Cryptocurrency Trading vs Investing

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Cryptocurrency Trading vs Investing

For those still not clear on what makes one an investor or a trader, this article is for you.

The first set of bitcoins I owned was from a freelancing job I did for a forum owner. In my mind, I honestly wanted to keep the coin for at least 2 years before selling it. Luckily or should I say unfortunately for me the price of BTC reached my profit target within 11 days of being paid the coin. This, in turn, led to me exchanging the coin for FIAT straight away. Eight months later the price was up 315%. Fortunately for me, I bought more BTC right after, and I haven't sold a single SAT from that stash since then. This will be my first and main crypto investment. I plan on probably selling by 2030. 

I still actively trade bitcoins and other altcoins on Bitmex though. So what does this make me? Simple, I am a trader and an investor. Who says you can't be both? 

For those still not clear on what makes one an investor or a trader, this article is for you.

So let's start with what an investor is before moving on to other things. 


What is an investor?


Basically speaking an investor is an individual or group willing to make a long term bet on the future of a proven or "shaky" entity.    

Investors are generally in for the long haul and are not distracted by the market noise.  So whether the price is up or down, they don't sell. They hold the fort as long as there is still hope.  


What is investing in cryptocurrencies? 


This entails taking into consideration both the fundamentals and technical aspects of a coin to determine if there is a future for such a project. Once a decision has been made, an investor buys as much coin they can afford and store it up. Usually, such an investor will have a price or time target in mind. And if any of these doesn't get triggers such investor holds the fort. 

For example, it has become quite clear that as long as the crypto industry exists, the price of bitcoin is likely to keep rising, so buying BTC and keeping it for like 5 years sounds about wise (not a piece of investment advice).

As a crypto investor, you are basically buying coins that are currently priced low with hopes that they will rise in the future. During this wait, you can still add to your stockpile. So far, in 2019, the price of bitcoin has gone from 3500 to 4700 and back to 3400. This is a small move compared to that of late 2017 to late 2018 (20k to 3.5k). Now the price of bitcoin is trading around $11k. Those who have accumulated at a low point of $3500 will be happy they didn't sell off at 4500 or 8000. Importantly, this took like 6 months to unfold. In a trader's life that's like 50 trading opportunities at least. 

An investor is not bothered by the current price of a coin. In some cryptocurrencies, the role an investor plays is similar to that of a miner. Apart from helping the network fight against pump and dump actions, investors help to maintain the balance between the supply and demand of any coin. Apart from storing up coins with the hope of one day increasing the total value of the stored coin, there are other benefits attached to HODLing a coin for long. Assuming a coin is using the proof of Stake governing algorithm, whereby stakers (investors), with an active node (wallet connected to the network), are entitled to some kickbacks in coin. So even if the price of the coins is not rising for a while, stakers, as well as master nodes owners, increase their coin stash without having to pay a dime for it.

While investing in crypto, the goal is to increase your net-worth with as few trades as possible. The process generally takes a long period of time that involved holding a particular coin through its ups and downs. If anything, the crypto market has proven itself to be a perfect investment vehicle. 

Personally, I equate my crypto investment in crypto (top two coins of course) to my retirement investment. FYI: I don't put my retirement investments in one basket. So don't go putting all your retirement funds in crypto. 


Trading


I trade crypto but the truth is that I am really not that good at "trading". I win and make money trading of course. But I take too long before making a trading decision and a lot of research is involved before I make my trades. Also, because I strictly focus on the daily charts, my trades sometimes take 2months before I finally stop milking it. So I wouldn't classify myself as a trader like most books defines it.


Who is a trader?


A trader is anyone who specializes in trading short-term market trend retracements and continuations. A typical trader's trades last few days at most. Most traders try to get out of a trade before the week runs out, while some enter and close a trade within a trading day. Instead of waiting for months before making about 20 percent on their trades, a trader is looking to make that much within five trading days. Traders generally depend on technical indicators and events which are likely to pump or dump the price of the coin even if it's for a short-range. Truth be told, trading is way more profitable than investing. Trading is also perfect for those with little capital, especially if you find a suitable margin trading platform.


Trading cryptocurrencies


The honest truth is that Crypto traders don't care much about a project. They are only in for the cash. So they will short a weak coin to the ground to milk every last drop of cash from it. If you are the type that cares too much, crypto trading is not for you. The idea is to go where the market is going. If the market is making a correction after an uptrend, you short it. Just because a project is promising, doesn't mean you wouldn't make a perfect sell setup, which can dump the price hard (if you have the volume). All a crypto trader cares about is where the price is going next, not the future of the asset or any other fundamentals about the coin. A bad report from a project will be made worse by traders simply because they will short the coin. A good report will also be rewarded with a price pump, although short-lived in most cases.


Which one is right for you?


Trading is almost full time. Since you will have to scan the market for trading opportunities. So if you're the type with little time on your hand, then trading is not for you. But if you are willing to take the time to learn as well as practice a lot, then you can give trading a short. By default, everyone buying any coin with the intention of cashing out once it doubles or triples in price is an investor. 


Joshua Dylan



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