Crypto Investing vs Crypto Trading: Which One is Right for You?


19 April 2023 | ZebPay Trade-Desk

Intro to Crypto Trading

Crypto trading, just like trading other traditional financial assets, involves predicting price movements and analysing on the future of digital assets like Bitcoin, Ethereum, etc. Trading is all about “timing the market,” or buying and selling assets based on predictions of the best entry and exit points. Traders watch market news and technical analysis indicators to make their decisions. Some crypto trading strategies that crypto traders employ are mentioned below.

  • Arbitrage: Arbitrage is a trading strategy that exploits price differences of an asset on different exchanges. By quickly buying and selling assets between exchanges, traders can take advantage of small price differences for quick profits.
  • Day Trades: Day traders constantly scan the market for intraday price fluctuations to lock in daily profits and close their trades before dark. Each operation can take from minutes to several hours.
  • Swing Trade: Swing traders benefit from the rapid price fluctuations of crypto assets, with a trade typically lasting anywhere from a day to a few weeks. Swing traders use technical analysis to identify significant directional movements in crypto prices over this short period of time.
  • Position Trading: Position trading is a form of trading that also tends to reverse.It is similar to swing trading, but involves a thorough study of long-term trends and patterns, and typically lasts from several months to a few years.
  • Scalping: Scalping is a high-frequency trading strategy that involves placing multiple trades in a short period of time to capture small price movements. As the most active market participants, scalpers make quick trades with short wait times, taking minutes or even seconds in some cases to “brush” a profit without incurring significant risk.

The main benefit of trading crypto is the potential to make quick profits by taking advantage of short-term price movements and market trends. Some crypto traders also value assets like BTC as a safe store of wealth, especially since crypto assets were designed to function independently of central institutions. Crypto assets can also be traded between peers, with much lower fees than transactions involving central authorities such as banks and financial institutions. They are also widely available, so anyone with an internet connection and a mobile device or computer can create a crypto wallet and start trading.

Trading crypto assets, on the other hand, entails significant risks due to their high volatility, which means that prices can swing dramatically up and down. If traders are not cautious and monitor their positions, this could result in significant losses. While beginners can begin trading in small amounts as they gain experience, it is important to note that the risks associated with trading crypto are far greater than those associated with most other forms of investment, which means that high-risk trading may not be the best investment method for everyone.

How Does Trading Differ From Investing?

Investing in crypto, also known as “hodling,” a derivative of “hold” and “hold on for dear life,” is a longer-term commitment than crypto trading. As a result, crypto investors are less concerned with short-term market fluctuations and more concerned with the fundamentals of the crypto assets they purchase. Few widely accepted investing methods are mentioned below.

Read more: Crypto Trading Strategies

  • Hodl: As previously stated, hodling is primarily concerned with purchasing crypto assets and holding them indefinitely. The underlying principle is that crypto prices will rise in the long run. 

Read more: HODLing vs Staking

  • Cost Averaging in Dollars: This strategy involves investors purchasing crypto assets in small amounts at regular intervals, regardless of market fluctuations. This approach, in theory, helps to average prices over time and reduces the impact of volatility on one’s investment portfolio.

Read more: What is Dollar Cost Averaging

  • Value Investing: This entails locating undervalued crypto assets with strong fundamentals and high potential. Buying at a low price gives investors confidence in the asset’s potential appreciation.
  • Growth Investing: In the hopes of increasing an investor’s capital, growth investors invest in new assets that are expected to grow exponentially in the future. 
  • Investing in Index Funds: Crypto index funds are intended to provide investors with exposure to a diverse set of digital assets. They are structured similarly to exchange-traded funds (ETFs) and mutual funds in that they hold a portfolio of various assets.

The most significant advantage of investing in crypto assets is the possibility of capital appreciation over time. Despite price and market sentiment fluctuations, historical data shows that, given the crypto market’s rapid growth over the last decade, being a long-term investor could potentially benefit one. 

Investing in crypto also carries lower risks than trading in crypto because it requires a longer-term commitment. Investing in crypto assets, on the other hand, can be extremely risky due to their high volatility. As a result, before investing their hard-earned money, investors should ensure they understand the fundamentals of crypto and the risks involved.

In general, investors buy crypto assets because they believe the price will rise over time. Traders, on the other hand, profit from market volatility by holding their coins for short periods of time.

Investing Trading 
Time FrameLong TermShort Term
Trade Frequency Low-frequency High-frequency 
Risk Profits Conservative /low riskRisk-taking
StrategiesBuy-and-hold/hodling,Dollar-cost-averaging,Value investing,Growth investing,Index fund investingArbitrage,Day Trading,Swing trading,Position Trading,Scalping 

You can learn more about trading and investing on ZebPay blogs. Join the millions of users already trading on ZebPay Australia.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

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