Though crypto investing and crypto trading can both be profitable, one should not confuse one from the other as each requires two completely different mindsets and skill sets. What exactly are those differences? And which approach is most suitable for you? Read on and find out.
- Crypto trading aims to make quick returns while crypto investing aims to build wealth over an extended period of time
- Crypto traders need to keep themselves updated on trading volumes, price charts, market conditions and other information that could help them predict or speculate on short term crypto price movement
- Crypto investors are more interested in doing research on crypto projects that have huge potentials and finding out who leads their teams, what their long-term goals are and other such information.
DEFINING CRYPTO TRADING & CRYPTO INVESTING
At its core, trading is simply the exchange of goods or services between two entities. To be more specific, a trade occurs when these two parties take part or engage in buying and selling of goods or services for their own profit.
Needless to say, crypto trading follows the same concept.
What is it? Crypto trading is when you buy or sell digital assets with the aim of making short-term profits or quick returns based on short-term fluctuations in the market. It usually takes place in a crypto exchange.
In contrast, the aim of crypto investing is to gradually build wealth over an extended period of time by buying digital assets that you think will grow exponentially in the coming months or years, and then selling them once price appreciation takes place.
That said, selling is not always the end goal of crypto investors. Instead of selling, crypto investors may choose to participate in liquidity mining, staking or lending and generate passive income from their digital assets.
ARE YOU A CRYPTO TRADER OR A CRYPTO INVESTOR?
Having just defined crypto trading and crypto investing, the question now is which of these two contrasting approaches suits you?. To help you answer this question, we’ll describe the characteristics of a crypto trader and a crypto investor. So that, later on, you can decide for yourself which resonates with you.
So, what’s a typical crypto trader like?
A well-known trader once said that “99%+ of traders don't care about Ferraris and yachts. They just want to pay their bills, save a little extra money, and sleep well at night”. Indeed, this description is consistent with what we said about crypto trading earlier - that it mainly focuses on making short-term profits or quick returns based on short-term fluctuations in the market.
For this reason, crypto traders need to keep themselves updated on trading volumes, price charts, market conditions and other information that could help them predict or speculate on short term crypto price movement.
On the other hand, crypto investors are usually not interested in short-term price movements.
Short-term volatility doesn’t concern crypto investors since they have longer time horizons and are more focused on building wealth over the long term. As popular investor Ken Fisher once said, “Time in the market beats timing the market” - which is why they are more interested in doing research on crypto projects that have huge potentials and finding out who leads their teams, what their long-term goals are and other such information.
All in all, traders are more active in their approach to making profit with crypto while investors are more passive. Also, while crypto traders tend to make quick decisions and educated guesses, crypto investors take their time in understanding the crypto projects that they wish to support and invest in.
So, which approach do you identify with?
As mentioned earlier, both crypto investing and crypto trading can be profitable if done correctly. There isn’t really a “best approach” - only what suits your personal goals or your personality.
Do you want to actively check on price movements or be more passive and focus on setting long investment goals instead? Do you enjoy studying multiple signals and technical indicators? Or do you prefer doing research on crypto projects that are currently undervalued but have huge potentials? Answering these questions can help you decide on which approach works better for you.
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