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Bitcoins: Investment vs Trading

September 7, 2017

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The hype behind bitcoins is almost a household name now. With people from all over the globe, especially India, rushing in to join the Bitcoin bandwagon, a common question they face is whether they should invest in the currency and stay at it for the long haul, or do quick trades and make money at the highs and lows.

To better answer this question, an understanding of investments and trading concepts is imperative. Let’s dive in.

Investment vs Trading

Both investment and trading methods are used by investors and traders for monetary gain. There is always a dilemma about which one of the mentioned is better in giving returns. While that is debatable, some other facts are not.

For a long time, people have been confused about which one is a better option. There is no definite answer as both can give you great returns. It depends on with which one you are more comfortable with. Which one you can pull off better. Great investors believe like Warren Buffett, Peter Lynch and Benjamin Graham believed in value investing and made great fortunes by investing in great stocks.

Investment is primarily focused on holding the assets and waiting for long periods until it gives good returns. Investment is a long process and if you are willing to research well and have patience; it can be fruitful for you. Wild guesses in long-term investments or speculation can lead you to trouble.
Meanwhile, trading is a short term ‘buy’ and ‘sell’ method where you will buy for a short period of time and sell as soon as you are making reasonable returns. You will then repeat this process at the high and low prices. ‘Stop-loss’ is a very important factor if you are willing to trade. Trading can be a risky business as well as very profitable; if you are not doing it correctly, you can end up losing a lot of money.

In the case of Bitcoin, things are little different because of its high volatility. Bitcoin’s price has witnessed some wild fluctuations over the years, which is why many initial investors were hesitant to get into it.

Now, having observed bitcoins for more than half a decade, we are in a better position to recommend an invest/trade call on Bitcoin.

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Investment in Bitcoin

Investing in bitcoins is very much similar to investing in securities. It is known fact that Bitcoin has delivered humongous profit in the last 6–7 years. No other investments have shown such growth in recent times. If you had invested Rs 4,500 about 7 years ago, you would have been richer by a staggering Rs 459 crores today.

This fact has attracted a lot of investors to bitcoins around the world. Even more thanks to Satoshi Nakamoto, who programmed bitcoins to have a finite quantity. A limited number of bitcoin will result in high demand, and high demand will ultimately hype bitcoin prices in the market since more investors will continue to come in. This is an obvious observation according to the ‘law of demand’ of economics.

Investors can get started on bitcoin by buying it off exchanges like Unocoin.

Trading in bitcoin

Fluctuation is the most opportunistic property of bitcoin. Bitcoin is known for its high volatility in the market. Its fluctuation is much higher compared to shares, commodities or mutual funds. However, this shouldn’t be something to worry about.

Intelligent trading can be very advantageous for you. Waiting for the prices to go down, grabbing them at the right moment and selling them when the price gets higher can be very profitable. Investors get edgy when they see this volatility and exit their investments. So arguably, trading in bitcoin could be somewhat better than investing in it. Buy at low & sell at high. Take a look at bitcoin’s edgy price charts to let the volatility sink in.

Ideally, it can be argued that trading is a better option than investing in bitcoins. But, an undeniable fact is that Bitcoin has delivered huge profit to investors as well. There is no doubt that bitcoin has favoured the brave investors who stayed invested in it.

Regardless of whether you invest in bitcoins or trade in them, diving into the bitcoin world is something no longer a matter of debate. Get started with bitcoins on Unocoin now.