Let`s learn about Crypto trading vs. investing.If you are in the crypto space, by now, you definitely have heard a few rags to riches and then to rags again stories caused by the high volatility in this industry. 

All of the major investment strategies in crypto fall under two major categories – trading and investing. 

In this article, we will try to give a detailed idea on Crypto trading vs. investing.

Trading –  Buying low and selling high, right?

Well, it’s not that simple. 95% of traders lose their investments in crypto, forex, and stock markets. So, you must be wondering why it is so difficult?

Traders mainly focus on movements of prices that could be predicted due to their cyclical nature. But no single trader knows every factor that affects the price of a cryptocurrency.

Some crypto traders rely on technical charting analysis, while others use news updates to predict prices. The strategy is based on short-term gains only. 

Two major sub-categories are day trading and swing trading. Day traders buy and sell crypto within the same day – sometimes repeating the process many times within a day. Swing traders buy cryptocurrencies they expect will go up in the next few days or weeks.

Investing – slow and steady race

Successful investors know the constraints of risk-taking, and they carefully try to minimize it to as low as possible. Investing is far less risky than trading. It is based on carefully selecting sound investment targets and waiting for them to mature in the long term.

Investing in crypto assets is done after thoroughly evaluating underlying important factors for each asset. These factors are:

1. The fundamental technology.
2. The developers involved in the project.
3. Underlying economic model (rewards, tokens, incentivizing security).
4. Integration with other software.
5. Transparency and number of users.

You can read our previous article to learn more about investing in crypto.

Bottom line – which is better for you?

It’s always difficult to generalize things. But, overall, trading is much riskier than investing. 

There is a lot of speculation involved. Most of the time, you have to make educated estimates and guesses. Some traders even resort to gambling. There is also no diversification in trading as one can’t really follow more than a few trades. 

However, when trading works, it does yield far higher returns than investing in a short period.

That is why it’s tricky to select the best approach that would work for everyone. The best method for you should be based on your goals, risk tolerance, and personal strategy.

Every crypto investor should know how to prioritize their mental health. Read our guide to learn how.

Suleman Arshad

Suleman is a part-time crypto writer and full-time book addict. He holds a master’s degree in Chemical Engineering. Nothing excites Suleman like a well-organized fundamental analysis for long-term investment.