A cryptocurrency course aims to educate people about the basics of cryptocurrencies. In this article, we will do just that by differentiating investing and trading. Knowing how traders and investors interact will give you an idea on how to partake in the industry as well.
At first glance, trading and investing are often misconstrued as similar concepts. It is understandable since both are involved in buying and selling of crypto assets. But there is a fine line between the two. This is one of the basic topics often discussed in various cryptocurrency courses. Consider this a free lesson, so let’s dive right in.
Long Term vs Short Term Gains
This is one of the most obvious tells. An investor wants a long-term value than traders. They take many considerations in deciding which cryptocurrencies are worth the money. Investors also tend to hold on to their assets for a long period of time.
On the other side of the coin, traders have a different mindset. While investors give importance to the long-term value, traders prioritize small term gains. They buy assets when the prices are cheap and immediately sells when it increases. From this difference alone, you can see that traders and investors are far from similar.
With the previous comparison in mind, traders take more risks than investors. They highly depend on the daily price alterations to make their profit. While the chances are high for huge gains, the risk for equally huge losses should not be overlooked.
While traders are such risk takers, investors like to be on the safe side. There is lesser risk in holding on to assets for long term value.
Cryptocurrency Analysis Mechanisms
Lastly, investors and traders use different tools for analyzing cryptocurrencies. Since investors are all about the long-term gains, they focus on the intrinsic value of a coin. They also take into consideration other financial and qualitative factors.
On the other hand, traders focus solely on the price of a coin. To predict market prices, traders refer to the previous data movements. Also, charting lines and trends help them create forecasts. They are not concerned with a coin’s potential but only of its current state.