While crypto investments are quite lucrative, identifying the digital coins that will ascertain sustained portfolio growth and high gains while separating them from low-performing projects and scams can be challenging, even for a seasoned investor. This makes it difficult to learn how to add cryptos into your traditional investment portfolio.
While some crypto assets have since been known as high performers, cryptos are speculative in nature and have unique risks you, as an investor, should account for. Before getting into the digital assets world, ensure you have a plan that orders your investment decisions to reduce risks. In this article, we’ll outline seven best cryptocurrency investing strategies.
The buy-and-hold technique implies purchasing cryptos directly from peer-to-peer networks or exchanges and keeping them in your digital wallet. This avenue is ideal for any investor who believes in cryptocurrency’s future growth. Engaging in a long-term buy-and-hold trade means you won’t overtrade, significantly minimizing transaction costs. Unlike short-term trading techniques, buy-and-hold isn’t as stressful and exhausting, particularly for new crypto investors.
If you’re looking for a strategy that can help you make potentially huge gains with less time expenditure, buy-and-hold is the way to go. Conducting technical analysis can help you determine the best time to enter your trades. For instance, if you’re investing in ADA, analyze Cardano price changes to identify substantial or weak cost retracements so you can enter the trade.
2. Invest what you can comfortably lose
Like any other form of investing, you should invest an amount you’re willing to lose when putting your money in cryptocurrencies. If you’re unable to bear the possible loss of your entire crypto investment, then you shouldn’t purchase that digital coin. When determining crypto market risk tolerance, look at your risk profile and earnings. If you’re new to cryptocurrency investing, put the least percentage of your income into crypto investing to see how it performs. As you build your trading expertise, increase your investment depending on how much you’re ready to lose if things don’t turn out as anticipated.
3. Focus on liquidity
Liquidity shows how quickly you can convert an asset into cash without affecting its worth. It’s a major consideration when determining what and how to invest in cryptocurrency, as it helps you decide whether to go in or out of a trade at the preferred value.
Considering how fast the crypto market moves, you should be able to enter and exit positions quickly, meaning there should be cryptocurrency demand and supply for you to purchase at good prices and make a profit when selling. When assessing liquidity, consider the trading volume and your interests in the asset.
4. Dollar-cost averaging (DCA)
DCA involves making small, equivalent investments at regular intervals rather than irregular or large crypto buys. Purchasing your preferred digital currencies regularly means you’ll end up investing more over time, regardless of what’s happening in the crypto markets. For effective DCA crypto trading:
- Decide on the crypto assets you’ll be purchasing
- Determine how often you’ll invest
- Set the amount you’re willing to invest
- Select a trading exchange
- Decide where you’ll hold your crypto
5. Ensure diversification
Putting all your money into one crypto project is very risky. So add various cryptocurrency projects and coins to your crypto portfolio to lower investing risk. You can diversify across multiple blockchain and cryptocurrency-related digital assets like NFTs and IoTs projects. You can also use different crypto exchanges to spread investing risk.
6. Value Investing
Value investing is a technique involving finding cryptos trading for a value below their intrinsic worth. It’s based on the assumption that most digital currencies are undervalued, meaning their true value is more than what they’re trading for. Collecting and evaluating a digital token’s history price data can help you make data-based decisions when using the value investing strategy.
For instance, if you’re investing in Cardano, look at Cardona price charts to determine its volatility after hitting its all-time low and high, what caused it, and the pattern it showcases for the future. This will make it easier to execute the value-investing trading strategy.
7. Arbitrage trading
Arbitrage is a crypto trading trick that capitalizes on price differences. It involves buying and selling the same crypto asset in multiple marketplaces to gain from the price discrepancies. Instead of predicting future crypto prices or entering trades, an arbitrage trader spots arbitrage opportunities and then capitalizes on them without depending on predictive pricing techniques or assessing market sentiments.
While crypto investments are lucrative, having the right techniques can help ascertain success. Consider implementing the best cryptocurrency investing strategies to get the most out of your trades.