The Complete Guide to Building Crypto Investment Strategies
What Is Crypto Investment? How Do You Build the Best Crypto Investment Strategies? Benefits, Pros and Cons to invest in Crypto
A survey by CNB reveals that one in every ten people invests in cryptocurrency. But all will agree that if the crypto investment is easy, everyone would be a millionaire by now. It is all about willingness to take risks and have the best strategy to make the most out of your investment.
If you are considering investing in cryptocurrencies, here is a comprehensive guide to developing the best crypto investment strategies.
What Is Crypto Investment?
For many years, many were doubtful about digital currencies competing with traditional assets. The narrative is changing as more individuals realize the unmatched benefits of investing in cryptocurrency.
The first step to successful investing is to understand the difference between crypto investment and trading. The two terms are used interchangeably and have resulted in hesitance among individuals who feel like trading is a hard nut to crack.
Unlike trading, crypto investment features a long-term horizon based on fundamental analysis and trends. The goal is to purchase your cryptos at a much lower price than the selling price if you intend to sell the coins down the road.
This means that upon purchasing your cryptos, you will hold through the upturns and downturns until you feel it is time to release the coins when the selling price hits your target.
You don’t sell your stock when you hit a bad quarter. The goal is to buy as many coins as you can and hold them for as long as possible until the most favorable investing period.
How Do You Build the Best Crypto Investment Strategies?
Now that you understand what crypto investment entails, you are better positioned to make sound decisions before diving into it. Nonetheless, it would be best to have a sustainable strategy to guide you through your investment decisions.
The right crypto investment strategy should outline the type of currency to invest in, how much you wish to invest and when to get started. There is a range of strategies to choose from, and they all come with risks and benefits.
Therefore, it will help to study the different crypto investment strategies and select the right one for you, depending on the available capital, goals, and expectations. Some practical tips to help you build the best strategy are;
Be Ready To Take Risks
No one can foresee the future of the crypto market. Therefore, you should expect anything and be ready to deal with the mishaps you face during your investment period.
You could suffer irrecoverable losses, but that should not prompt you to give up. If watching your investments go down overnight will push you to panic, then the crypto investment might not be your thing.
The good thing is that while crypto investment risks are high, so are the returns. With the right strategy, you could double or even quadruple your investment amount within the shortest period.
Other than lowering your expectations, investment demands patience. Do not be the kind of investors who purchase assets today and expect to make profits in a week. The price could drastically fall as soon as you make your purchase, forcing you to wait for months or even years before making profits.
Considering the volatility of the crypto market, you should understand that prices may increase drastically and crash within a few months. The vice versa is also true, so patience is a must-have virtue for investors.
Don’t Follow the Herd
Among the commonly made mistakes by crypto investors is purchasing an asset due to the fear of missing out. A newly introduced cryptocurrency is likely to be overrated. If you are not diligent enough, you will most likely fall for scams.
It would be better to buy the most undervalued cryptocurrency with high potential, even if no one is talking about it now. This one is best Crypto Investment Strategies among all. Do not believe everything the media says about a token without studying on your own and assessing its future profitability.
Take your time to understand the features, mechanisms, and pros of investing in a particular cryptocurrency. And only invest in it because you strongly believe in its potential and not because everyone is purchasing it.
Note that the most hyped coin is less likely to be profitable in a few months or years from now. The reason being, everyone will purchase and probably hold the coins hoping to sell them in some years. They will have no one to sell the coins to because everyone already has them.
Don’t Rush
As much as you want to make quick profits, the worst mistake you could make as a crypto investor is to rush yourself. It will help if you take things slow and move at the most comfortable pace.
Take your time to draft your objectives and evaluate your decisions to avoid losing everything hoping to make an unachievable return on investment. Check out the market trends and pick the best time to buy the assets.
The internet has a ton of information to guide. You may also seek help from experienced investors for insightful input.
As soon as you settle for a particular investment strategy, ensure to track and measure your progress. This will help you establish if you are on the right track or you need to diversify to other cryptocurrencies to achieve your goals.
Diversification Is the Key
Bitcoin is the most popular cryptocurrency. While it has proven to be profitable for the past few years, it is only one of the many options for cryptocurrencies to invest in.
It will help if you embrace diversification without considering what everyone else is purchasing. Nano coin might not be the next bitcoin, but it could turn out to be even better.
Do not look down on a cryptocurrency because no one is talking about it. Conduct research to understand the cryptocurrencies with the highest market cap. Check their current prices, their history, and usability potential, and select the most promising.
You might be among the few who believe in cryptocurrency now, meaning that you will be one of the few who reap high profits when the market realizes the value of the coin.
Crypto Investment Strategies To Try Out
It is, however, important to consider the crypto investment strategy you will use with your crypto purchase. Here are several strategies:
Buy Low, Sell High Strategy
The buy low, sell high is the most common strategy among crypto investors. As the name suggests, this is a strategy where you aim to buy coins at the lowest price and sell when the price skyrockets.
You have to create average positions by purchasing the coins at the average price over a specific period. The crypto market is highly volatile. And this makes buying cryptos in installments an excellent trick to build long positions.
Buy low, sell high, reduce risks, but the returns are pretty low. Depending on your goals and budget, you can choose when you wish to purchase the assets, which could be weekly, monthly, or after a few months.
This strategy features two averaging strategies; value cost averaging and dollar-cost averaging. The former is where you add to your portfolio depending on your last gains or losses, while dollar-cost averaging is based on investing equal amounts at outlined intervals.
The averaging strategies help you decide if you wish to skip a particular crypto purchasing period, perhaps to wait until the lows or dips to buy the assets.
The buy low, sell high strategy favors both beginners and experienced investors. It is also a chance for investors to take advantage of other investors’ panic selling mode.
The main drawback, however, is that the strategy requires you to conduct in-depth and lengthy research. Furthermore, it may be hard to make sound decisions when buying and selling cryptocurrencies due to market uncertainties.
HOLD
Also known as a long-term investment strategy, this is where you purchase cryptocurrencies and then hold them for an extended period waiting for prices to increase before you sell them. HOLD is among the common and most preferred strategies by investors looking to make the highest profits.
As earlier mentioned, the crypto market is quite volatile. Just because the prices are extremely low today does not mean the situation is permanent. Each day in the crypto market is different, and even the most undervalued asset could skyrocket overnight.
HOLD strategy is the best for beginners. It is easy; buy assets and leave them as they are until their value and price increase. You do not need to dedicate your time following up on the investment.
This investment strategy is also a great option if you doubt your technical analysis skills because it requires none. The drawbacks are that the strategy can be terrible and frustrating during downtrends.
The best part about HOLD is that you can use the coins for other transactions and make profits in the long run. For instance, you can purchase digital gift cards with bitcoins and resell them at a profit.
Check out trustworthy kiosks such as bytefederal.com for more information on how to buy and sell gift cards and the best Crypto Investment Strategies.
Value Investing
Value investing is where you pick assets that appear to be trading for a value lesser than their book value. These are the currently undervalued stocks, and their price is likely to go up as soon as the market realizes their worth.
For instance, if ten years ago you were told that Bitcoin would be worth millions today, you would hardly believe it. Only a few bought the idea and are undoubtedly reaping the gains now.
As investors realized the value of this crypto coin, its demand increased and resulted in its high price. The same applies to other assets. You can buy as many undervalued coins as you can now and wait until the market realizes their value.
However, do not rush to purchase every coin that’s introduced in the market. Conduct due diligence and establish the possibility of the asset’s price going up some years to come. And this is where the main challenge comes in.
It takes in-depth research and a long-term mindset to spot the underestimated assets to invest in. If your findings are correct, the returns are worth the time and risk.
The other trick to be a successful value investor is to avoid following the multitude. Use financial analysis and trust your instincts.
Trading Bots Investment
Trading bots work by analyzing the market and executing orders immediately. And while that does not align with investors’ end-goal, you can use the technology to reduce risk and maximize returns.
You can program the bots to manage your portfolio while aligning with your chosen investment strategy. Nonetheless, most of the bot’s features do not work if you wish to purchase and hold the assets for the long term.
Furthermore, bots are not ideal for casual investors and beginners. You must be well-versed with bots applications to avoid making costly mistakes.
Besides helping you focus on your end goal, crypto trading bots can be used across different accounts, which is beneficial to veteran traders. Moreover, there are no emotions attached during investment. Thus, you are likely to make sound purchase and sales decisions.
The downsides are that you are prone to falling for scammers claiming to offer reliable bots. And with investment, you cannot automate the entire process.
Growth Investing Strategy
Growth investing strategy is more like value investing. But in this case, investors are not interested in the market value of the cryptocurrency. Instead, they focus on cryptocurrencies that indicate above-average signs of growth.
Growth investing is a short-term strategy as investors go for tokens that have already shown strong performance but yet to reach their full potential. It is a low-risk strategy, but you may not always achieve your goals within the anticipated period.
Maximize Your Crypto Investment Returns With the Best Strategy
From the guide above, you can quickly identify the most suitable investment strategy for you. Every investor hopes to grow their wealth over a specific period, but you don’t need to follow the same route as your friend, relative, or colleague to reach your goals.
Understand the pros and cons of different crypto investment strategies and settle with the most favorable based on capital availability and how long you wish to invest.
Keep reading our articles for more insightful guides.
