Unless you’ve been living under a rock, chances are that you’ve probably heard about cryptocurrencies in one form or another. Whether it’s Bitcoin, Ethereum, or maybe even Ripple XRP, there’s no denying the fact that cryptos are here to stay.
Now, you’ve also likely heard about how crypto millionaires were seemingly minted overnight in the wake of the 2017 – 2018 crypto bullrun.
Given all that we’ve seen and heard, the question on everyone’s mind is – how do you exactly trade and/or invest in Bitcoins and other cryptocurrencies. And are cryptocurrencies a valid investment?
If so, what are the strategies available to us now that the crypto market has grown to such a size. In this article, we take a look at the various crypto investment strategies that the pros have shared with us.
Let’s start with the basics:
How to invest in cryptocurrencies?
Before getting into the various strategies of investing, let’s first look at how we can acquire cryptocurrencies. The easiest and most direct method to start investing is by acquiring cryptos on an exchange.
Platforms such as Paypal and eToro have made it possible to exchange fiat currencies for cryptos such as Bitcoin, Ethereum, and Litecoin amongst others.
In the past, you could also mine Bitcoin, but given the complexity of the blockchain, the initial investment makes this no longer viable. Before you go further, make sure to read this article about the fluctuations of cryptocurrency value: https://blog.tezro.com/cryptocurrency-value/
Now that you’ve gotten your hands on some cryptocurrencies, let’s explore the various strategies.
- Playing the long game i.e. hodling
They say that the best things in life come to those who wait. To some, the crypto market is a high-paced environment that changes from second to second due to its extreme volatility. These investors seek returns by leveraging on price differentials and buying and selling at a rapid pace.
On the other hand, playing the long game can also be extremely profitable for those who wait. Hodlers seek to eliminate the uncertainty and risk of the cryptomarket by buying and taking a long position on their assets.
They will only seek to crystallize these gains in the future once cryptos have appreciated significantly in value. These investors believe that cryptocurrencies will one day overtake fiat currencies thus their adoption of the hodling strategy.
Given Bitcoin’s meteoric rise over the years, there is some merit to this strategy. However, it can also lead to huge losses if the market continually crashes and the investor chooses to cut his/her losses and exit the market.
- Buying low and selling high
The easiest and most effective way to turn a profit from crypto investment is by buying assets low and selling them for a profit. This is however much easier said than actually done.
Day trading conventional stocks is already a risky enough proposition on its own. Even with extensive research, sudden changes in market conditions can result in huge losses being made.
Given the extreme volatility inherent in the crypto marketplace, most investors end up making a loss on their speculative trades.
With enough experience and research, it is quite possible to reap massive profits trading on cryptocurrency price fluctuations. As crypto markets operate 24 hours a day, trades can be made instantaneously at any time.
When adopting this strategy, inventors will need to determine their risk appetite and take decisive action when needed. This includes identifying when to buy and sell and when to cut one’s losses.
- Using an automated trading bot
Bot traders have a variety of advantages over a human. Firstly, they are entirely automated and can perform trades 24 hours a day. In a highly volatile marketplace, this offers you a huge advantage and allows you to capitalize on any sudden changes.
Besides that, a bot trades without emotion i.e. no anger, no panic, and no fear of losing out. This allows it to trade with total objectivity.
These bots however do need to be programmed with a variety of preset parameters for them to act accordingly. They are incapable of intelligent thought and lack the nuances of a human trader.
Thus, when keying in your parameters, always be sure to keep an eye on market conditions and regularly check back with your bot.
Getting into the cryptocurrency market is no joke. With these strategies and a solid plan, you too can capitalize on the growing cryptocurrency market.