When it comes to cryptocurrencies, the common question that comes to our mind is whether to invest in cryptocurrencies or not. With all the uncertainties that revolve around investing in cryptocurrencies, both from the regulatory perspectives and legal perspectives, cryptocurrency investments are still in its stage of infancy. But, how is cryptocurrency investment different from cryptocurrency trading? In this article, both the concepts of trading and investments pertaining to cryptocurrencies are discussed that will help you to gauge which one is better.
Cryptocurrency trading and cryptocurrency investment look similar at the very first glance, but there is a thin line of difference that sets them apart. Both crypto investment and crypto trading serve the ways of generating wealth in the cryptocurrency world. Now, let us find out the basic differences between the two before delving into making the decisions as to which is a better option.
While investing in cryptocurrencies, the investors need to coin the long-term potential of the cryptocurrencies to sell them in the future. While on the other hand, traders lay more emphasis on the short-term price movements. The crypto market is a highly volatile one, and therefore, the traders are at the most profitable end of the spectrum as compared to the investors.
Investing in cryptocurrencies are associated with high risks of losing your funds by falling prey to inciting Ponzi schemes. In the case of investing in cryptocurrencies, the potential risk is directly related to the potential returns from a particular investment. Extreme price fluctuations make the cryptocurrency investments, the riskiest ones.
Trade frequency is the term used to define the execution of trade cycles. Trade frequency is directly related to the period of investment. That is to say, the longer the investment’s time horizon, the lesser would be the trade frequency. Investors have a low trade frequency, which indicates that the investors tend to hold on to crypto coins without selling them until their long-term objectives are met, which can take even a few years. On the other hand, traders have higher trade frequencies, therefore, giving more profit opportunities to the traders, but at the same time, traders are constantly required to monitor the conditions of the market.
Understanding the basic differences between the two will help the users to wisely decide what they want to do with their coins, whether they want to buy cryptocurrencies or just want to trade them. However, certain issues have started to creep up recently and are crippling the cryptocurrency investment market. Some of these issues are described hereunder in detail.
Some of the reputed banks have already banned purchasing cryptocurrencies by using the credit or debit cards issued by them to the users. Banks and other financial institutions across the world are thinking of taking this precautionary measure to combat the inability of the users to repay their dues to the banks in the event of a price crash. This has been more intensified, given the volatile nature of cryptocurrencies.
Many crypto exchanges are asking their investors to take back their money, which is yet again creating a lot of buzz for the crypto investments. In support of this move, the crypto exchanges are saying, “the government discouraging the cryptocurrency trading has put our business under a lot of stress and putting us in a position where we don’t feel that we can continue our business in a professional manner any longer.”
All cryptocurrencies do not give high returns as the myth is created. The price entirely depends on the demand and supply and driven by speculations. Therefore, investors need to be very well informed about the necessary details revolving around cryptocurrencies before investing.
Therefore, referring to the above points, crypto trading seems to be a safer option than investing in cryptocurrencies.