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Three Reasons For Long-Term Crypto Investing

By RAIN EDITORIAL TEAM - Jun 21, 7:00 PM

Many seek quick and overnight gains with crypto trading, but that is the harder way to go about securing profits with this novel asset class. Instead, what numerous seasoned investors do is planning long-term with their crypto portfolios, which not only saves them great amounts of time and resources, but also frees them from the potential stress of short-term volatility. In this article, we’ll focus on exploring three reasons why long-term crypto investing can be beneficial for you, and explain all of them step by step.

Crypto Investing vs. Crypto Trading

First, let’s begin by ensuring that everyone is on the same page about the terminology of the market. Crypto investing and crypto trading are often mixed or used interchangeably, while they actually refer to two different ways of conduct. 

Generally speaking, crypto investing is mostly used when an investor buys an asset with the intention of holding it for in the medium or long run, while crypto trading is the act of buying crypto assets with the goal of reselling them as soon as the targeted profits are reached. It’s not just the action, but also the goals of these two that differ. Crypto traders are mostly after short-term gains that can become a side income, and later even full-time income potentially. Investors, however, seek to get the most out of their holdings by waiting it out and letting their portfolio grow over the years. 

Why Investing In Crypto Long-Term Can Be Beneficial

Now that everyone understands the above-mentioned crucial differences and traits, let’s see three reasons for investing in crypto long-term.

Reason 1: Compound Interest 

Compound interest is a powerful phenomenon of the investing world that trading can rarely unlock. That’s because compound interest is exponentially amplified by time, of which investors tend to have a lot on their hands. Let’s see an example: Bitcoin (BTC) has returned around 230% p.a. every year since it began trading. Without compound interest, one year of such return would turn $1,000 into $2,300. While this is not a bad result by any means, with only 5 years of compound interest at the same rate $1,000 would become $35,937, which is a significant increase from $2,300.

Reason 2: Potentially Lowered Stress Level

Many of us are constantly checking their portfolios in pursuit of trying to time the market and sell at the peak, or buy at the bottom. This conduct simply does not work for most investors out there, and only results in impulsive decisions, and high levels of stress. With long-term investments, you don’t have to constantly worry about your portfolio being down or up, as in a few years’ time, all such bumps can simply even out eventually.

Reason 3: Securing A Fair Share By Holding On

Getting a notification that one’s portfolio is down by 35% can cause panic selling, however, the same is true about impulsive profit taking when the holdings are up by a hefty margin. Holding investments long-term tends to have the best averaged effect out of all other ways of trading, at least based on historic stock market data.  

Ending Remarks

Short-term crypto trading can be exciting and, if done right, even immensely profitable. For most investors out there, however, becoming consistently profitable with short term trading is a distant dream that requires countless hours of practice, and potentially thousands lost during the process. Long-term investing, on the other hand, offers similar, or even higher potential than short-term trading for everyone, regardless of expertise or skills. At the end of the day, remember how the saying goes: “Time in the market beats timing the market.”

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