As can be seen, by recent events, the cryptocurrency market has been heating up. Since the late 2020 crypto rally, investors both large and small have been scrambling to get in on the action.
Compounding all this excitement has been announcements made by Tesla with regards to Bitcoin. The tech company noted that it would be accepting payments in Bitcoin and have themselves recently acquired $1.5 billion in Bitcoin.
This announcement sent Bitcoin prices through the roof with prices hitting a historical high of $49,716.44 at the time of writing.
Given all of this excitement, most of us would likely be tempted to hop onto the crypto train also. With phenomenal rates of return, you’d likely be kicking yourself for not buying into crypto at an earlier point in time.
However, the crypto market is no place for amateurs and the extreme inherent volatility can be frightening. With careful management and investing, it is quite possible to profit from the crypto market.
Here we’ve put together a list of proven crypto investment strategies to help you get started.
Holding. Or simply playing the long game. This is the main strategy adopted by most crypto enthusiasts who believe that Bitcoin and other cryptocurrencies will only appreciate the value in the days to come.
Given how Bitcoin has performed historically, there appears to be some merit to this strategy. Since skyrocketing from 2011 to 2013, Bitcoin prices have fallen dramatically before remaining relatively stagnant during the build-up to 2020. To find out how many Bitcoins are in circulation today you may visit blog.tezro.com/how-many-bitcoins-are-there/.
With the advent of the coronavirus pandemic, interest in cryptos once again increased and BTC valuations have once again hit record highs.
Taking a long position on investment allows the investor to circumvent the market volatility faced by short-term investors. This strategy involves accumulating crypto over the long-term and then cashing out at a future period in the long-term.
2. Day trading on market volatility
Unlike stocks and shares, cryptocurrencies are traded 24 hours a day. With the advent of trading platforms like Binance and eToro, anyone with an internet connection and a computer or smart device can trade cryptocurrencies.
While holding is a great strategy for long-term investors and crypto enthusiasts, day trading can potentially allow an investor to crystallize on his/her returns immediately.
A day trader speculates on price movements in the market and proceeds to buy or sell assets accordingly. Given the extremely volatile nature of the crypto market, day traders hope to leverage on sudden market changes to turn a profit. They will open multiple positions on a particular asset and speculate on the changes accordingly.
For example, a trader predicts that the prices of BTC, LTC, and ETH are expected to increase accordingly with regards to a recent announcement by the government. In response, they open multiple positions on these cryptocurrencies in anticipation of a rise in valuations.
Once the announcement is made, prices of the aforementioned crypto assets rise accordingly and the investor closes on these positions. Thus netting a decent return on investment.
Day trading is one of the most lucrative and risky investment strategies. As crypto prices can fluctuate wildly, wrongly speculating on the asset’s position can be extremely costly.
3. Piecemeal holding
Sometimes an investor may be reluctant to spend all of his/her capital on a single asset in a single transaction. Instead of holding outright, an investor may choose to gradually build up a portfolio of assets.
Extreme market volatility means that cryptocurrency prices can wildly fluctuate with little or no warning. This is why some investors purchase their assets in smaller installments.
Thus, reducing their risk exposure to sudden price movements but incurring additional costs in terms of fees and potentially losing out on higher rates of returns.
Investing in the cryptocurrency market should not be taken lightly. However, with the right investment strategies, discipline, and a bit of luck, it can also be extremely lucrative.