014: Investing vs Trading

Crypto enthusiasts can be broken down into two categories: Investors, and traders. What’s the difference?

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Episode 14 Transcription – Investing vs Trading

Liam  00:01

Welcome to Candid Crypto, a place where anyone can learn about Blockchain Tech.

Michael  00:08

We are two friends who love cryptocurrency and have acted as retail investors and researchers for years. I’m Michael.

Liam  00:16

And I’m Liam. Our goal is to create a community where listeners can build their knowledge and meet like-minded people in the digital asset space. 

Liam  00:28

Welcome, welcome. Welcome. Welcome back to Candid Crypto, Episode 14. 

Today, Michael and I are going to be talking about the difference between cryptocurrency investing and cryptocurrency trading. What exactly is the difference? And why does it matter?

Michael  00:46

Yeah, that’s a good question. And for the most part, a lot of people use these two words interchangeably. And in my opinion, that is totally incorrect. There are fundamental differences. So we’re going to go through it. And if you are one of those individuals, I used it interchangeably let us know and let us know if you learned something at the end of this. But in my mind, I always see myself more as an investor. And when it comes to cryptocurrency, there are a few ways to make money. 

In the past two episodes, we talked about mining. It’s a technical process. It’s really cool. But it’s not for everybody, it’s way easier to make money and really get into the industry by either investing in it, or trading in it.

Liam  01:35

Yeah, and fundamentally, that boils down to just straight up buying it, instead of creating computers to mine it for you.

Michael  01:42

Yeah. And, you know, I can see why people use it interchangeably. They kind of do the same with stocks. But in my eyes, investing is more you believe in cryptocurrency, in the long term. You know, you look at it, the fundamentals, and you say in 10 years, it’s going to be valuable. I’m going to throw $1,000 in now, and I’m just not going to touch it. Where in traders’ eyes, they are on a daily, weekly, or maybe a few times a month, they’re actively looking at the price of coins, and they’re trying to make a quick buck off of short term volatility. And they’re kind of more in it as a short term, instead of the long term.

Liam  02:29

And when it comes to cryptocurrency, the volatility is bonkers, certainly way more volatile than traditional financial instruments like stocks.

Michael  02:38

And we’ve definitely mentioned this word in past episodes, but Hodling, Hodling is really for the true investor in cryptocurrency.

Liam  02:51

So the old Montreux [phonetic 02:52] Hodl really means hold your crypto.

Michael  02:55

And instead of your Bitcoin or whatever cryptocurrency that you’re interested in, it might go up 10% in one day, it might go down 10% in one day, but that doesn’t matter to the Hodler. They stick with it; they think it’s going to be more valuable in 5 years. And that 10% doesn’t really mess with their head, and they’re in it for the long run.

Liam  03:21

And so what is interesting, and this applies to stocks in a sense as well, the appreciation, the big gains really occur on a one or two-day basis. With Bitcoin, massive price hikes have occurred in the span of 24 hours. And that is every trader’s dream for them to purchase their crypto in the short term, have it skyrocket 100 plus percent, and cash out those sweet gains.

Michael  03:52

You know, we keep on talking about volatility, it can be good and bad for the average trader. But when it comes to crypto, things go up 10% in 24 hours, that’s a little bit different than the stock market. You’re expecting 7 to 10% over the course of a year. In crypto that can happen in just a few hours. And you don’t really know why there are so many factors that could contribute to that. So I’ve always been kind of scared to be a trader in the crypto market because it just kind of feels more like gambling. You never know.

Liam  04:33

There’s a lot of uncertainty. And oftentimes critics of cryptocurrency will point to the traders and say, ‘Hey, you guys are glorified gamblers. Your technical analysis is just a facade to justify your compulsive spending on crypto’, which has some merit. I mean, obviously, some people are going to fall into that subset, but at the same time, if there are strong fundamental properties of a cryptocurrency, it can be very appealing to throw in a lot of money and put your skin in the game. So to say.

Michael  05:10

Yeah, and really one of the main differences I see between an investor and a trader, when it comes to crypto is just how much risk you’re willing to take on. For me, I am more risk adverse. I think I’m going to be profitable in the future. But I’m not willing to trade 5 times a day, it’s just not willing, I’m not willing to do that. But people that are willing to take on that risk, you know, trading might be your option.

Liam  05:46

So Michael, tell me a little bit about that. You’ve employed an investment strategy in the past, how has that benefited you? And what cryptocurrency did you see the most appreciation from.

Michael  05:56

You know, when I was a little bit younger, I didn’t have that much money, which is very normal, and I think the average for a lot of people, unintelligible 06:06], getting into the market, so they don’t have a whole lot of money to actually trade or even invest in the crypto market, which I don’t think that should discourage anybody. Recently, I start to have a little bit more income, so I can invest a little bit more in the market. And I’ve seen my investing strategy has played out well with Ethereum and Bitcoin. You know, I’m pretty confident that those are going to be here at least for another 5, 10 years. I’ll probably be Hodling my coins even longer. 

Liam  06:41

Yeah, yeah. Right on. 

Michael  06:43

And you know, the only thing I would say I’ve traded, and I’ve actually haven’t done that, well, trading is Dogecoin. And I kind of just got wrapped into the hysteria, and I just thought it was fun. You know, I much rather be on the side of Elon Musk when he goes on to SNL. And I don’t know, I just thought it was fun. It wasn’t a whole lot of money. It is not a big part of my portfolio.

Liam  07:10

Hey, they are Doge coins? [crosstalk]

Michael  07:12

Why not? Liam, what about you? What do you see yourself as? Are you the investor? Are you the trader?

Liam  07:23

Investor, for sure. Where I saw large gains was from basic attention token the past year. For me, basic attention token sat at around the same price for a while. And then one day, it clicked. And it went up by 300%. That’s what I glossed over earlier you know. 

As an investor, the longer you have skin in the game, the more likely it is for that one or two days of crazy Bull Run market to occur. And that’s what happened to me. And I cashed out some of my gains and was very happy with the money I took away from that.

Michael  07:59

Yeah, and this is a crypto podcast, not a stocks and financial podcast. But, you know, similar to stocks, I don’t know what the exact stat is, but I think it’s four days a year is really where most investors get the majority of their profits. So, you know, similar to stocks and crypto, the trader, if you’re constantly buying and selling, it is very easy to miss out on that one day where it goes up 10, 20%. And the same thing as crypto, like, it’s easy to mess up that and you have to be really in tune with many different tools to be a successful trader.

Liam  08:44

Certainly one of the most prolific tools in the crypto trader’s arsenal is Algorithmic Trading. And this applies to the traditional financial market as well. But it’s not so much technical analysis that is being performed by hand as it is algorithms performing that technical analysis for you. And those algorithms are all competing with each other to try to make that say 2 or 3% per day off of market volatility. And we’re not saying that it’s completely impossible to break into that game. But it is harder, it certainly is harder. The longer you have skin in the game in the market, the higher chance you will encounter that one or two days of crazy Bull Run increase with your favorite crypto.

Michael  09:34

And by now, I hope you know that we are not financial advisors.

Liam  09:43

We don’t give financial advice. Yeah, we don’t get financial advice. We are not financial advisors. Remember, past performance is not indicative of future results. Please bear that in mind. However, Michael and I are big believers in crypto. We think it’s here to stay. We think if you have skin in the game long term, you will be happy.

Michael  10:03

Yeah. And if you’re a beginner, which a lot of people listening to our podcast are, you might be asking yourself, so what’s best for me? And the answer might be both, there is no harm in trying both the few coins that you fundamentally believe in, in the long run Hodl those, put them on a Cold Storage Wallet, put it in your safe, put it in a deposit box, and your bank. And for the few coins that you just want to have fun with, maybe make a quick timer to try trading.

Liam  10:39

Because at the end of the day, we don’t have to take ourselves so seriously. Like if you want to buy some Doge coin and mess around with that and see what happens. Go for it. Just make sure it’s disposable income that you are comfortable losing 100% of

Michael  10:52

Feel free to message us at CandidCryptoPodcast.com and reach out to us on our social media. And tell us if you are an investor or if you’re a trader, and why we would love to hear more from our audience and it’s always a joy.

Liam  11:07

Michael and I have thoroughly enjoyed making crypto so far, we are pushing out new content, and revamping our website. And we appreciate all the love and support that we have gotten on social media and to our email. It means a lot. So thank you all for reaching out and interacting with us.

Michael  11:24

And hopefully now you know the difference between an investor aka a Hodler and a trader. What would be a fun nickname for a trader?

Liam  11:35

This is a trick question.

Michael  11:36

No, I’m just thinking like, I love the word Hodling. Like what’s a good word for trader I don’t want to say gambler.

Liam  11:47

Compulsive gambler. Fundamentally, it just boils down to your risk tolerance and the money you’re working with. Don’t take out loans and buy crypto don’t frickin sell your car and buy crypto with that. Use the money that you’re comfortable with. And you will have a good time in the cryptocurrency space, even if it’s just $20 a week that you can use to buy Dogecoin or Bitcoin, you know, go for it. Life’s too short to live with regrets.

Michael  12:19

Hell, yeah.

Liam  12:21

Awesome. Well, thank you for tuning in to Episode 14 of Candid Crypto until next time.

Michael  12:27

Happy Hodling.

Liam  12:28

Happy Hodling.

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