The 5 Different Crypto Investment Strategies You Should Know About
Crypto is a big buzzword in tech and finance these days and for good reason. Cryptocurrencies are ushering in a new type of investment that yields high profits but can also be highly volatile by nature. However, with easy access to information on cryptocurrency at everyone’s fingertips, it makes crypto easy and attractive to get into.
How to Invest in Crypto
Navigating the crypto scene can be tricky. So, first thing’s first: How do you start investing in the first place? Most crypto traders meet on platforms called cryptocurrency exchanges. Here they manually trade with other crypto investors and need to pay a nominal fee to exchange coins using the platform.
On the other hand, if you’re looking for ease of access, you can also approach a cryptocurrency broker who can guide you through the process through a simple app. This will save you time and effort but be prepared to pay your broker a fee in exchange for their services. Once you’ve made your choice on your method of investment, you’re all set to start investing.
However, like any financial venture, crypto has its ups and downs. It’s easy to feel FOMO (fear of missing out), a common term that more seasoned investors warn newcomers against. Because of FOMO, new investors tend to get the losing end of the bargain by investing too much at once or riding on the wrong trends.
Fortunately, it’s not completely impossible to make a profit off of investing in cryptocurrencies. Many seasoned crypto traders have come up with various trading strategies over the years and aren’t shy about sharing them with their fellow traders. Here are a few interesting strategies you can try out for yourself:
Securing Asset Storage
The first strategy you should think about is keeping what you’ve already gained in a safe place that is accessible to you. Crypto traders often have two types of storage for their coins: a “hot” wallet and a “cold” wallet. The hot wallet is an online digital wallet that can be accessed via a security key that is known only to the user. For example, Monero traders can use an XMR wallet to add a necessary layer of protection to your assets by using a dedicated security key to access your coins.
On the other hand, a cold wallet is a physical, offline storage device, such as a USB drive, that can protect your earnings against online attacks like hacking. You simply have to remember your password to your cold wallet and be able to access your assets from there. Keeping both wallets will allow you to still be able to access your earnings even if one wallet is compromised.
Hold on for Dear Life (HODL)
As the name suggests, HODL means to hold your assets in your wallets and wait for an opportune moment to use them. You can accumulate more crypto while doing so, but the trick is to not have any outgoing transactions until it’s favorable to sell your accumulated assets.
The reason behind this strategy is to invest in the currency when its price is at a low point and not get hit when the value of the currency plummets. Since crypto is highly volatile, keeping your assets on the market for too long has a chance of seeing its value soar, but take note that it may also crash at a moment’s notice. Making use of this particular strategy is all about waiting for the right time to offload your coins when their value peaks so that you can maximize your profits.
Riding the Wave of Volatility
That said, volatility isn’t all that bad, if you know how to play your cards right. Focusing on any apparent patterns that emerge in the market can be beneficial to traders who are interested in a particular type of crypto. Although the market itself is unpredictable, there are moments when you will be able to pinpoint when a particular asset will skyrocket and pull out just in time before its value falls again.
The trick to this particular strategy is to allot plenty of time and attention to watching the crypto market’s movement. It may take up a significant part of your day, but if you are able to ride the wave of volatility, you’re in for some good gains.
Another strategy to mitigate the effects of crypto as a still-emergent asset is by not putting all your eggs in one basket. Earlier, we mentioned having more than one wallet to put your coins in is a good idea. In this strategy, you might also want to consider diversifying your investments. There are a few crypto-related assets in the market, such as non-fungible tokens, which you can invest in, just to avoid your assets becoming stale or banking on just one currency to gain from.
The idea behind this is that if one asset begins to gain traction, you’ll earn from it. However, if another asset begins to show less than stellar performance, you have the option to pull out your investment from it without suffering too much of a loss.
Dollar Cost Averaging
One of the more popular strategies is Dollar Cost Averaging, or DCA. DCA-ing your investments means investing small portions at regular intervals to avoid crashing when the price of crypto falls in the market. This is a helpful strategy if you want to weather the volatility of cryptocurrency values while still getting your investment's worth.
DCA also allows you to purchase crypto when its price is down so that you can sell it later on when the value of the currency goes back up. It's a good strategy that minimizes risks and maximizes profit.
Now that you’re more or less familiar with a few tricks that can help you when it comes to crypto trading, it’s time to start testing out your knowledge in the real world. Investing in crypto doesn’t have to be daunting. Take note of a few simple strategies that will keep you grounded and help you navigate the exciting and volatile crypto market.