The last few years have seen a surge in Bitcoin’s price (BTC) so the virtual currency has hit record highs that can put any fiat currency to shame.
Therefore, many investors have been lured and attracted by its magical charm and put their money into it, hoping for the cryptocurrency to gain further.
Investors who bought the cryptocurrency have certainly gained from it, but BTC traders have also made profits from the virtual currency.
It is important to mention here that purchasing and trading of the same are two different aspects and should not be mixed together.
For any beginner, both these aspects may look similar, but there is a world of difference between the two. Hence, we try to bring forth the differences between these two aspects of cryptocurrency in the following sections.
#1 Type of ownership
When a person buys Bitcoin, it is normally delivered depending on the amount that has been invested in it. Therefore, a full or partial Bitcoin can be bought and kept by an investor.
Additionally, a purchase is usually made as a long-term investment. In Bitcoin trading, there is no buying or selling of the cryptocurrency.
Therefore, even a person who does not own the cryptocurrency can trade in it with ease if a person has a reasonable knowledge of the BTC market and understands the trends and variations that can be enough to pursue trading the virtual currency.
Moreover, Bitcoin trading is considered a short-term investment as people can buy and sell and make profits daily.
#2 Model of working
While in purchasing a Bitcoin, the same is owned by a person, and it can be bought or sold on exchanges, but in Bitcoin trading, the trade happens on Contract for Difference (CFD).
The price difference has to be speculated in CFD, and the Buy/Sell spread is the real thing to consider.
Reliable sites like market-master can help in assessing the buy/sell spread very well so that an investor can make a profit from Bitcoin trading. CFDs are generally used for a shorter timeframe as Bitcoin is a volatile financial instrument, the prices in different exchanges can vary significantly within a day.
#3 Flexibility issues
Buying a Bitcoin and holding it in a wallet may not be flexible enough like its trading.
CFDs are not tied to any asset, only the underlying contract is bought or sold, and therefore trading can be a more flexible option compared to buying Bitcoin.
Having said that, it does not mean that purchasing Bitcoin and keeping it is a tedious job, but when compared to trading, it offers less flexibility.
It should also be mentioned here that CFDs are more regulated and established financial offerings compared to Bitcoin purchasing.
#4 The place of the transaction
To buy a BTC, an investor must visit an exchange, as that is the place where BTCs are sold.
Additionally, investors can also buy the same from other investors, depending on one’s choice and preference. Bitcoin trading, on the other hand, can be performed at any trading site that facilitates trade.
However, most exchanges can be trusted with ease, but not all trading platforms may be similar, as some of them offer more excellent features than the rest. That is the reason why more people like to trade BTCs only at a few sites as they offer amazing features to accrue smart profits.
#5 Wallet versus trading account
Upon buying a Bitcoin from an exchange, an owner gets a wallet to keep the same safe.
The BTC can be kept in it as long as one wishes to hold the same. Compared to it, in BTC trading, users get a trading account upon registration.
There is no Bitcoin that is held by them in these accounts, but it is only the real money that is kept in these accounts so that trading can be done with them.
These are some of the major differences between Bitcoin purchases and BTC trading. For any beginner, understanding these differences is very important so that there is ample clearance between the two processes involving Bitcoin.
There can be investors who may like to trade as well as purchase Bitcoins, but due to their value, there can be more traders in the market compared to buyers of BTC.
Having a clear understanding of both aspects is very crucial for them.