There are many theories and opinions on whether trading cryptocurrencies is better than investing, and vice versa. People, based on how risk-averse they are, choose to trade or invest. However, we can aggregate the most important factors and come to a conclusion of which one is better.

We can separate the market movements into three segments:

Bullish trend — upwards facing price movements

Bearish trend — downwards facing price movements

Stagnation — sideways movements

Bullish trend

Upwards facing trends are simply time-spans in which the price is constantly moving up. It is a longer period of time and is characterized by big upwards moves and small downwards retracements. Last year was an example of a bull market and a long-term bullish trend.

During that time, cryptocurrency investors made huge returns. However, most cryptocurrency traders made even bigger returns. During bull-markets, as long as traders enter only long positions, and trade with reasonable leverage which can handle possible retracements, they will outperform any cryptocurrency investor by a long shot. The last years have also made trading algorithms extremely popular, as they buy and sell without any supervision. However, while they are great during bullish periods, they can underperform during stagnating and bearish times.

While a person that invested $1,000 into Bitcoin on January the first of 2017 would have around $13,600, a trader could make one trade per month, catching a 1% move with 10x leverage, and have immensely bigger profits. The trader would profit 10% of his portfolio size each month, along with the price rise of Bitcoin.

Bearish trend

Many people think that everyone loses during bearish trends. However, that is absolutely not the case. Even though trading can be more difficult than during bullish times, good traders can profit on a day-to-day basis using many trading strategies. Trading only “with” the trend — meaning that one should enter short positions only during bear trends and long positions during bull trends — is the main guideline of any winning trader. Being a trader is, ultimately, reducing risk as much as possible while having as much profit opportunity as possible.

Leveraging your position against a cryptocurrency during a bearish trend would be the only way to earn money constantly during this time. While a Bitcoin holder would have only $300 left of his $1,000 that he bought Bitcoin with on January the 1st of 2018, a Bitcoin trader could catch the downwards facing trends, utilize the possibility to short cryptocurrencies (that exchanges such as PrimeXBT offer) and net some profits.

Stagnation period — Ranging moves

During both bull and bear markets, ranging moves and price stagnation happens in 80% of the cases, while we are in a bull or bear trends only 20% of the time. Learning how to recognize and trade price ranges is crucial for earning money trading in cryptocurrencies.

A cryptocurrency holder will not earn any money while the price bounces from one point to another (which are in a close proximity), a trader will recognize the range and will establish his profit potential and stop-loss price perfectly. This will give a trader the opportunity to calculate the risk to reward potential as closely as possible and to enter a high probability trade. Trading price ranges is the easiest and the fastest way to profit while trading cryptocurrencies.

When combined with leverage, a mere 1% trade can net the trader 5, 10 or even up to 100% profit (PrimeXBT, as an example, offers up to 100x leverage on both longs and shorts)!

Conclusion

Many people think that trading is difficult, but it is mostly following a trend, or establishing that there is no trend at the moment. Trading will always outperform investing and hodling if the trader knows his or her craft.