Crypto Investment Strategies
What Are The Most Popular Crypto Investment Strategies?
Digital assets are the most attractive investment vehicles for the following reasons:
Favorable exchange conditions. When trading stocks, brokers hold at least $1 or 1% of the transaction amount. Cryptocurrency exchanges have an average commission of 0.1-0.2%.
Availability. Any amount can be invested in crypto assets. $100 is enough for the first investment.
Volatility. Crypto assets fall and rise in price more often than stocks.
What Are The Most Efficient Cryptocurrency Investing Strategies?
The digital asset market has a fairly developed infrastructure. There are several cryptocurrency investing strategies for beginners with a quick start.
Buying through exchangers
This option will allow you to quickly purchase cryptocurrency without registration. Several hundred exchanges on the Internet offer the purchase of Bitcoin, Ethereum, Litecoin, Ripple and other large-cap coins.
These services have no additional fees. The fees are included in the quotes. The user receives the amount that is indicated in the application. Among the shortcomings is the lack of less popular coins. If a cryptocurrency is outside the top 20 in terms of capitalization, exchanges do not support it due to low demand.
Everyone can take part in the issue of coins. To do this, you need to connect special equipment to the Bitcoin, Ethereum or other crypto blockchain. ASIC devices are used to mine BTC, and video cards – for the generation of ETH. Mining, unlike trading, requires additional investments. There are alternative ways of mining, for example, using HDD and SSD.
Companies offer to rent facilities for cryptocurrency mining.The client transfers a fixed amount, and the supplier maintains the equipment and pays utilities. Such cooperation may seem mutually beneficial. But cloud mining is not recommended for beginners desiring to invest in cryptocurrency. The reason is that financial pyramids are often hidden behind a convenient option for mining coins.
The market provides freedom of action. The user can perform an unlimited number of transactions with different intervals. Investors and traders usually follow one of the following strategies.
The price of a coin can easily increase by 10% in 1 day. Swing speculation is the main source of income for traders. To use such short-term strategies, you must have knowledge of technical analysis.
It can take several months between buying and selling an asset. The user purchased a crypto with the expectation of a sharp increase and a quick sale. But the trend can change direction and the price falls. Instead of fixing a loss, some traders prefer to wait for growth.
The course of the coin’s price during the day may change and not meet the expectations of the investor. It is not always possible to predict with high accuracy the movements of quotations for several days or weeks. In practice, the value of Bitcoin and a number of other coins is gradually increasing. It is enough to compare how quotes have changed over the past 10 years.
What are the best cryptocurrency trading strategies? In the course of trading, you can follow one or more strategies. Traders at the stage of making a deal determine the exit point. This is fixed with the help of special pending orders.
For example, a trader buys a token at $0.55. According to the forecast, the cost of the cryptocurrency will quickly reach $0.60. In order not to monitor the market manually, a limit order to sell is set. When the price reaches the specified value, the deal will automatically close.
What is Staking in Crypto?
This concept means a contribution to a digital project to maintain its cryptocurrency network. To participate in staking, the user transfers the savings to the wallet or exchange account, where they are frozen. Usually the investor does not manage the blocked funds.
In return, he gets the opportunity to register a node in the blockchain and the right to validate (check the validity of transactions and new parts) within the system. As payment for the work of the node, the user takes a commission from the trading operations made to the chain link. In the cryptocurrency community, such nodes are called validators. Staking is possible only in networks with the Proof-of-Stake (PoS) consensus algorithm and its analogues.
What Is Yield Farming Crypto?
Investors make a profit for depositing tokens into liquidity pools. As a reward, users are given DeFi coins that can be exchanged for other cryptocurrencies and used as a voting token within the ecosystem.
What Are Fundamentals of Investing?
How to develop an optimal crypto invest strategy? Forecasts of further changes in the exchange rate are made with the help of analysis. In practice, two radically different approaches are used: fundamental and technical.
To forecast, the investor pays attention not to the chart, but to important events that are associated with the coin. Among the most significant factors:
Political: the attitude of large countries towards digital assets always has a serious impact on the value.
Financial: when investors lose interest in a particular asset, such as gold, they massively look for more attractive instruments.
Corporate: the prospects of a coin are always influenced by the statements of the developers.
Opinion leaders: Twitter statements by individuals can dramatically change the current situation.
Fundamental analysis is often criticized because of its complexity. When using it, the number of factors affecting quotes tends to infinity.
The trader has to keep abreast of the market. If he notices the news 2-3 hours after its first publication on the network, a good moment to enter will be missed.
For forecasting, a chart and a Depth of Market are used. In the first case, changes in the exchange rate for a certain period are tracked. In the second, they evaluate the current market expectations by displaying the current orders of other participants.
Reasons for the effectiveness of this approach:
Trends: a set of changes in quotes is formed, forming a trend. It provides an increase in the exchange rate over a long period.
Cyclicity: when events repeat, for example, a trend reversal, market participants behave in the same way.
What Are the Best Cryptocurrency Trading Strategies?
Having understood the basics, you can move on to specific actions. First of all, you can choose a crypto invest strategy and investment method. For most users, buying and holding crypto will prove to be the best investment. Acceptable risks and high profits allow you to quickly promote even a small deposit with successful transactions.
Finding a promising asset is a difficult task for a beginner. There are thousands of coins on the market. Most of these assets are worthless. Therefore, their rate gradually tends to zero. When investing in cryptocurrency, pay attention to the following indicators:
Capitalization is the total value of an asset in the market. The higher its level, the lower the probability of speculation.
Availability in the market – the more exchanges support an asset, the higher the prospect of further growth. If one of the sites removes the crypto from trading, this will not affect its value so much.
User interest – you need to determine how often a coin or token becomes an object of discussion on forums and in the media.
Functions – if the new coin is an ordinary clone of the “central” coin, Bitcoin, it is unlikely to be of interest to potential investors. You should pay attention to cryptocurrencies with a specific purpose and real use in the future.
After choosing a coin, it remains to find an offer. If an asset is in the top 20 by capitalization, it is available in any exchanger and exchange. The choice of market analysis will depend on this. For Bitcoin, fundamental and technical are equally suitable. But for unknown coins, the second option is more often used.
Not every crypto can be directly converted into dollars or euros. Because of this, users have to make a double conversion. In this case, most transactions go through Bitcoin or ETH. There is an important difference between exchanges and exchangers – the number of payment systems. Trading platforms mainly work with bank cards and transfers. Sometimes they offer a fund deposit and transactions through Adv Cash or Paypal. Exchangers support many more payment systems.
The market situation is gradually changing. But for more than 10 years, Bitcoin has held the lead. The first cryptocurrency is an unmistakable option. It will definitely not disappear from the market. And if this happens, then the flagship will pull the rest of the assets with it.
How to Choose a Cryptocurrency for Investing?
Beginners are not recommended to focus on one coin. To diversify risks, you should divide the capital between several assets. The choice of currency largely depends on the willingness of the investor to take risks. If he is not psychologically afraid of losing part of the capital, then more money can be allocated for new tokens.
What Are the Risks of Cryptocurrency Investments?
Not every trade ends with a profit for the trader. The market participant should prepare himself for the potential risks resulting in the loss of capital.
In the case of Bitcoin, due to the high activity of trading, the user can quickly buy and sell coins worth millions of dollars. The lower the volume of transactions, the more difficult it is to conclude large transactions.
The authorities can at the legislative level prohibit the local population from using cryptocurrencies.
Most coins, with the exception of stablecoins, depend on the Bitcoin rate. When BTC falls, a bearish trend is observed throughout the market. Because of this, even a promising coin can noticeably become cheaper.
Giving preference to dubious assets with low liquidity, the investor becomes a hostage to speculators. Such coins are often inflated artificially using pumps. They are followed by a price collapse – a dump. In such situations, fundamental and technical analysis will not help to make a forecast.
Where to Store Cryptocurrency?
Beginners should pay special attention to safety. Cryptocurrency investments will end up with a loss of capital if the funds are stolen.
There are different ways to store digital assets. Wallet types include:
Alternative storage methods
Beginners most often prefer to invest in cryptocurrency and leave it on an exchange account. This approach is considered less secure. If hackers attack the exchange servers, they will gain access to users' crypto. Among the most notorious cases is the Mt.Gox hack. In 2014, attackers stole 840,000 BTC.
If the user still prefers to keep funds on the exchange, there are several ways to increase the security of the account:
Two-factor authentication – during authorization, you need to enter a unique code that comes via SMS or the Google Authenticator application.
White list for withdrawal of funds – you can transfer cryptocurrency only to the specified addresses.
Security key – authorization is carried out through a hardware device, for example, Yubikey.
Tips for New Investors
The main problem for beginners is the risk of losing capital due to lack of experience. You can start investing money in cryptocurrency from scratch in 2-3 minutes. So much time will be required to register an account, replenish an account and purchase assets through an exchange. Just follow a few tips:
Long term cryptocurrency investing strategies. To guess the direction of the course during the trading day, you need a lot of time and experience in trading. It is easier to use long-term strategies. Popular cryptocurrencies rise in price over time.
Trading on free capital. Crypto assets are not the best tool for storing all savings. Investment in Bitcoin and other coins should be the amount that the user is willing to lose without harm to the current financial situation.
The study of material. Due to the large influx of beginners, trading is sometimes compared to gambling. In order not to bet mindlessly, you should start studying the principles of how cryptocurrencies work and the basics of investing.
No leverage. As long as the user trades on the spot market without margin, the probability of losing capital tends to be minimal. Bitcoin may sink by 20-30%, but it is unlikely that the rate will drop to zero. Trading with leverage will result in the loss of all capital if the price moves in the opposite direction from the trader's expectations.
Subscription to specialized media. The market situation is constantly changing. Thanks to the news, you can find a promising coin.
Advantages and Disadvantages of Investing in Cryptocurrency
Digital assets are not the only tool on the market. It has advantages and disadvantages compared to other investment options.
Round-the-clock market – cryptocurrency platforms work 24/7, and stock exchanges are closed on weekends.
No intermediaries – beginners can register on the exchange on their own, and for stock trading you have to turn to brokers.
No passive income – deposits in banks and stocks bring interest.
High volatility – the value of the crypt changes more often than that of stocks, banking metals and other assets.
No guaranteed profit, even for early birds – the deposit always brings income, albeit a small one.
Regulation – legislation of cryptocurrencies is hazy and incertain.