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The Difference Between Trading And Investing In Crypto

Digital currencies are becoming increasingly popular nowadays whether its trading in crypto or investing in crypto. They’re currencies that use encryption to supply and demand currency units and verify fund transfer, operating independently of a central bank.

There are various digital currencies, but Bitcoin is the most well-known and high valued.

So, to join the cryptocurrency market, you either trade, invest or do both. While both methods often mean the same, they’re different.

  • What Is Trading And Investing In Crypto?

Trading in crypto is a process that involves the buying and selling of cryptocurrencies, done with or without the use of a trading platform.

Investing in crypto is not for the faint of heart, and it requires an understanding of the market,  technology, and  how to keep your coins safe.

  • What Are The Key Differences Between Investing And Trading In Crypto?

Cryptocurrency investing differs from cryptocurrency trading. Trading cryptocurrencies means you’re buying and selling to make a profit on the market, while investing means you’re holding until a period, expecting its value to increase over time.

Other differences between them include:

  • Investing Is A Long-term Strategy; Trading Is Short-term

 The former investors typically buy and hold long-term, which means they are interested in the potential of the cryptocurrency to grow in value over time, while the subsequent traders are more interested in making a quick profit from buying and selling cryptocurrencies.

  • Investors And Traders Pay Different Crypto Tax

Both crypto investors and traders are subject to crypto tax payments. But they differ in how they pay the tax itself. Although the guidelines are unique from one country to another, investors are generally subject to capital gain tax (CGT), while traders levied taxes on their ordinary income.

Understanding whether you’re an investor or trader will inform your taxation decisions. You can click here to get a better overview.

  • Investors And Traders Have Different Investment Strategies

Cryptocurrency investors are usually more conservative than cryptocurrency traders regarding their investment strategies.

Investors look for long-term gains, while traders look for short-term profits or quick trades on volatile markets. Thus, while stability is to investors, volatility is to traders.

  • Investors And Traders Have Different Profit Methodology

Investors want to diversify their portfolios; traders want to maximize profits on every trade.

Investors are looking for the best rates of return; traders are looking to make the most profitable trades through several avenues. In all, traders tend to profit and lose more than investors.

  • Investors Have Lower Trade Frequency; Traders Have Higher Trade Frequency

Another difference between investors and traders is trade frequency.

Investors have lower trade frequency than traders because they adopt cryptocurrency as a store of value to earn long-term benefits. On the other hand, traders regularly transact to make profits, leveraging market shifts.

  • Investors Face Lower Risks; Traders Confront Higher Risks

Crypto investors hold assets until they mature, thereby profiting from time and patience. Traders go all out to make a profit, not minding the volatility effects.

By comparison, investors face lower risks than traders.

  • Investors Use Fundamental Analysis; Traders Use Technical Analysis

Fundamental analysis of cryptocurrency is the analysis needed to understand the market. It usually involves understanding the interplay between crypto demand and supply. Since investors are not open to market rigors, they use fundamental analysis. However, this is not the case for traders who engage in daily transactions. Traders require technical analysis to understand crypto movements, trends, and patterns.

  • Investors Impact The Market Less Than Traders

The nature of investors is to store wealth and earn from eventual returns. Therefore, they play a less active role in the market and make less influencing decisions. On the other hand, traders impact the market with daily decisions borne out of regular transactions.

  • Investors Require Long-Term Capital; Traders Use Short-Term

Being long-term, investors stick to long-term capital, which takes a while to generate returns.

Since the psychology of an investor is to wait, they hardly bother about the duration of the returns. But a trader doesn’t work this way. Traders use up short-term capital and look forward to immediate returns.

  • Investors Manage Their Investments Better Than Traders

Effective investments take more time than ineffective ones. Capitalizing on this, investors take time to make decisions that’ll yield them profits in the long run. Unlike traders, they’re not hurried into making hasty and costly decisions based on market trends and patterns.


The digital currency market grows in modern finance, leading to new economic choices and decisions. To participate in the market, you’ll need to invest or trade. Although both investors and traders can mean the same, each enjoys unique and peculiar benefits.

News Desk

Unlock News Desk, is a group of Blockchain and Crypto enthusiastic young people, working to keep Unlock readers up to date with the industry news. Connect with the team via email: info(@)

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