• Sat. Jun 22nd, 2024

Crypto Investment Strategies



Cryptocurrency is the new digital or virtual medium of transacting business. Even without a professional background, you probably have an idea of how hot Crypto is right now.

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There have been several Cryptocurrencies hitting the market in the past decade. From Bitcoin to Ethereum, all these Crypto are common household names. First, however, you must understand the difference.

Some Crypto is highly volatile, making them risky to handle. So, before you can plan your investment, you should know that each asset presents risks and opportunities.

Understanding Cryptocurrency can only happen when you understand basic Crypto Investment Strategies. So, what is Crypto, and what are some of the Cryptocurrency Investment Strategies?

Crypto Investment Startegies

What is Crypto?

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Cryptocurrency is a digital currency. It is the medium of exchange in computer networks around the world. Unlike traditional notes and coins, Cryptocurrency has no regulatory or issuing body. Therefore, it can operate within and without a government as an asset.

The name Crypto comes from the encrypted nature of the asset. Usually, each digital currency has special encryption that secures its network. Most Cryptocurrencies use Cryptography encryption techniques. For example, you view your Crypto balance in a publicly available ledger (also known as a wallet), which you access using credentials specific to you.

You may have also heard of mining. This term refers to the process of developing new Crypto through computers. Popular Cryptos include Bitcoin and Ethereum, but there are over 8,300 Cryptocurrencies in the digital trading world.

Crypto Investment Strategies are pretty straightforward once you understand the market dynamics.

How Does Cryptocurrency Work?

Cryptography is a protection technique that you use to turn any plain text into encoded data. The process gives secure communication to every Cryptocurrency.

Each Crypto has an electronic payment system in a digital ledger known as the blockchain. The blockchain keeps a record of all Crypto transactions and stores them as encoded data.

The process of encoding the data is complex, thus presenting a serious challenge to anyone looking to remove any data of transactions online.

Miners manage the network voluntarily. They are the participants who conduct the complex math and verify transactions.

Due to their decentralization, there’s no government or bank to oversee the Cryptocurrency industry.

What is an Investment Strategy?

Now, let’s say you are interested in Cryptocurrency and are wondering where to start.

The first step in Crypto investment is to adopt a strategy. With a strategy, you can analyse the risks and opportunities and decide whether to invest or forfeit.

Crypto Investment Strategies are basic instructions that help investors make decisions regarding Cryptocurrency. They can help you determine the Crypto to invest in and how much to invest.

There are different investment strategies ranging from conservative investments to aggressive ones. The low-risk investment strategies will focus more on wealth protection. On the other hand, aggressive investment strategies aim to grow capital.

Why Do You Need a Strategy?

A common mistake people make when investing in Crypto is treating it like a gambling game. They go in there hoping the prices will appreciate or drop in their favour. But unfortunately, this means they end up losing a lot more than they gain.

However, with a strategy, you have a handbook for navigating the digital currency world. You define your goals and the risks you are willing to take. A Cryptocurrency investment strategy forces you to commit to your plan of building your wealth.

Crypto Investment Strategies

Why is it important that you choose a strategy and stick with it?

One of the risks you take when investing in Crypto is the loss of assets. Doing it without a strategy is gambling, where you have a 50-50% chance of winning. However, it’s best to know how to invest and plan how much you can invest—and that’s where a strategy comes in, to guide your decisions. You learn when to hold your assets and when to sell them. Other benefits of having a strategy include:

  1.  You have an easier time making informed decisions

Unlike participants who gamble with their assets, a Cryptocurrency Investment Strategy boosts your confidence in your decisions. No more worrying about the latest trends!

  1.  You develop more independent thinking

A Cryptocurrency Strategy guides you to think of your investment decisions; you can plan your goals and work towards them. This means you are less susceptible to psychological biases when making investment decisions.

  1. You can define realistic goals

When you invest in Crypto, you are likely to stray if you focus on unachievable goals. However, an investment strategy keeps you grounded. It creates a clearer idea of the capital allocations you would need in the future to achieve your goals. This makes your ambitions reachable and attainable.

  1. Risk reduction

Cryptocurrency is volatile, and the slightest mistake could see you lose a considerable amount of your wealth. However, a strategy paints a clear picture of the risks you can anticipate. It also gives the maximum acceptable chance you are taking before investing.

By following through with your strategy, you will achieve your goals and lower your risks of losing. Conversely, not having a strategy has undesirable implications.

Influence from greed and fear could make your wealth crumble unless you have a solid investment plan that you follow.

Need help with your Crypto Investment Strategy?

If you’re new to Crypto or want to do more with your assets than just letting them sit on the blockchain, and want a hassle-free way to invest in Cryptocurrency, then check out the AQRU platform! Finding a trustworthy exchange platform is difficult. However, AQRU gives you safe access to high-interest gains in the Crypto market

By investing with AQRU, you enjoy up to 12% interest on your savings and investments and let them take the lead with your investment strategy. Other key features you benefit from include:

  • Insurance
  • No fees on buying Crypto
  • The highest rates on any balance
  • No lock-in periods
  • Fast funding on your deposits and withdrawals
  • High security
  • Regulations that favour you 

In short, AQRU collaborates with you when you begin exploring the world of Cryptocurrency investment. They walk with you by creating a safe space for you to trade, so you don’t need to be an expert in the Crypto world to get started. They also comply with anti-money laundering and anti-financial terrorism policies to keep your assets safeguarded at all times.

So, Why Invest in Cryptocurrency?

Crypto is a safe investment when done right. It is also beneficial and can help you grow your wealth. Some pros of investing in Cryptocurrency include:

  1. a) High liquidity

Cryptocurrencies are easy to buy and sell in the market. You can also easily convert them into cash. These liquid Crypto assets are also less vulnerable to market manipulation inflation and have a high trading volume.

  1. b) Low entry threshold

Unlike a shop, where you need capital for rent and stock, investing in Crypto is simple. You can start with £100. Most of the exchanges even let you invest £10.

  1. c) Security and transparency

No one person handles all the incoming and outgoing transactions. The blockchain itself requires a lot of computing power to change or penetrate the ledger. So, it is nearly impossible to manipulate or uncover the details of any transaction on the blockchain.

  1. d) Diversification

If you lack risk management skills, Cryptocurrency investment might be the best teacher. You can distribute your money over different classes rather than investing your money in one asset class. Therefore, when negative market trends hit, you lose some and gain some.

Now, what are some of the risks of investing in Cryptocurrency?

Lack of regulation—although it seems like a good thing, most investors are hesitant because of the lack of regulation in the industry. The decentralisation of the network means that investors are more liable to fraud hacking and lack sufficient fund protection.

However, local governments enforce anti-money laundering policies in the UK and other countries like Canada and Australia. The authorities also combat financial terrorism by stipulating policies that licensed exchanges must have now.

Volatility—the Cryptocurrency market faces some extreme price fluctuations. This is common for new markets, but using an investment strategy could save you a lot of trouble. You also learn when to sell and hold your assets rather than reacting to short-term price movements.

Scams—unfortunately, the Cryptocurrency market has one of the highest fraud rates. You might have received an email to trick you into sending money for bogus proposals. Other investors also create hype around a new token to pump the prices. Novice investors buy the tokens, after which the investors exit the market. Therefore, you end up losing your money.

Crypto Investment Strategies

How Cryptocurrency Investing Works

When you learn someone is investing in Crypto, many questions come up. What coins are they buying? Where do they buy their coins? Before you can get a competitive edge in the field, you need to understand how Crypto investments work.

Cryptocurrency investing is like real estate. You buy the commodity when prices are low, and when they increase, you sell them for a profit. You will need an exchange to start purchasing or selling Cryptocurrency. 

An exchange is a platform where you trade one type of currency for another. For example, it could be real cash for Crypto coins or tokens and vice versa.

Most exchanges include different Cryptocurrencies. Therefore, the first step would be to identify which Crypto is worth investing in.

Next, you will need to create an account. Depending on the exchange you use, you might need verification documents like your ID, bank card, etc. However, some decentralised exchanges do not demand personal information from you.

Now, in the exchange, you can buy Cryptocurrency using digital assets. However, if you do not want to purchase your Crypto from an exchange, you can buy it directly from people. There are numerous peer-to-peer digital assets trading platforms.

Once you have some Cryptocurrency, you store it in your wallet. The wallet keeps your assets safe and secure online. However, you can store the asset in a physical hard drive offline.

Once you have the coins in your wallet or drive, it is time to wait. Usually, you wait for the prices to increase to sell and make a profit.

Now, the Cryptocurrency Investment Strategies help you maximise your returns. This way, your wealth grows.

Different Crypto Investing Strategies

There are different Cryptocurrency Investment Strategies in the market today. Some of them include:

  • Investing early in strong projects

Investments are likely to grow more in the long term. Here, the trick is to identify a strong project and buy some tokens. You then hold your assets until the value increases to a point where you can sell for a profit.

After identifying new projects, you can then evaluate the opportunity they present. Ask yourself:

  • How unique is this project?
  • Is the whitepaper (a document detailing the problem the project is solving) making sense?
  • Is the project’s community invested, loyal and convinced?
  • How about the coin distribution?
  • Is the token planning to list on an exchange?

An active and loyal community is a good sign when looking for a project to invest in. Also, if there are plans to list in an exchange, this should be a great sign of a good project.

  • HODLing

Yeah, that is right, not an incorrect spelling of HOLD. HODL is an abbreviation-Hold On for Dear Life. This is a long-term strategy where investors buy tokens and hold them as they wait. It is a common and one of the easiest strategies in the market. It is also effective, especially for investors interested in different early projects.

Some of the richest Bitcoin addresses used this technique when Bitcoin started.

  • Earning a yield

The strategy shares some similarities with HODLing. However, you earn a passive income while you hold.

Investors buy assets at one price and hold them with the hope of selling them when the currency increases in value. While waiting, they earn an ‘interest’ on their ‘savings balance.’

  • Dollar-Cost Averaging

This is a Crypto Investment Strategy where investors periodically allocate a certain amount of capital to invest in Cryptocurrency. This approach benefits investors because they do not need to worry about short-term volatility. Instead, they build their portfolio regardless of the market conditions. However, they also amass wealth with long-term returns if they invest in an asset with strong fundamentals.

  • Lump-sum investing

In this investment strategy, you forego the option of investing a small amount periodically. Instead, you go ‘all in’ with your money. You buy digital assets with a large sum of money once.

Dollar-cost averaging and Lump sum investing is different, and any could work for you depending on the investment style you like. The assets you invest in and the liquidity of your assets at any time are also important determining factors.

On one side, lump-sum investing would be profitable if there’s a great Bull Run season. On the other hand, dollar-cost averaging may cost you huge profits. However, if there is a drop, you can lose less by dollar-cost averaging investment than lump-sum investing.

  • Value investing

The strategy focuses on undervalued assets. Essentially, you buy assets you believe are worth more than what they cost in the market. As more investors recognise the value of the assets, prices start to rise, and at that point, you sell.

The challenge with this investment strategy is determining which assets to buy. You need a lot of research and a long-term mindset for your returns to be substantial.

  • Value averaging

This is one of the Bitcoin investment strategies similar to value investing. However, your period investments are more flexible and vary depending on the market situation.

Unlike dollar-cost averaging, where you invest a fixed amount, value averaging involves a higher investment during a bearish market (when the token prices are dropping). Conversely, you can also invest less during a bullish market (when the asset prices rise, hoping for a further increase).

  • Contrarian Investing

The idea is to be conservative when the season is euphoric and seize the opportunity when others are in a depressive state. Investors purposely go against the current market trends in the contrarian investment strategy.

So, they buy when most investors are selling, and sell when most investors are buying.

To a contrarian investor, the risk is highest during a bullish market, when trends attract a lot of interest. It’s in a bearish market that contrarian investors find the biggest opportunity.

  • Growth Investing

Growth investors do not care for market prices and the intrinsic values of assets. Instead, they focus on tokens with above-average growth signs. This is a short-term investment strategy.

  • Long/Short Strategies

This investment strategy seeks to take advantage of profit opportunities in the Crypto market. First, it aims to take a long position on undervalued assets. Second, it focuses on selling overvalued short assets.

This strategy aims to reduce risks in the market and increase the gains from the movement of assets.

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How to choose the best strategy for you

Now that you know about the Crypto Investment Strategies out there, which one is best for you?

To answer this question, you should consider your investment goal, your preference (active or passive investing), and your risk profile.

  • Your goal

Different investors have different investment objectives. By contrast, you can find an investor with a 5-year goal—like saving money for retirement. On the other hand, you can find one with a short-term goal, such as saving money for a trip with friends.

The periods you set for your goals will be different. When setting your objective, consider how much you will be investing in your portfolio and when you want to reach your goal.

Also, think of the minimum return you will need to achieve your goal and your starting investment.

Once you have the answers, you can choose a long-term or short-term investment strategy to accommodate your vision.

  • Your risk profile

Investment and risk go hand-in-hand. The larger the investment, the greater the risk. While Cryptocurrencies offer the highest reward, they are also the riskiest. So, make sure you understand your risk appetite.

How well can you tolerate risk while following an investment strategy? This will depend on your age, experience, time frame, goals, portfolio size, and the level of comfort you want as an investor.

If you are conservative, you should stick to a low-risk strategy to conserve your wealth. However, if you want to grow your assets, then aggressive investment strategies are what you should master.

  • Your involvement level

If you do not want a lot of involvement in your investment strategy, you should pick a passive investment technique. Buy and hold investment strategies are good examples of passive investing.

However, if you want to buy and sell assets regularly, you should consider active investing.

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Kevin Moore - E-Crypto News Editor

Kevin Moore - E-Crypto News Editor

Kevin Moore is the main author and editor for E-Crypto News.