Mastering the Token Market


What is trading vs. investing?

Learn how trading and investing differ, and the advantages and disadvantages of each strategy.

Token Takeaways

Trading and investing in crypto requires different skill sets, and both strategies have advantages and disadvantages.

While trading can yield great returns for successful market participants, investing is generally better suited to newer crypto adopters.

When entering the token space, everyone should be aware of the risks, choose the best crypto to invest in and choose the strategy that’s right for them. 

The crypto universe offers different ways to adopt tokens. As tokens are available on an open market that runs 24/7, anyone can choose to get exposure to their price performance through trading or investing at any time. Many assume that trading is the only way to participate in the crypto market. However, investing has many advantages, particularly for newer adopters. This guide breaks down both strategies, explaining the benefits and drawbacks of each.

Token trading explained 📈

Trading is a popular activity across all financial markets. In the crypto market, traders buy and sell tokens with the intention of securing profits.

For all token traders, the core goal is to get exposure to a token at one price and later sell the exposure for a profit. As the crypto market is highly volatile, it provides fertile conditions for traders.

As trading involves risk-taking and making predictions about tokens, it requires a specific skill set. Some traders use fundamental analysis, looking at the value propositions for different crypto projects, to make judgements on the market. Others use technical analysis, which involves studying price charts, to select their trades.

Technical analysts use indicators such as the Simple Moving Average to make predictions about how tokens could perform in the market (Source: MarketWatch)

Additionally, trading experts often use products such as futures, options, and perpetual swaps to get exposure to crypto on exchanges. These products are financial contracts where traders agree to sell an asset at a predetermined price on a specific date in the future. Future traders can go “long” or “short” depending on if they believe a token’s price will rise or fall.

Token tips: Traders go “long” when they believe an asset will appreciate in value, making a prediction that it will rise. Conversely, they go “short” when they anticipate a decline in market value 💡

Futures trading also allows for taking out additional leverage to place trades, which makes it highly risky. Although these products are readily available on large crypto exchanges, they’re typically only recommended to more experienced, advanced traders. 

The importance of risk management

Although traders have many different approaches to the market, risk management is key to every successful trading strategy. As trading involves taking risks, successful traders are careful to limit their possible losses wherever possible and choose the best crypto to invest. Some place hedges against their trades, while others take out stop losses to automatically sell tokens at a set price to limit downside.

Token tips: Hedging involves offsetting a position in a token to reduce risk. A hedge is a type of trade that reduces the risk of having exposure to another asset 💡

It’s worth noting that crypto trading is very competitive. While many traders enter the crypto space in hopes of securing profits, few succeed. As such, it’s important to understand the risks associated with trading. For many newer token adopters, investing offers a more accessible way to enter the market.

Token investing explained 🌱  

While trading involves buying and selling tokens at different price levels, investing primarily focuses on buying and holding assets. 

Due to the crypto market’s volatility, crypto investing requires adopting a long-term mindset. Successful token investors can weather short-term market downturns as they take the view that tokens could appreciate in value in the long-term future. This also means that investing requires patience and conviction; investors may expect to wait a very long time to secure profits.

For many crypto investors, the “DCA” method is a popular strategy for getting exposure to the market. DCA, or dollar-cost averaging, involves setting a specific amount of funds aside to buy a cryptocurrency at regular intervals regardless of the price. For example, someone may decide to allocate $50 to BTC and $50 to ETH every week.

Where traders often use futures to get exposure to the market, investors typically buy assets on the “spot” market. Spot market orders are immediately fulfilled at the point of sale.

Although there is a philosophical meaning behind the crypto space, in most cases, both traders and investors also enter the crypto market to secure profits. Similar to traders, investors typically pick a sell point to secure profits from tokens. However, the difference is that they apply long-term thinking. Where traders may think ahead to an asset’s price in days, weeks, or months, investors may think in years or decades.

Is it better to trade or invest in tokens? 🤔

While crypto trading can be lucrative, it’s not for everyone.

Investing is a popular strategy for token beginners, with BTC and ETH, types of cryptocurrency, providing a clear gateway into the token universe.

Since the crypto space launched in 2009, its value has fluctuated based on market cycles. However, the value of the space has greatly increased over time. For anyone who believes the value could continue to increase in the future, investing provides an opportunity to get exposure to potential growth.

The global value of the token space currently sits at $1.2 trillion, around 60% down from its November 2021 all-time high. However, the market has greatly expanded in size over time (Source: CoinGecko)

It’s also important to understand the relationship between token technology and the market. If token technology is successful and tokens hit mass adoption, it’s likely that the most robust projects in the ecosystem will appreciate in value in the future. 

Ultimately, it’s up to every individual entering the crypto space to choose the strategy that’s right for them.

Discover more 💫

Now that you’ve read our guide, you should have a clearer understanding of how trading and investing work. If you’re ready to start getting exposure to the token market, the app offers an easy way to discover tokens and buy them with as little as $0.25. Head to the app to start exploring the token universe today. 

Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.