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Trading vs investing in crypto: Which is better?

Trading vs investing in crypto: Which is better?

Trading vs investing in crypto: Which is better?

Fri Sep 03 2021 03:25:00 GMT+0000 (Coordinated Universal Time)

Thanks to technology, people can now better inform themselves and take calculated risks in the world of finance. Nowadays, more and more are choosing to either invest or trade in various assets, one of which is cryptocurrencies.

Aside from being a medium of exchange, it is now an avenue for people to earn, even in the comfort of their homes through investing and trading. But how are they different and which one is right for you? Learn about the pros and cons of investing in cryptocurrency and trading here!

Trading vs investing crypto side by side

Although investing and trading in crypto appear the same, they work in distinct ways. Investing is buying an asset and holding onto it until its value appreciates over time while trading involves buying and selling coins to profit over movements in the market. Learn more about these two when we compare them side by side below:

Pros and cons of investing in cryptocurrency

Investing in cryptocurrency is fit for long-term investors who can wait years to profit from their assets. This involves buying a crypto asset like Bitcoin (BTC) and Ether (ETH) and waiting for its value to increase over time.

Most crypto investors tend to do the ‘HODL’ strategy which is a slang term that means ‘hold on for dear life’ onto their assets no matter if the price drops. Rather than being swayed by volatile price changes in the crypto market, these types of investors choose to hold onto their coins and wait for the right time to sell them.

Know more about the pros and cons of investing in cryptocurrency below so you can choose if this is the best option for you. Here’s all you need to know:


  • This can be done passively

Investing in cryptocurrency can be done during your spare time without having to be fully active on the market. All you have to do is buy a performing crypto asset and see how its prices move within the next few months or years.

  • Suited for long term goals

Investing focuses on long-term profit or gains that are often bigger compared to trading. Price drops don’t concern investors for long term investments in cryptocurrency since they look at the trends in the long run and know that prices can rise again in the future.


  • Results take longer to earn

Like most investments, cryptocurrencies also don't pay out overnight and it can be difficult to predict when with the market’s volatility. Along the way, you might be faced with doubt or impatience of profiting immediately. However, if you keep track of your assets’ performance through market predictions by experts and look at things from a long-term perspective, you can potentially gain substantial amounts from your investment.

  • It has a higher risk

The crypto market is known for being highly volatile and therefore, risky. And while the famous saying goes ‘high risk equals high returns’, this also means the possibility of losing big money. Additionally, your investment can still result in zero return no matter how long you wait for it to appreciate if it’s not doing well in the market. So, make sure to choose your investments wisely. All you can do is try to protect your crypto from market volatility as best you can by being open-minded, cautious and knowledgeable of the pros and cons of investing in cryptocurrency.


Pros and cons of cryptocurrency trading

Crypto trading involves buying and selling coins to profit by predicting the price trends using a CFD (contract for differences) trading account.

Opposite to investing, trading is more fit for short term profit goals since it allows you to earn through buying and selling coins within a few hours, days or weeks.

Here are the pros and cons of cryptocurrency trading you should know:


  • It works well with the market volatility

Crypto trading is rooted in the market’s volatility rather than investing in crypto that doesn’t heed to short-term price changes. This means that once prices go down, you can buy more crypto and profit by selling them later for a higher price when it appreciates. Rather than seeing price fluctuations as a bad thing, traders see this as an opportunity to gain in the near future.

  • It is faster and more accessible

If you want instant profits in the crypto market, trading is the best option for you. This can easily be done by simply buying and selling tokens through various platforms like exchange sites. To make the most out of your assets, make sure you know all the different strategies, trends and analyses used in crypto trading.


  • Should be active in the market

Since trading is aligned to the market’s volatility, you are expected to monitor the latest changes. Unlike investing where you can be passive, you have to always be active when trading so you can enter and exit the market whenever necessary. If you don’t stay alert on certain market trends, you might miss the opportunity to profit or suffer great losses when prices drop. Bitcoin trading bots, however, can help you by aggregating all of this information and help you make the most informed trading decisions.

  • Smaller returns for each trade

Although you can get faster returns in crypto trading, they usually come at smaller prices. Since price drops happen minimally especially for lesser-known coins, the profit you can get from buying and selling multiple currencies will also be small.

  • It requires more knowledge on crypto

Compared to investing where you can buy and leave your assets alone, trading requires you to brush up on your knowledge about crypto to profit from it. You need to be updated about the recent happenings in the market especially those that can affect the asset’s prices and understand how the entire system works for you to make substantial profits from crypto trading.

Is there a risk in cryptocurrency?

Like all kinds of investments, there is a certain level of risk as well as pros and cons in cryptocurrency you should keep in mind. This includes the high market volatility, which means prices tend to rise and fall.

Another thing to be wary of is the safety of your assets. Crypto’s core tech such as blockchain and cryptography secures your assets, however, other financial platforms that make investing and trading possible may not be as safe. This includes popular cryptocurrency sites used in trading that are often centralised and operate online, which means they can be a target for internet threats like hacking and malware.

Investing apps such as wallets where you choose to store your coins also pose their own risks such as hacks and getting lost. Ensure that you secure your Bitcoin wallet by keeping your password safe and using 2-step verification.

So despite its built-in security features, there are risks in cryptocurrency that users like you should be wary of. Do your own research on the steps you can take to improve the safety of your coins. Consider all the pros and cons of cryptocurrency when deciding because, at the end of the day, your assets are only as secure as you make them.


Into the realm of crypto: Where to get your crypto

Now that you know the pros and cons of investing in cryptocurrency, ready to step into the world of volatile markets? To help you get started in either trading or investing, find out where you can buy these coins first. Here are the three best platforms for beginners:

Exchange sites

Big exchange sites like Coinbase and Binance allow traders and investors to buy and sell coins in one place. It acts as the intermediary that facilitates transactions between two parties (buyer and seller).

To make an exchange, all you have to do is create an account on your chosen platform and begin trading or investing. You can instantly get any of the well-known coins like BTC and ETH using your fiat money or other cryptocurrencies.

Peer-to-peer marketplaces

If you want to directly buy and sell your crypto assets with another person, you can use Peer-to-Peer (P2P) marketplaces. These sites allow you to contact any interested party for the transaction. Additionally, the prices of the coins are usually determined by the seller. Some examples of P2P marketplaces you can consider are Paxful, Bisq and Localbitcoins.

Payment apps

You can also buy crypto from payment apps like PayPal and Robinhood. These apps make crypto available to their userbase so they can easily buy crypto on-demand without finding a seller.

Pick a side and see it through to get those gains!

Still at the crossroads of picking between trading vs investing in cryptocurrency? Consider the pros and cons of investing in cryptocurrency and trading, as well as your profit goals to find the right option for you. Once you’ve chosen a side, stick it through until the end to see for yourself how much you can earn with crypto.

Words by: Lourda Lumain

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Trading vs investing in crypto: Which is better?