Cryptocurrency: Buying vs Investing

Crypto Smartlife Research Team
Feb 01 2022 . 2 Minutes Read
Many investors, as well as professionals, have made cryptocurrency investment a part of their portfolio. Most of the people today are just into “trading or merely buying” the cryptocurrency, they do not tend to “invest” into it. You might be wondering, now what’s this trade / buy vs invest in crypto? So let’s talk about it.

Buy Low and Sell High - Seems Straightforward Right? Not at all in reality.

The high market volatility of crypto is an opportunity to make some quick money, but many over 95+% end up losing or not having a good experience, as they get wrong with the timing around mere buying and selling of crypto. Even the most professional traders get the timing wrong as the volatility could play against it many times.

What is buying in Cryptocurrency?

Cryptocurrency trading is the act of speculating on cryptocurrency price movements , by buying and selling the underlying coins in hope of making some short-term quick gains. This method requires you to carry an in-depth knowledge of trading, track news updates and price movements as they say only the super smart ones win. For example - China banning crypto could send immediate shock waves in the market and only the most prowess traders will be able to respond without losing money. This method is a double-edged sword as this can lead to complete loss during both bull and bear markets based on which side of the market you are betting against. Cryptocurrency risks are as real as they can get. So, we should weigh the risks and goals that suit us the best.

What is investing in Cryptocurrency?

Investing on the other hand involves doing some in-depth study and betting on the fundamentals of the coins. In the Crypto world, fundamentals typically mean looking at the right network protocol, technology, application, token economics, software development team, number of users, integrations, legal concerns, etc.

There are multiple strategies in investing:

  • HODL (Hold on for Dear Life), coined by bitcoin social forums, basically means to buy crypto and leave it as is hoping the price will appreciate over the long term without worrying about the short and medium-term price fluctuations.
  • Recurring Investment Commonly called Dollar Cost Averaging (DCA), is a common and simple investment methodology. You basically invest small amounts at certain periods, weekly, monthly, Quarterly, etc in a consistent manner irrespective of market prices. Over time your investments will average out and reduce the impact of market volatility.
  • Thematic Basket Investing: This is similar to investing in a basket of coins with common themes that you believe are mainstream or will be mainstream over the long term. You get the benefits of diversification of your investment in multiple coins than limiting risk in one coin still sticking to the theme you believe in. During rebalancing, your coin allocations change based on market dynamics leading to maximizing basket value over the long term

Conclusion: Buying vs Investing Crypto

In simple terms, crypto exchanges today offer a platform for you to trade crypto, but, if you’re looking to invest in crypto there is Crypto Smartlife that can help you invest in crypto.

Note: *We are not your financial or investment or legal advisors. Any information available on our Platform is for general use only and it is not our intention that you should rely on the same to purchase crypto-assets. The baskets listed on our Platform are suggestive, and you should invest in crypto-assets only after conducting independent research and considering your individual circumstances.

Trading in Digital Tokens entails certain risks. This risk disclosure statement cannot and does not disclose all risks and other aspects involved in holding, trading, or engaging in Digital Tokens. Digital Asset values can fluctuate substantially and unexpectedly with little or no warning, which may result in a substantial loss of investment.

Any content on this site should not be relied upon as advice or construed as providing recommendations of any kind. Past results are no indication of future performance. In no event should the content of this correspondence be construed as an express or implied promise or guarantee.  As suggested by RBI in India, investor discretion is advised.