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November 24, 2021

Profit from cryptocurrencies. What to choose: trading or investing?

Profit from cryptocurrencies. What to choose: trading or investing?

Cryptocurrencies are already a real exchange-traded instrument for making a profit. Even the absence of real content does not prevent them from earning money for their owners. Observing the intraday price fluctuations of 15-20% even of the market leaders in terms of value and capitalization, a question arises. How to proceed: just buy coins and wait for the value to rise? Or start trading yourself and profit from both the growth and the fall in prices?

Important: All the information and trademarks mentioned in the article are only of a recommendation nature and are not advertising, trade, or investment advice. You make all the decisions yourself!


Let's start with the terms. So:

  • Investing in cryptocurrencies. Purchase of digital coins to receive passive income from future price increases. At the same time, the purchased asset is not used in exchange trading, as a means of payment or in any other way other than being stored on a wallet.
  • Cryptocurrency trading. The owner independently or by transferring funds to the trader participates in exchange transactions for the purchase/sale of cryptocurrencies on trading platforms. These can be crypto exchanges, stock exchanges (Bitcoin futures) or Forex brokers.

How to invest?

Everything is quite simple. Through an exchange office or a crypto exchange, the necessary amount of cryptocurrency is bought for "real" (fiat) money, and then when the price increases, some of them are sold and we get passive income. For medium- (from 6 months to a year) and long-term (more than a year) investments, you can use a strategy to increase the volume of coins by selling some of them at a low price, and buying during periods of decline. Which are regularly even in the TOP-10.

You can also use the stacking service when coins are transferred to external storage at a guaranteed (usually annual) percentage. The scheme works similarly to bank deposits, it is recommended to invest in major exchanges such as Binance or Kraken.

Stacking offers on the crypto exchange

In addition to rising prices, you can invest in cryptocurrencies, where you can earn income from confirming transactions on the network. Look for PoS and LPoS coins. In them, the owner of the coins can organize his confirmation node (node) and receive a reward for signing transactions on the network. The scheme is simple: the larger the wallet balance, the more confirmations, and passive income.

PoS and LPoS coins

Important: all organizations working with cryptocurrencies, both investment and trading, are not tax agents. Clients decide all issues with the legal regulation of digital money and tax authorities themselves.

Cryptocurrency trading: options and features

If you want more than 4-6% percent per year from staking, you need to move on to trading. Here you can make money with any price movement, the main thing is to open a deal in the right direction. Large market makers and investors trade Bitcoin on the CME Chicago Exchange, where the volume of transactions is not available to most medium and small investors even with leverage. Crypto exchanges and Forex brokers remain.

Crypto exchanges were the first trading platforms where it was possible to conclude transactions for the purchase/sale of digital money. According to the number of assets presented, they remain the leaders, it is there that new coins appear, most of which are speculative, disappearing as quickly as they appear, or having a low cost and small sales volume. If you plan to trade small AltCoin exchanges, the only option is.

Important: reliable exchanges require full verification of the client, so anonymity, which was one of the goals of cryptocurrencies, is no longer there. But the guarantee of a refund is higher than on sites where it is enough just to open a wallet.

BitConnect trading on the Crypto Exchange

Forex brokers can be more attractive options for trading cryptocurrencies, especially if you do not have large funds or you want to trade currency pairs at the same time:

  • On the exchange, a deposit is opened only in cryptocurrency, when trading several assets, you can lose part of the profit on conversions and commissions at the current rate, which is constantly changing. The Forex broker provides a single deposit (euro, US dollar, etc.) from which the client can trade any instrument: crypto, currency, futures and stocks. Transfer them to fiat without additional conversions. In other words, the client does not buy cryptocurrency, he just replenishes the deposit and trades! Although there is also a withdrawal to crypto wallets.
  • You can start trading the minimum amount through cent accounts. The offer of crypto exchanges for accounts over $ 100 has not yet been observed.
  • Leverage. With its help, a trader on a Forex broker can increase the transaction volume several times with the help of a broker. On crypto exchanges, such a service is a rare phenomenon, its size is much smaller.
  • Licensing. Companies are operating in the market of financial market access services for more than 10-15 years. It is much easier to find a licensed broker than a crypto exchange unless of course, it is Coinbase, Kraken or Binance

Important: any type of trading is a risky activity without a guarantee of profit. Brokers and exchanges do not bear any responsibility for the losses of customers.

How do I start trading?

The choice of a broker or exchange with the subsequent opening of an account will not be considered in detail, this is a topic for a separate article. Here we list only the personal characteristics and knowledge that you need to get before opening your first trade:

  • You need to understand that cryptocurrencies do not have "real" filling with economic and state resources. For example, the Euro or the US dollar. They exist only on the Internet and price fluctuations (even Bitcoin) are based mainly on speculation and rumors. Do not forget about the complex government regulation of this market. What news will be impossible to predict: the market grew when Salvador recognized Bitcoin as legal tender, before that there was a big drop when China banned mining in its territory;
  • At the same time, “classic” instruments, patterns, strategies of technical and graphical analysis work well within the day. Therefore, we begin the study of trading with them, then, as we experience, we move on to more complex techniques, such as exchange arbitrage.
Trade Bitcoin with a Forex broker on technical indicators
  • Personal characteristics. Trading, especially with cryptocurrencies, requires good psychological endurance. If it is difficult for you to watch how the current transaction goes to a loss, you can not strictly follow the risk control system, or you are just a gambling person, it is better to choose an investment option. We always start training in trading on a demo account!

Summarize. Both options make it possible to make a profit; each one decides for him which one to choose. Buying based on passive income from the growth in the price of the cryptocurrency has one significant drawback - you need to choose the right asset with a good growth prospect. It is optimal to buy the market leaders: Bitcoin or Ethereum futures for which were announced to be listed on stock exchanges in early 2022. As the current year has shown, there are drops in prices, but then return to their original levels. The main thing is to "catch" the moment of the rollback and buy at a bargain price.

When there is no big budget for buying leaders, this is a situation for most medium and small investors who have to look for promising currencies from the" second list" of AltCoin. The risk of loss is higher, as is the intraday volatility. At a low cost of the moment, you can get a good profit only by trading. You can trade yourself or transfer funds to an external trader for management. But, it is better (if you have the ability) to work on the exchange yourself.

You can also follow one of the basic rules of hedge funds to divide investments into "passive" and "active". The first should be at least 50-60% of the total, and then even if there are losses in trading, some or even all of them can be covered by proper investment.

There is an article in russian, you can read.