Getting started with blockchain | What is the difference between cryptocurrency investment and speculation? How to make both fish and bear's paw

Author | Wayne

Produced | vernacular blockchain

Some financial experts believe that cryptocurrency will become the most important asset class of our time. That is to say, although the discussion about blockchain and hashing seems to be inconsequential, many people may still want to investigate whether cryptocurrency is the best investment opportunity.

After all, the best investment is an investment you can manage with confidence, and confidence comes from understanding. So, what is the difference between investment and speculation in the blockchain and cryptocurrency?

01 Investment

For most people, the difference between investment and speculation comes down to risk, return and length of time. The Oxford Dictionary defines investment as: “Investing money into financial plans, stocks, real estate, and commercial enterprises to make a profit.”

Investors usually participate in the long-term, so investors need to spend a lot of time on research and analysis before they decide to invest their money in the company, they must ensure that it is safe and reliable, and the possible return is worth the risk.

Often, investors invest money in lower-risk investments that naturally result in lower returns over a longer period of time. Benjamin Graham lists these as investment rules in his book Smart Investors: Before buying stocks, you must thoroughly analyze the health of a company and its underlying business. You must be interested in protecting yourself from serious losses. You must pursue enough performance, not extraordinary performance.

If we break it down, we can see that Graham advocates a comprehensive analysis and due diligence before buying stocks. For stocks, this usually involves fundamental analysis, quantitative analysis, qualitative analysis, and intrinsic value testing. Graham also values ​​humility and deliberation, which means not taking too much risk and getting a good return.

02 speculation

In contrast, speculation often leads to higher risks and rewards in a shorter time frame . The definition of speculation is “investing in stocks, real estate or other companies with a view to gaining income, but at risk of loss.” If we look at it from a broader non-financial perspective: “Form a theory or pair without conclusive evidence Conjecture on a topic."

Obviously, this applies to many cryptocurrency areas where there are countless traders who don't study fundamentals at all, and countless “investors” who sit at home throw money into any sleek currency. But speculation is not limited to cryptocurrencies.

Day traders in the world's largest currency and stock markets are speculators who are using market inefficiencies and volatility every day to earn a small portion of their profits. The “investors” in small mining companies are also speculators who bet on a newly discovered field that barely guarantees sufficient production or returns.

03 Investors and Speculators

Investment and speculation in the cryptocurrency market are possible, and it only depends on the approach taken when considering investing in the market . Investors may find a reliable cryptocurrency project that meets all the requirements of their research and seems to be underestimated. The purpose of their purchase is long-term holding. These types of projects will shape the future and may become the next Apple, Amazon, and even Internet 3.0. Such investors will conduct due diligence and will be involved for a long time.

The portfolio is divided into two major segments, investment and speculation, and can still conduct due diligence, and continue to conduct individual project research in the long-term holding, while a small part of the portfolio is put aside for speculation.

You can invest 80–90% of your capital. In this portfolio, you can distribute your funds to 5, 10, or 20 projects for diversification, but you need to drill down into each project. the study. Speculate with 10% to 20% of the funds. In this portfolio, you can still diversify your investment by dividing your funds into 10 allocations.

By doing so, our goal is to: invest: choose long-term benefits while ignoring market volatility. These projects will have good and bad days, but it doesn't matter because you are HODLer; speculation: take advantage of the small gains and make full use of the cryptocurrency market to make money.

The way to reduce any investment risk is through diversification. By adopting a strategy that uses both investment and speculation, you can make a big profit during the bull market and lose less during the bear market. Finally, there is an old saying: "The amount of speculation should not exceed the amount you are willing to bear. "

When buying cryptocurrencies, do you usually consider investing or speculating? What is the biggest difference between them? Feel free to share your opinion in the message area.


『Declaration : This series of content is only for the introduction of blockchain science, and does not constitute any investment advice or advice. If there are any errors or omissions, please leave a message. You are not allowed to reprint this article by any third party without the authorization of the "Baihua Blockchain" sourced from this article.

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