The presence of crypto assets is increasingly attracting public interest in trading and investing. However, there are differences in trading and investing in crypto that you need to know so you don’t get stuck, let alone suffer losses.
Like transactions in the capital market, crypto asset trading also involves two users, namely traders and investors. Even though trading and investing activities are both aimed at making a profit, the two are fundamentally very different.
What are the Differences between Trading and Investing in Crypto?
1. Viewed Crypto Investment and Trading Purposes
Investment in general is the activity of buying crypto assets to be stored for a long time, and these assets are only stored. Unlike trading, which takes advantage of market volatility to buy and sell crypto assets in a relatively short time.
The difference between investing and trading is not only in how to get profit. There are four other factors that differentiate between trading and investing. These four factors are.
2. Duration of Holding Assets
Because generally investing in crypto assets has long-term goals, an investor will bet on the long-term potential of a crypto asset when investing in the coin.
Investors will hold crypto assets for a long period of time with the intention to sell them and make a profit in the next few years.
Therefore, investors must consider carefully which types of crypto assets are appropriate and in accordance with their investment objectives. Because the cycle of the crypto asset market is much shorter compared to the stock market.
In addition, the crypto asset market is more volatile, meaning assets can trend up and trend down in short periods of time.
In contrast to trading, which is more short-term in nature and depends on price movements. Traders will focus more on price movements within a certain period of time, such as hourly or daily on the crypto asset trading market.
The basic goal of a trader is to buy a crypto asset at a low price and sell it at a higher price in the next minute, hour, day or week.
Volatility is an important component that must be considered when trading, because prices must have significant price movements so that traders can make a profit. Extreme volatility in the crypto asset trading market is a profitable thing in trading.
3. Risks Faced
Crypto assets are often considered the riskiest investments compared to other types of investments due to their extreme price volatility.
The concept of risk is easy enough to understand, but it must be accompanied by an understanding of the potential benefits compared to the risks you take.
However, the risks involved in trading crypto assets can actually be categorized depending on the level of risk they face.
Investing in crypto assets is considered to have less risk when compared to trading. Because investors only keep their crypto assets and don’t really care about daily price volatility.
The daily ups and downs of an asset’s value do not really affect investment in the long term. In addition, traders often engage in margin trading, which is the practice of borrowing funds from third parties to trade crypto assets.
Significant margin trading can also be a risk in trading, especially if the trader suffers a loss so that he cannot return the funds. Then what are the weaknesses of trading and investing in crypto? The answer is vulnerable to fraud.
Limited regulations, rejection from financial authorities in various countries, the existence of digital assets and agents, makes crypto trading and investment prone to fraud. Moreover, the types of crypto assets are very diverse.
In Turkey, crypto investors lost around IDR 29 trillion of their money because they chose the wrong crypto asset trader. As a form of response and prevention of security issues that occur in crypto asset trading,
The Indonesian Ministry of Trade through BAPPEBTI has provided legal certainty regarding the crypto asset trading regulations listed in CoFTRA Regulation No. 5 of 2019 and No. 7th year 2020.
Other regulations are still being developed to create a safer crypto investment climate for the public. Despite the drawbacks of trading and investing in crypto, the judgment and decision remains with the individual.
Therefore, knowledge, understanding and wisdom are needed in weighing and deciding on exposure to crypto assets in your investment portfolio.