Trading vs Holding Cryptocurrency - Which One Should I Go With In 2020?


When starting a new investment journey we must always figure out what are the easiest and most convenient ways to get to the return on the investment we make (ROI). Most of the new investors search for guides to check and follow them to get to the profit easier.

The same thing happens when it comes to the cryptocurrency world. Most probably you have heard of the leader of the cryptocurrency world - bitcoin. Now you find yourself sitting in front of your laptop and wondering how is it possible to make money with cryptocurrencies? As a newbie, you read all these success stories and wonder if it could happen to yourself as well. You start searching for guides and methods on how to invest in cryptocurrency.

Consequently, the internet is full of guides and articles about cryptocurrency. Some individuals will try to sell you technical analysis claiming that they will make you a fortune. You could take them and analyze them and maybe you could learn something. But technical analysis has to do more with short term investing.

In short term investing you have to be much more involved than in the long term one, so we are going to cover all investing methods in this article. We cannot say that there is something wrong with any of the methods and we encourage you to do some experiments. But, always make sure to not invest more than you can afford to lose!

What is the difference between investing (holding) and trading cryptocurrency?

Both, investing and trading require patience. Although, getting good at them can be rewarding so you must pick one, be patient along the way and get good at it, to see the rewards later. Let’s dive deeper and see what investment types it is possible to make!

1.   Long term investing

Long time before even thinking about getting into the cryptocurrency business we would hear that investors would buy the coins, hold them, wait for their value to grow and sell them when the price would get higher. Well, this is pretty much it. It is not rocket science!

Whenever you buy a coin or a token you should at least hold it for a year to be considered as a long term investment. It might not be as exciting since you will not have to pay attention to the ups and downs of the cryptocurrency prices. This is a perfect method of cryptocurrency investment for those types of people who do not want to be involved everyday, checking if their investment is doing well. Although, if you decide to go with this type, you must do deep research and figure out if the project has a future.

Many cryptocurrency analysts and writers have referred to long term investment holdings as HODL or HODLing. 

What does this mean? This is an acronym that stands for “hold on for dear life”. This means that as an investor you must be able to hold through ups and downs of the cryptocurrency markets no matter how drastically the prices change. So, if you are ready to HODL be prepared to hold your coins for a long time.

For someone, it might not be the right choice since it requires a lot of patience. There are times when you see the cryptocurrency price raised high and it might feel tempting to get rid of the coins. But a smart investor always waits for the right time to take action! Predicting is everything in the cryptocurrency sphere.

Since it is a long term investment, therefore you must be careful when picking the storage where you will keep your coins. More secure and safe storages are hardware wallets. These ones are not connected to the internet which makes it harder to steal or hack them.

2.   Day Trading

This is a method preferred for more experienced traders. If you have been into the cryptocurrency business for a while and you feel like you can gain more wealth using short term investments then there you go! There is more enthusiasm and it feels like a marathon checking the cryptocurrency prices every day and trying to take advantage of high prices.

Well, this is what day trading is like. There is more excitement and a lot of opportunities to make money. It requires a lot of work though. So, if you are willing to put in the work and you are not afraid of ups and downs in prices, this might be a field where you would want to play! Basically, you will have to attempt to buy low and sell high in short terms. Typically a trade could last minutes or hours with constant monitoring of price movements. Trading cryptocurrencies is done through cryptocurrency exchange platforms. There are many platforms that operate out there such as Binance, Bybit, Coinbase, Bitfinex, Kraken, etc.

However, it is very important to check the reviews of the exchanges made by many users all around the globe. This way, you will be able to pick the most trustworthy cryptocurrency exchanges that you will use to trade your cryptocurrencies.

Things to consider before starting to trade

There are some things you should take into consideration before getting into the cryptocurrency trading business. At the moment there are 4900 listed cryptocurrencies. You must know that the media tends to favor the largest cryptocurrency exchanges by market capitalization. Those are the most known cryptocurrencies for new and experienced users as well.

Therefore, most individuals who want to get into the cryptocurrency business start trading with the most known cryptocurrencies. But, this is a little tricky! Sometimes, tokens with a high market cap are less vulnerable to manipulation and volatility whereas smaller cap coins can see bigger price movements, so you could make money quickly.

Also, trading volume is a key aspect. Cryptocurrencies with higher trading volume are more preferred because it is easier to buy and sell the digital asset, whether with cryptocurrencies that have lower trading volume it would be harder for a trader to buy and sell the assets since there is not enough liquidity. Pay special attention to the cryptocurrencies with low trading volume since they could be projects in front of a big failure.

What cryptocurrency trading method should you go with?

It is actually hard to give you the right answer. Or maybe there is no answer. It depends more on your personality and the amount of work you want to put in.

If you decide to get into the crypto world, maybe it would be good if you experiment a little in the beginning.

Just like when you go to the beach. You hesitate to get into the water because it is cold compared to the temperature of your body. Then you start walking slowly, get your feet wet, then the whole body. Afterward, you find yourself swimming in the sea. It is the same thing here.

Do some experiments in the beginning, starting with small investments. Do not invest more than you can afford to lose. If you are not sure if you want to be an investor or a trader, try both. Just be careful and be patient because there will be a lot of ups and downs on prices in the market. 

Anyhow, no matter what strategy you are going to use, make sure you do your own research and pay attention to market capitalization and trading volume. In case you want to listen to a Spotify podcast from a professionist like Ty Daniel Smith for blockchain futures and crypto marketing overall, here is the link.

Mining

We almost forgot to mention. Except long term investing and day trading, another way you could gain wealth in the cryptocurrency business is through mining. The main reason mining is mentioned at the end of this article is because it is not an easy thing to do.

Mining cryptocurrency requires a lot of experience and background knowledge that will help set up a very sophisticated computing software in order to mine new cryptocurrencies. So if you want to become a miner you will need to possess a specialized computer. Let’s say you are mining bitcoin. So, you have to secure the network and process the bitcoin transactions. You will have to solve computational problems making it possible to chain blocks of transactions together.  This actually is where the famous term “blockchain” came from.

When you get done with this service, you are rewarded with brand new bitcoins and transaction fees.

Again, mining is not an easy process, since it requires a very sophisticated computing system. So, we would not recommend it, unless you have a lot of software knowledge and experience.

Anyways, whichever method of gaining wealth with cryptocurrency you are going to choose, we wish you good luck! One thing is 100% sure though - the cryptocurrency business will remain alive as long as the internet itself remains alive. Especially in this era, when studies have shown that millenials and young investors are aiming more towards the digital currency over the traditional one. Fortunately for all new investors, now it is much easier to invest than at the beginning of the cryptocurrency era!

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