When people want to buy/sell crypto, they often ask the following questions:
Many times, when I say “crypto investment”, they think that means investing in a get-rich-quick scheme. This is not what we mean here. What we are going to talk about here is the difference between trading and investment. If you trade crypto then you are looking for a quick profit, you might be a day trader or swing trader and that’s fine.
Those guys who trade on an exchange usually sit in front of their computer screen, watching the charts all day long. They pick up coins that have volume and pump them to make money. A lot of guys dabble in trading to make some quick cash, and some of them are very good at it. This is not what we are going to talk about here though.
What is the difference between Crypto Trading and Investing?
Some people think trading and investment are the same things but there is a big difference between the two. Investing in crypto means you will buy coins not to sell them immediately, just like investing in stocks or bonds – you hold your coins and you wait for them to increase in value. It takes time to see results, but the reward can be much greater than what you might get from day trading or shorting crypto.
So if you buy some BTC and HODL (hold on for dear life) then at the end of the year, maybe that $100 you invested is worth $500 by today’s prices. In a year you made a 100% profit on your investment, and that was just from holding BTC. If instead, you shorted Bitcoin then sold it after it went down then maybe you made a short-term profit of $1000 or more too, great! But if the price of BTC goes up ten times in the next year then what happens to your $1000?
You would be losing money by shorting BTC and every time you sell it, you are paying a commission on top of that. So if you sell your Bitcoins for a quick profit then take out commissions into account then maybe you made a total profit of $500 or more.
The reason it’s called “crypto trading” and not “crypto investing” is because every day people trade crypto on the exchanges and make profits through BitIQ. People who invest in stocks or bonds don’t have to sit in front of their computer screens all day long watching the prices go up and down.
Should I trade or invest in Crypto?
Only invest in what you can afford to lose, and only for the amount of time that you can commit. Even if you think there is a good chance that BTC will go up in value, it might not happen this year or next year – or even 5 years from now. So don’t invest your life savings into crypto! You should only risk money that you can afford to lose.
If you are looking for short-term profits then trade, but don’t blame us when the price drops even though you only held it for a few hours. If you want large, long-term gains then invest in crypto and hold on until your investment pays off in full. Remember that the prices of all crypto assets are influenced by a lot of different factors which you can read about here.
Hopefully, this article has given you some insight into the difference between investing and trading. If you’re still confused then leave a comment below. Thanks for reading and please share this post so others can learn what crypto trading vs. crypto investment is all about.