When the value of Bitcoin went up 20 times over just 12 months, many people started dreaming about getting rich overnight by investing in crypto.
All they had to do was find “the next Bitcoin,” buy a large quantity while the cost was low and sit on it for a while. A lot of them even acted on this idea. The problem was that the payoff never came. Some have gotten disheartened and quit, while others chose to choose their approach.
Those who remained realized this was not a gamble or some get-rich-quick scheme. Instead, it’s an investment opportunity, like any stock or option. Making money this way was still possible, but they would have to change their approach. They had to learn more about this field, and they would have to start using strategy.
For those who want to skip this unpleasant wake-up call and get started on the right foot, here are some cryptocurrency investing strategies you’ll want to use.
Find the next promising crypto coin
Let’s clarify: we’ve never suggested that finding the next Bitcoin is impossible. We’ve all said that you can’t know with 100% certainty. Therefore, it’s unwise to go all in with your investment.
Still, if you were to look through some of the most promising new crypto coins, make a short list of those you believe are the most likely to make it, and diversify your investments, things would be different.
Here are a few examples of such promising coins.
Ecoterra
Ecoterra is a cryptocurrency based on “Recycle2Earn,” blockchain, and carbon credits. In other words, it’s a cryptocurrency to solve climate change issues. Expectations are that its value will reach $0.02 by the end of the year and $0.08 by the end of 2030. This would be four times the profit for those who are patient enough. Since the global climate issue is a burning topic and getting more important by the hour, some would say that Ecoterra has a decent perspective.
AiDoge
While our previous coin was based on an important cause, AiDoge is a project that allows users to generate memes with AI technology. In other words, it’s a platform/crypto aimed to monetize entertainment through technology. Upvoting or downvoting these memes generates rewards for their creators, which further incentivizes their use/creation.
Metropoly
In a world where many new investors still don’t fully trust crypto, having an NFT marketplace backed by real-world property is huge. We’ve already seen this trend with stablecoins, where real-world assets are used to provide value and stability to a token. Metropoly is hardly an exception there.
Key takeaways
These three coins are a great example of what you should look for. Ideally, you’re aiming for indicators like:
- A great team behind it
- High levels of community engagement
- Market capitalization
- Unique features
As long as a coin has one or all of these four, it has potential.
Even more importantly, you need to learn how to recognize cryptocurrency scams.
Understanding risks and risk management
What is risk management?
- Would you be willing to invest $100 if someone told you there’s a 50% chance of getting $1,000? Probably.
- What about investing $100 if someone told you there’s a 2% chance of you getting $110? Probably not!
- What about investing $100 for a 10% chance of getting $1 million? In a heartbeat.
We discuss spending $100 to earn more money in all three examples. However, the risks are different, and the potential payoff is different. This is what risk management is all about.
Now, some risks are universal in this industry. For instance, crypto is always volatile.
There are also legal and regulatory risks. For instance, china fully banned crypto and eight other countries. This is a massive decision, but it’s not unimaginable that your own country will do the same (or just introduce harsh regulation). While this is not given, it’s an eventuality that every crypto investor needs to be ready for.
Then, there are adoption risks. Even if one crypto seems technically superior to its counterpart, there’s no guarantee that it will be adopted.
Generally speaking, an excellent risk-to-reward ratio is 1:3. Still, you shouldn’t always be guided by reward, either. Even when sure or optimistic, diversify your investments just to stay safe.
What are examples of popular crypto investing strategies
There’s no reason why you can’t make your strategy, except one, you’re new at this.
Have you ever heard the saying, “Know the rules so you can break the rules?”
As a beginner, you should find a popular investment strategy and stick to it until you’ve learned the ropes.
Here are some crypto investment strategies you should know of.
HODLing
Some people drop all their coins as soon as the price drops. However, others are willing to hold (almost indefinitely), believing this downward trend has to end. Put into more familiar investment terms, HODLing is bullish trading. You invest and wait for the value to go up.
Now, the etymology behind this trading trend is quite interesting. In 2013, during the first great Bitcoin market crash, someone famously misspelled HOLD as HODL. The name stuck, and Bitcoin, even more famously, bounced back.
Day trading
Some people see the fact that the crypto market is volatile as an opportunity. Day trading is a perfect example of this. You see, the aim is to profit from the short-term price movements of crypto. Sure, these movements usually aren’t that high, but since you’re regularly trading, you can make a profit regularly.
The downside of this strategy is that it requires too much active effort and attention. The market volatility is great, and it’s easy to miss an opportunity. This is why a day trader usually does this full-time or at least spends more time trading than users of other strategies.
Scalping
The simplest way to describe scalping is to call it a more extreme version of day trading. Here, you’re exploiting the smallest market movements and making many such trades throughout the day. Similarly to day trading, you expect to make up for small profit margins with huge volumes and trade frequencies.
The biggest problem with scalping is that it’s a high-risk strategy. It requires you to make quick decisions when you recognize trading patterns. This is why scalping traders use so many tools and rely so heavily on their technical prowess.
Dolar-cost averaging
The simplest trading strategy is dollar-cost averaging. Here, you don’t have to fixate too much on the coin's value (at least from the strategic standpoint). Here, you make a decision to spend X amount of dollars on Y coin.
For instance, you may decide to buy $1,000 worth of Ethereum regardless of how much you’ll get for that amount. When the price is low, you get more. When the price is high, you get less. Still, you’re trading $1,000. This method is simple and, frankly, preferred by new traders.
Value investing
Finally, value investing is a bullish trading strategy where you buy undervalued cryptocurrencies believing their true value is far above their current one. In other words, if you’re firmly convinced that a token's “true value” is far above what it’s currently valued at, you should buy and wait for the “inevitable” jump in price.
This high-value, undervalued asset usually has strong fundamentals. This is one of the reasons why we chose those three cryptocurrencies while giving examples in the first section. Memes and climate change are trends that are not going anywhere; hence, there’s a reasonable doubt that these cryptocurrencies will grow.
Conclusion
While it's impossible to guarantee success in cryptocurrency investment, adopting the right strategy can significantly increase your chances.
First, you need to understand the risk-to-reward ratio, which will help with your decision-making. Then, find the right strategy and start trading. Nothing can substitute a real investor’s experience. Lastly, in a field that’s developing as fast, you need to stay informed. So, find your resources and visit them frequently.