It’s become undeniable that the cryptocurrency market is one of the most profitable ventures for investors all around the world. Moreover, it’s highly accessible, as you can easily buy USDT for cash and start trading on various exchanges.
However, many ask themselves which way they should approach the markets to become more profitable. Should you become a day trader or invest regularly?
In this article, we will try to answer this question. To this end, we will explain the differences between trading and investing. We also compare the risks involved, and the expected ROI. In the end, you should be able to decide for yourself which method for profiting from the markets suits you best. Let’s get started.
We can safely say, cryptocurrencies are here to stay. They began their journey as a simple fad, or in pejorative terms “digital money for nerds”. However, the popularity of Bitcoin over the years has increased immensely.
People saw the value in the decentralization of finances, as well as having access to an independent, deflationary store of value. Consequently, the value of the original crypto rose from a mere 3 cents to an all-time high of $60.000 in May 2021.
This caused many retail investors to start considering cryptocurrencies much more seriously. Even institutional investors have started accumulating Bitcoin on a massive scale, with Microstrategy having acquired over 100,000 bitcoins worth more than $40 billion at the time of writing.
All in all, cryptocurrencies are highly appreciating assets that can bring more profits than any stock, commodity, or bond.
Cryptocurrency investing is the action of acquiring cryptocurrencies with the goal to make profits in the mid or long term. Consequently, crypto investors aren’t too concerned with the daily Bitcoin price, but prefer to zoom out and watch for long-term returns.
As such, the risk involved in cryptocurrency investing is much lower than trading, as we will later see in this article. Investors usually use simple investing strategies such as dollar-cost average (DCA) to accumulate large amounts of crypto over time. Below is a short overview of this strategy.
DCA is one of the most beginner-friendly strategies for investing in cryptocurrencies. It involves purchasing one or more cryptocurrencies at regular intervals for a set amount of USD, regardless of the price of those cryptocurrencies at that time.
The goal is to soften the price curve of cryptocurrencies so that you aren’t affected as much by the volatility of the market. Of course, there’s some risk that remains.
By doing a DCA strategy, you are committing to a long-term investment in crypto. You need to believe that the value of your investment will ultimately go up in the future, making it worth your while. Consequently, you should stick to your long-term goal and ignore price fluctuations, something that is easier said than done.
Cryptocurrency trading is the action of buying and selling cryptocurrencies regularly (e.g. on a daily basis) with the goal to make profits on the price difference. In contrast to investing, it requires a lot more skill to be successful.
Additionally, the risks in trading are also amplified. There’s a much higher chance to register losses as an inexperienced trader than as an inexperienced crypto investor.
Moreover, to be really successful at trading you will need to learn technical analysis or TA. TA is the science of reading statistical price history and charts and being able to detect patterns and market exit or entries.
So which one should you choose – trading or investing? Well, the answer is really up to you. If you are looking for a lower-risk venture that doesn’t require a lot of time, we recommend investing using DCA. You won’t have to follow the news too closely, just have a general idea of what is happening in the markets.
If you are a risk-taker and think that you can master technical and fundamental analysis, trading is by far a more profitable venture. Some coins can make incredible returns (x100) in a matter of days, and experienced traders often make the most of these crazy price movements.
All in all, investing is a safer, long-term venture, while trading is a high-risk high-reward short-term type of deal that requires some learning beforehand.
Using cryptocurrencies as a financial instrument is a risky, but profitable enterprise. Trading requires a lot of learning, but once you get it right, you can start making some considerable profits. Investing, on the other hand, has proven to be a surefire way of making good long-term returns, nearly risk-free.
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