more challenging to find reputable exchanges to trade Bitcoin and other virtual currencies. With news of SEC investigations against two major exchanges, Coinbase and Binance, investors are more hesitant than ever to trade cryptocurrency on these websites.
So, if you want to buy digital currencies in a different way, we advise that you consider crypto brokers. A successful broker-matching place you can try is the XBT App iFex 360 AI official website. It only takes a couple of seconds to pair with a fully-featured broker, and it won’t even cost you a dime! Brokers are perfect assistants to novice investors and can help them learn the ropes.
You can ask your broker all manner of crypto-related questions and work together on choosing the right crypto strategy for your investment style. You will also receive a set of useful tools that can help you trade cryptocurrencies, monitor the market, and start trading fast.
On the other hand, if you’d rather trade at an exchange, we’ve got your back. There are plenty of exchanges today that you can sign up with and receive the tools and resources to trade cryptocurrencies. It’s all about finding the right one. If you ask us about our preferred exchange, we would recommend eToro. Here, you can not only swap crypto but also participate in peer-to-peer exchanges and even trade traditional currencies. The website also tailors to those who prefer long-term investments and offers rewards for staking.
Crypto Trading Strategies You Should Try
Here are some examples of trading strategies you can research if you want to improve your earning potential:
- Day Trading: Day traders focus on small price movements that they can benefit from within a single day.
- Scalping: Scalping takes day trading and brings it to the next level. It involves making many trades within a short period of time, often minutes. Traders aim to benefit from small price changes.
- Swing Trading: This type of trading involves closely monitoring market changes so traders can benefit from short-term price movements.
If you decide to partner with a broker, you can ask them about these strategies and work together on how to implement them.
Crypto Investing Strategies We Recommend
Perhaps buying and selling crypto short-term is not your cup of tea. No worries. There are plenty of options for those who want to invest in crypto. Consider the following:
- Buying and Holding: Instead of selling cryptocurrencies shortly after you acquire them, you can hold your digital currency for longer. This strategy is called HODL-ing, and it stands for “hold on for dear life.” You can find articles online about hundreds of investors who made a profit while HODL-ing, so it’s never too late to try it yourself.
- Staking: If you are thinking of holding onto your assets anyway, why not consider staking your crypto? You can back a crypto project by locking your assets for a specified period. In return, you can receive dividends – a portion of money back as a thank-you for supporting a project. Once the time is up, you can withdraw that money back to your wallet and sell it to make a profit.
At first glance, trading cryptocurrencies and investing in them may seem like two very similar activities. But from what we’ve learnt, there are three fundamental differences between the two. Investors employ these strategies at different times and have varying approaches for each method. Additionally, each involves a separate kind of risk, so it’s important for beginner investors to familiarise themselves with these details before they start trading.
However, if you decide to join the crypto market, remember to buy digital assets at reputable platforms and do plenty of research so you can optimise your skills. We wish you an ever-green crypto portfolio!
Sean Michael is a writer who focuses on innovation and how science and technology intersect with industry, technology Wordpress, VMware Salesforce, And Application tech. TechCrunch Europas shortlisted her for the best tech journalist award. She enjoys finding stories that open people's eyes. She graduated from the University of California.