Cryptocurrency Investment Strategies
In recent years, investing in cryptocurrency has become a major part of the financial world. With the rise of Bitcoin and the increase in thousands of altcoins, investors now have a vast array of opportunities for portfolio diversification. However, cryptocurrency is known to contain risks and can be very volatile. It’s essential that investors are armed with accurate investment strategies to navigate cryptocurrency investment. Below, we will explore several cryptocurrency strategies for investment.
Cryptocurrency Investment Strategies
Dollar-Cost Averaging (DCA)
This is an investment approach involving buying a certain dollar amount of cryptocurrency
intermittently. However, there are several things investors must take note of when they DCA, they
● Consistency: You can choose to purchase a specific cryptocurrency amount like $50 at intervals
which could be bi-weekly or monthly.
● Long-term focus: DCA aims to focus on the long term.
● Reduces timing risk: DCA reduces the risk of buying at the market cycle peak since the
purchases are usually spread over time.
In this strategy, investors purchase cryptocurrency and hold onto it to create returns over a specific time
frame. In yielding, you only hold the cryptocurrency for a specific time. The aim is to purchase coins at a certain price, and then sell them at a higher price.
This strategy presents investors with an opportunity to earn passive income while holding the assets.
This is similar to how individuals earn interest on their savings account balance. For instance, you could
find out the value of 1 BTC to USD, then consider it an asset for potential yield earning.
In this cryptocurrency investment strategy, there is an assumption that the asset is undervalued. This
means the asset’s real worth is higher than what it currently trades for. Warren Buffet made this
strategy a pretty common one.
Here, investors find assets they think are currently trading for less than their worth. Then such assets are purchased based on the assumption that its market price will rise with time. The obvious challenge with this method of investment is that it can be challenging to know which asset is undervalued. This strategy
tests the investor's research skills, and time, if they intend to make a profit.
This is a long-term aim investment approach. It is also a common cryptocurrency investment that began from the misspelling of the word “hold” in a Bitcoin forum post. Since then, it has become a slogan for
long-term cryptocurrency investors. HODL has some key principles, they include:
● Buying and holding: Investors buy and hold cryptocurrencies for a long period, usually years,
irrespective of any short-term price fluctuations.
● Diversification: This strategy ensures investors diversify their investments across different
cryptocurrencies. This ensures the risk is spread.
● Risk mitigation: Investors in this strategy believe in the long-term potential of their selected
assets and therefore, are not too bothered with daily price swings.
● Withstands FUD and FOMO: This strategy ensures investors don’t make impulsive investment
decisions based on fear, uncertainty, and doubt (FUD) or fear of missing out (FOMO).
Endnote: Cryptocurrency Investment Strategies
There are many strategies that investors can employ when investing in cryptocurrency. These strategies
can fit different investment horizons and risk appetites. Irrespective of your choice, you must ensure
your strategy suits your financial goals, expertise level, and risk tolerance. Dont forget that the
cryptocurrency market is highly volatile, and speculative. You must conduct proper research and seek
advice from financial experts before making investment choices.