Bitcoins are very popular in the past ten years, and they have increased in their value as the years passed by. Now they show steady growth and are very interesting for the population, most people would like to get involved, but they would like to avoid investing a lot of money into the machine and mining. This is why they turn to alternative ways of obtaining bitcoins. Trading and investing is a good alternative, and we will dive into the differences between the two in order to get these terms familiar to the reader.
Main differences
When it comes to these two, there are a few main differences that make them apart from one another.
Trading can be seen as a process that is short, and it is more dynamic when compared to investing. How it works is very simple, and the profit is obtained through the small transactions that are sometimes happening in a span of a few minutes or hours.
When it comes to trading, there are four types of different ways you can do the trading:
1. First are so-called scalpers, and this may be one of the most popular and dynamic ways of making bitcoin trades. Since the purchases and transactions occur many times a day, sometimes the one doing the transactions may be in a position of the coin no longer than a few seconds. The whole idea is to gain a lot of small amounts through every transaction.
2. Day traders got their name from the way that they make the trades since all transactions are established and wrapped up during one working day. Like the previous ones, they do this very fast, making sure that the funds have no delay and not spend too much time in their possession.
3. Momentum ones are as the name states doing all transactions at the moment, meaning that they are using the heat of the moment in order to create a wave and use the upraise to create profit. This means that the bitcoins are purchased as they are going down in price, and sold as soon as this shifts and increases the value. This way of trading is interesting, and it requires good knowledge of the prices and the cryptocurrency market itself.
4. Last but not least are the swingers that are using the changes in the values to create the profit. They are using daily and weekly fluctuations in values in order to make transactions and profit.
Investing can be defined as a way of handling bitcoins in such a manner that the profit is established through long term expenditure of funds. This means that the money is gathered and stored in bitcoins, and it will stay there until there is a substantial growth that is worth intervention and selling.
Investing is for the patient since it requires more years, and it is based on the prediction. Here it is crucial to follow the market and to know when to make a transaction. It is best to use the so-called wave and take the bitcoins when they are on their low, so when the prices and values increase, there can be a very high profit. This can last for years.
Time limit
Trading can be very time consuming since it requires a constant oversight of the market and the close tracking of even the smallest changes in the values since the transactions do occur in a matter of minutes and hours. Even though sometimes the transactions may occur in the span of a few days or hours, compared to the investment, it is very time-consuming as way faster. Especially due to the fact that trading uses micro-changes in the values in short intervals to make a profit.
When it comes to investments, they may stay out for years and lay low till the market changes are favorable for the one that is owning the coin and wants to sell them.
We can say that trading is short term and investing the long term when speaking of the time needed for the profit to be established. When compared to the values of income, it may come to the same amount since the trading is making small profits often and investing bigger profits once in a while.
When it comes to the frequency of the transaction, as stated before, there is a very big difference in those, since the trading is based on an exceptional number of transactions during the day, let alone one month. On the other hand, investing may have a few months or years without transactions due to the patience and the market state of bitcoin.
Risks and safety
When it comes to potential risks, every transaction and investment may carry its own. Trading may seem like something that carries less risk since the transactions are fast and happen so often that even a slight decrease can and will be compensated. Investing can carry more risks since it can be hard to determine how the bitcoin will grow and how fast this will occur. There are indications that there will be a steady growth of the coin, but the one who invested may have to follow and see what to do if the values start to drop. This may lead to selling, or they can decide to wait and see if the values will increase as it happened.
When it comes to safety, most shareholders did state that this way of trading and investing is seen as the safest and profitable when compared to conventional ways.
If you would like to find out more about safety and security of the bitcoin trading go check out coinpedia.org.
Conclusion
There are differences between trading and investing in bitcoin. Trading is a short term thing where the small changes in the values and fast and frequent transactions are making a profit. The profit is small per transaction, but it adds up. Investing is a long term thing, and this is important since it requires few transactions that are based on the big changes in values and bigger profit. Even though there are potential risks, both are labeled as pretty safe, even the safest of all the possible trading and investing that can be found on the market.
