While Investing and Trading are intertwined and aim to increase your investment value, the difference lies mainly in the type of strategy each method employs to chase the investment goal. This is true for conventional financial securities and as well cryptocurrencies.
We will now take a look at the fundamentals of Crypto Trading and Crypto Investing before we dive into the key differences between them.
What is Crypto Investing?
Crypto investing refers to buying and holding cryptocurrencies and assets with the hope that their value will increase in the future. This strategy is similar to that of stock market investments. HODLers, as cryptocurrency investors are called, buy and hold the cryptocurrencies over the long term without worrying much about timing the market.
If you want to invest in cryptocurrencies but don’t have sufficient expertise or time to evaluate each crypto, platforms like ZebPay Earn could help you. ZebPay Earn is like a savings account in which you can hold cryptos and earn a fixed income at the beginning of every month.
ZebPay Lending is another investment method you can use to maintain a fixed-term deposit to lend cryptos to ZebPay and earn passive income.
What is Crypto Trading?
Crypto Trading, like trading in financial securities, is all about speculating on the price movements of crypto. You can trade crypto coins on a crypto exchange, such as Zebpay. Like traditional equity and other securities trading, crypto trading has risks because traders employ various trading strategies to derive returns in a highly volatile market.
The trading strategies in cryptocurrency markets include the following:
- Day trading: Daily monitoring of the market for taking advantage of the price movements.
- Swing Trading: These traders depend on technical analysis for predicting high volatility in the prices of the coins.
- Scalping: These are the most active traders. They use the crypto market for executing several trades, making small profits from these transactions.
- Momentum Trading: These traders trade based on recent price trends by buying low in an upward trend and selling once the momentum breaks and vice versa.
Differences between Crypto Investing and Crypto Trading
Here are some key differences between crypto investing and trading:
- Investing: One of the major differences between crypto investment and trading is the time horizon involved. When it comes to Crypto investing, investors buy and hold a crypto asset for the long term, hoping for an appreciation in its value.
Another difference is in the trade analysis tool used by investors – the fundamental analysis, which evaluates crypto’s long-term potential by establishing an intrinsic value. Various metrics are adopted, such as the project and team analysis or cryptocurrency usage and adoption rates.
The crypto market is highly volatile; hence you should understand the risks before venturing into trading than investing. Moreover, traders involved in margin trading are at high risk as they trade with borrowed funds, and the losses can result in losing additional funds than what was originally budgeted.
- Trading: When it comes to Crypto Trading, traders buy and sell cryptos based on assessing the best time to enter or exit the market. In crypto trading, the returns are faster, although it requires a lot of hard work and is riskier. Thus, crypto trading can be more profitable for those who have better risk exposure.
Crypto traders employ technical analysis to predict future prices using the analysis of historical price data, price indicators, and charting tools. Since the short-term price movements can be very volatile, a crypto trader must have a deep understanding of technical analysis techniques to help time the market and profit from volatility.
Unlike trading, investing is comparatively less risky, where prices frequently change and are unpredictable and volatile.
Like any other market, the cryptocurrency market is exciting and volatile. You must understand the key differences between investing and trading crypto before deciding the strategy that suits your profile. Ultimately, a smart investor tries to gain an understanding of the market cycles to take advantage of the market conditions and HODL in the hope of price appreciation. On the other hand, traders aim to profit from the short-term price movements in the bull or bear market.
Cryptocurrency trading costs include fees for exchanges and network charges, and the exchange platforms charge the former. The network fees are paid to crypto miners to secure the networks. The fees vary on different exchanges; however, if you are looking for the best cryptocurrency exchange, you should take a look at the features that Zebpay offers.