Trading And Investing In Cryptocurrency – What’s The Difference


Trading or investing? Are they one and the same thing? On the surface they would appear to be. Both involve buying a commodity, in this case cryptocurrencies, holding onto it for a certain amount of time and then selling it for more than what you paid for it.

The difference between the two really lies in the scope or length of time the investment is held and the exit expectation. Trading typically has a finite life, usually a pre-determined target price. When that target is reached, the stock is sold. Investing on the other hand is open ended; there is no expectation of precisely when the investment holding will be sold. Some investments are never sold during the lifetime of the investor.

Famous examples of traders and investors are George Soros and Warren Buffet respectively. George Soros ran a hedge fund that was actively involved in shorting currencies amongst other things. As the exit strategy for these trades was the fall in the value of the currency being invested in, they’re trades rather than investments. Warren Buffet buys companies for investment purposes, then sells them again for various reasons, none of which are pre-determined.

Another way to tell the difference between investing and trading is to look at the income expectations. A trade is entered into in the expectations of making a quick return ie a capital gain, as the price increases in value. When the pre-determined price is hit, the stock is sold and the difference between the buy and sell prices less fees is your expected capital gain.

When someone invests in something like cryptocurrency, they’re doing so with the expectation of holding onto it for some time. During that time, they expect to earn an income from dividends or be issued with more coins to build up their investment. If the price of the cryptocurrency increases significantly they may decide to sell and cash in on the rise but that’s not their primary aim when they initially invest.

To sum up, investing in cryptocurrencies is about hanging onto coins for the long haul and benefiting over time. Trading in cryptocurrencies is about buying with the intent to sell quickly for a capital gain. It usually comes with more risks as well, because the crypto market is highly volatile. However, you can minimize your risks by investing in software that has been specifically designed to monitor the market and make ‘smart’ trading decisions for you. The Chef Gordon Ramsay bitcoin revolution platform is one such trading program.