Once an individual has evaluated whether bitcoin is right for them, they can begin looking into whether it makes more sense to invest in the digital currency or trade it. While these two may sound the same, they are different.
When differentiating the two, the easiest way to think of it is that investing is a long-term activity, and trading is a more short-term activity. For example, many people invest for retirement, accumulating wealth over time so that they can build up a viable nest egg. Alternatively, they may save up for their children’s college education.
Trading can be far more short-term, however, as a person could purchase a security with the intention of selling it later the same day. High-frequency trading, a more extreme example, involves buying and selling assets within fractions of a second.
Investors should keep in mind that bitcoin is notoriously volatile. It’s price has experienced both sharp rallies and notable declines. As a result, these investors should remember that they could potentially lose the value of their principal rather quickly by trading bitcoin. On the other hand, they could potentially generate some very compelling returns by trading this digital currency.