5 crypto investing strategies to consider when building your portfolio. Investing in cryptocurrencies generated many controversial opinions on the safety of such assets. While some say crypto investing can ruin your financial situation, others say it is the best thing to happen to them. The difference between these two types of people is that one category invested all their savings on the first try. In contrast, others got knowledgeable and chose to distribute their contributions on an array of coins (stablecoins, NFTs, etc.)
Another tricky part of investing is the buy low, sell high strategy that deceives people into thinking that if they buy something at a low price, the output will benefit them by selling at a higher price. Unfortunately, that is not viable anymore because the market has gotten more volatile over the years, meaning this strategy poses a high risk to anyone’s portfolio. Therefore, we present you with more stable investing strategies to build a balanced portfolio.
Buy and Hold
Starting with a long-term, passive strategy, buy and hold means that you should keep your assets for an extended period to profit from the long-term value appreciation. Although this strategy is excellent for investors and traders, investors play safer since they’re not exposed to short-term volatility (therefore, not being able to make rapid profit margins).
The term has an interesting story behind it. It started from a misspelled word, HODL, that one investor used during the surging price of Bitcoin in 2013. Now, the community uses this term to indicate they wish to hold their assets for a longer time rather than make frequent trades. HODL is supposed to be the best strategy because there’s no wrong time to do it. It also implies buying and holding money and not selling when the market is low due to its volatility because that’s when most beginner investors start panicking and selling everything. HODL works against FUD and FOMO (fears of missing out on an asset), which is why it is one of the safest strategies.
Dollar Cost Averaging
Dollar-cost averaging (DCA) is a simple technique. It involves breaking up your total investment sum into smaller amounts and investing them separately but at regular intervals. It’s a reliable method of avoiding investing too much of your investments when prices rise. At the same time, it doesn’t require your whole investment amount to proceed; you can start with what you want and then gradually increase your invested capital. This way, the impact of the market’s volatility is reduced on your overall wealth.
DCA is another strategy for the ones who want to invest for the long term because it can optimize their input according to the market conditions. For example, some investors may be tempted to put more of their capital in crypto during a rising market, but that wouldn’t be safe due to volatility. But through dollar-cost averaging, you won’t fall off track despite the market conditions, meaning that you’ll accumulate more coins when the price is low and less when their value is high. Consequently, the chances of you buying at the wrong time will decrease, even if you won’t earn as much as other investors.
Value Investing
Value investing implies you search for assets you believe are underpriced (compared to their perceived value). It is believed to be the most efficient strategy because it can help you gain more crypto than other methods. However, it requires many hours of research because, before investing, you need to consider factors like:
- Real-life use cases
- Scalability
- Background of the founding team
- Adoption
- Tokenomics
- Engagement of the community
- Competitiveness
- Blockchain network
Value investing takes time, but it can help you gain more than you ever dreamed of. Don’t worry about not finding a good investment opportunity because cryptocurrencies like Bitcoin and Ethereum are still ruling the market and are the safest. If you want to know more about the Ethereum price, know that many factors contribute to its volatility, so look into its media coverage and supply and demand aspects before investing.
Growth investing
Growth investing implies that you only target cryptocurrencies which are in their early stages and are expected to grow in time. But this might not be the best strategy for beginners because they can’t make proper predictions regarding a market’s stability and evolution. It also requires a lot of research to be done in order to avoid risky investments because this type of method can offer you massive high-return in the long term.
NFTs and gaming tokens are great examples of how crypto can reach its peak in the future. At first, these two assets were underrated, and people believed NFTs were not stable or good enough to face the market’s challenges. Still, NFTs and gaming tokens are now one of the best investments, and the array of tokens helps investors from all levels earn something significant.
Balanced portfolio
Finally, a balanced portfolio requires you to balance your investments in such a manner that even if the market crashes, you won’t be heavily affected. It implies that you frequently manage the portfolio’s condition to ensure a diverse portfolio that covers many types of coins. For example:
- Value tokens (Bitcoin)
- Security tokens (similar to stocks)
- Utility tokens (used within a specific ecosystem)
- Governance tokens (DeFi to or DAO projects)
- NFTs
When building your portfolio, there are some things you need to consider as pivotal:
- Know your risk tolerance. As discussed previously, the market is volatile, meaning that even if you’re prone to high returns, you’re also sensitive when the market crashes.
- Mix your assets. One popular method is having 70% less volatile assets, while the other 30% can be more speculative altcoins.
- Rebalance your portfolio regularly. Don’t only invest in one cryptocurrency because you never know how the market will change in a short time.
Wrapping up
Whether you’re a beginner or are already investing for a long time, it’s good to remember that the market is pretty volatile, and you might need to change your approach from time to time. What do you think about the strategies below?
