Amateur investors and traders are often inspired by legends. Warren Buffett and Ray Dalio are known for consistently profiting from their investments over the long term. Traders like George Soros and Paul Tudor Jones rely on more general trading strategies to define their trades. These experts make a living in the traditional stock market and set standards that investors in new markets such as cryptocurrencies hope to emulate or exceed.
Investing and trading are very intertwined arts and can be practiced by the same person. The difference lies mainly in the type of strategy that each method employs. Cryptocurrency trading and investing both aim to increase investment value, but the ways in which they pursue this goal are different.
We explore the key differences between investing and trading cryptocurrencies to help you decide which strategy is more useful for you.
What is Cryptocurrency investment?
Investing in cryptocurrencies is a strategy to profit from cryptocurrencies by buying and holding cryptocurrencies in the hope that their value will rise in the future. Also known as HODLing — a misspelling of “holding” that has since become more common — investments in cryptocurrencies often involve holding positions over longer periods of time, independent of short-term price or market fluctuations. Including purchasing and retaining.
HODLers are known as cryptocurrency investors, who basically buy cryptocurrencies they believe in and hold them with confidence. They expect the value of their assets to increase over time and worry less about market timing.
Market timing refers to buying or selling an asset based on a prediction of the optimal entry or exit point. It’s like believing you have a crystal ball that tells you which way the market is headed. With that confidence, I would be more than happy to wait for a lower level of entry into the investment or a higher level of sales.
Market timing is a challenge in any asset class, let alone a volatile market like cryptocurrencies where price movements occur rapidly. The danger of waiting for the market’s timing means instead that you miss the trade entirely.In general, long-term investors don’t try to time the market or take advantage of trends. A tide that raises more boats is more important than catching a particular wave that can propel a single trade higher.
Crypto Investing (HODL) vs Trading
As mentioned earlier, investing and trading are intertwined, but the two terms are sometimes casually used interchangeably. Finally, traders can make investments and investors can make trades to buy or sell assets. The difference between investing and trading is a little more subtle. In order to choose the best strategy, we will analyze the differences based on some key factors.