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Produced by Wayne | Vernacular Blockchain (ID: hellobtc)
Some financial experts believe that cryptocurrency will become the most important asset class of our time. That is, although the chain on the block and hash discussion seems far-fetched are, but many people still may want to look into encryption money whether it is the best investment opportunities.
After all, the best investment is one that you can manage with confidence, and confidence comes from understanding. So, what is the difference between investment and speculation in the field of blockchain and cryptocurrency?
01
Investment
For most people, the difference between investment and speculation comes down to risk, reward, and length of time. The Oxford dictionary defines investment as: "Put money into financial plans, stocks, real estate and commercial enterprises in order to make profits."
Investors usually participate in it for a long time. Therefore, before investors decide to invest their funds in the company, they need to spend a lot of time on research and analysis. They must ensure that it is safe and reliable, and the possible returns are worth the risk.
Generally, investors will invest money in lower-risk investments, which will naturally bring lower returns over a longer period of time. Benjamin Graham listed these as investment rules in his book "The Smart Investor": Before buying stocks, you must thoroughly analyze the health of a company and its underlying businesses. You must intentionally protect yourself from serious losses. You must pursue adequate performance, not extraordinary performance.
If we break it down, we can see that Graham advocates thorough 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 thoughtfulness, which means not to take too much risk and to get a good return.
02
speculation
In contrast, speculation usually brings higher risks and rewards within a shorter time frame . The definition of speculation is "investing in stocks, real estate, or other companies in order to obtain profits, but there is a risk of loss." If we look at it from a broader non-financial point of view: "Forming a theory or theory without conclusive evidence Conjecture on a subject."
Obviously, this applies to many cryptocurrency fields, where countless traders simply stud without studying the fundamentals, while countless “investors” sitting at home invest their money in any glamorous currency.
But speculation is not limited to cryptocurrencies.
Day traders in the world’s largest currency and stock markets are all speculators. They use market inefficiencies and volatility to earn a small portion of the income every day. "Investors" in small mining companies are also speculators. They bet on a newly discovered oil field that can hardly guarantee sufficient production or returns.
03Investors
and Speculators
Both investment and speculation in the cryptocurrency market are possible, it just depends on the method used when considering investing money in the market . Investors may find a reliable cryptocurrency project that meets all the requirements in their research and seems to be underestimated. They are buying for long-term holding. These types of projects will shape the future and may become the next Apple, Amazon, or even Internet 3.0 . Such investors will conduct due diligence and will participate in it for a long time.
The investment portfolio is divided into investment and speculation. Due diligence can still be conducted, and the research of a single project can be continued when held for a long time, while a small part of the investment portfolio is set aside for speculation.
You can use 80–90% of your funds for investment. In this portfolio, you can allocate funds to 5, 10, or 20 projects to diversify your investment, but you need to deepen each project the study. Use 10% to 20% of funds to speculate. In this portfolio, you can still diversify your investment by dividing your funds into 10 distributions.
By doing so, our goal is: Investment: Choose long-term benefits, and ignore market fluctuations. These projects will have good and bad days, but it is not important, because you are a HODLer ; speculation: accept small gains as you see fit , and make full use of the volatility of the cryptocurrency market to make money.
The way to reduce any investment risk is through diversification. By adopting a strategy of simultaneously using investment and speculation, you can make a lot of money during the bull market and lose less during the bear market. Finally, there is an old saying: " Do not speculate more than you are willing to bear. "
When buying cryptocurrency, do you usually consider investment or speculation. What is the biggest difference between them? Welcome to share your views in the message area.
This article is a reissue of an old article with slight adjustments to the
original link: A classic story that will let you understand Bitcoin mining in 3 minutes
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"Sound Description: This series is only for entry-block chain science learning, does not constitute any investment advice or recommendations. If there are any errors or omissions, please leave a message to point out. 』