Cryptocurrencies are in the spotlight for quite some time now, with 2020 and 2021 seeing a massive increase in the mainstream limelight that crypto has been gathering. With increasing adoption sentiments and the march towards the inevitable crypto future gaining tremendous momentum, it is time for everyone to start looking into how best we can profit from this innovative technology.
Cryptocurrencies have not only revolutionized payments and changed the way we look at digital assets but have also created a whole new ecosystem of products (like DeFi) that was previously unheard of. With this increase in popularity, it is only natural to see a whole lot of crypto novices introduced to the concepts of crypto investing and crypto trading.
Crypto Trading vs Crypto Investing
Both crypto trading and crypto investing might sound similar, as both of them involve buying/selling cryptocurrencies at opportune moments. These terms, however, are not interchangeable and fundamentally are very different concepts.
Crypto Investing Basics
Crypto Investing takes advantage of the fact that different cryptocurrencies are being viewed as an alternate asset class, with increasing value over time. The goal of investing in crypto is to benefit from this long term price increase, and investors tend to buy and hold (HODL) crypto for years or even decades before “cashing out”.
The cryptocurrency market is fairly volatile, making this an inherently risky market to deal with. That being said, in the long run, volatility tends to even out, making crypto investments relatively less risky than the alternatives. The focus of a crypto investor is more on the fundamentals and the long term value of the cryptocurrency, and less on the day to day price fluctuations and volatility.
Crypto Trading Basics
On the other hand, Crypto trading focuses on profiting from the short term price fluctuations and the inherent volatility of the crypto market. Unlike crypto investments, crypto traders stand the chance to benefit from both positive and adverse price movements (crypto investors tend to buy and hold, while crypto traders can attempt to predict the market with either long or short positions). Crypto traders can take advantage of crypto derivatives – instruments that allow traders to participate in the price movements without actually buying/selling cryptocurrencies.
The period of holdings are significantly shorter, from a few minutes to a few weeks as the case may be, and is a lot riskier compared to just buying and holding cryptocurrencies. On the flip side, the returns can be quite alluring – where a crypto investor may be satisfied with a 10-12% appreciation per annum, a crypto trader might be looking for a 10-12% return per month. The focus is more on the timing of entry and exits, the short term price volatility and the technicals of a cryptocurrency, rather than the long term fundamentals.
Crypto Trading vs Investing: Which Approach Suits You The Best?
Depending on your risk profile, and your approach to wealth generation, a mix of both these methods might be the perfect pick. Crypto Trading is considered significantly more profitable (high risk/high reward), although requiring a lot more of your time (to both effect the high volume of transactions and to technically analyze cryptocurrencies). This requires significant ability, knowledge and the knack to spot the right move at the right time. Crypto investing, on the other hand, is a more passive approach, and significantly less risky than trading cryptocurrencies, while still earning you decent returns on your investment.
While it is true that Crypto Trading can be complicated, Delta Exchange makes it extremely easy for you. Delta’s Robo Trading Strategies allows you to participate in the price movements without having to dedicate nearly as much time and effort. Users can take advantage of Robo Trading Strategies by following 3 simple steps, and put their crypto trading on auto-pilot.
If you’re someone that wishes to take more control of your portfolio and require access to crypto derivatives, Delta Exchange provides you with a bunch of different innovative products, including Futures, Options, Calendar Spreads, and Spot Trading opportunities.