Cryptocurrency investment has been the hottest new trend in the investing world. In fact, Bitcoin has been setting records this year, reaching a peak of $63,000 in mid-April. Other cryptocurrencies like Dogecoin, Shiba Inu, and Ethereum have also been gaining popularity as investors are onboarding the cryptocurrency bandwagon. The cryptocurrency ecosystem is more robust and secure than ever before. Many experts even believe that cryptocurrencies might be the future of finance.
The crypto market has changed in the last few years, and investors are now carefully using cryptocurrency investment strategies to generate consistent returns. Since it is essential to have a cryptocurrency investment strategy, this guide brings you cryptocurrency investment strategies to help identify positions to make massive gains on your capital.
What Are Cryptocurrencies, and the Best Ways to Invest in Them?
If you don’t know what cryptocurrencies are, you might be living under a rock. But, for definition, cryptocurrency is decentralized digital money that is powered by blockchain technology. Cryptocurrency can be used to buy goods or services and can also be invested in similar other assets like stocks or precious metals.
There are various cryptocurrencies in the market, and all you need is a place to buy and sell them. Like any other investment, you need to weigh the potential risks against your risk tolerance to invest safely. Here are some of the best ways to invest in cryptocurrencies.
1. Always start small
The crypto market is profoundly volatile, which means prices may rise and fall unpredictably. It is, therefore, wise to invest in cryptocurrency with the funds you are okay losing. To begin with, start with a small part of your money to invest in cryptocurrency and increase the amount over time.
2. Select the right cryptocurrency
There is more than one cryptocurrency in the market, and it is essential to choose the right one. But it is advisable not to jump into investing in multiple cryptocurrencies at once. You need to be aware of what is happening in the market, make a list of the best-performing cryptocurrencies, observe their growth, and invest carefully.
In most cases, wallet and exchange are the same
4. Pick the right cryptocurrency exchange
An exchange is a platform where you can buy, sell or hold your crypto assets. It is essential to choose a suitable exchange to ensure smooth transactions, transparent prices, and security of your crypto assets. Some of the most popular cryptocurrency exchanges that you can choose from are Binance, Coinbase, OkEx, Deribit, Huobi, FTX, etc
How Important Are Crypto Trading Strategies?
With the right crypto trading strategies, you stand a better chance of generating a consistent return on your investment. And when you consider choosing a strategy, there are a few essential aspects that you should know.
1. Volatility
The volatility of cryptocurrencies is what makes the crypto market so exciting. Rapid price movements provide a range of opportunities to traders to go long and short, but such opportunities also come with significant risks. Therefore, you should research the market in-depth and develop risk management strategies before investing.
2. Market hours
The crypto market is available 24×7, which means that price changes can happen anytime. Therefore, your strategy should factor in the hours you are not available and act accordingly. To overcome your absence, you can invest through trading bots and automate your trades.
3. Varying liquidity over currencies
Liquidity reflects how quickly and easily a trader can convert a cryptocurrency into cash without impacting the market price. Better the liquidity, the easier it is to trade. Therefore, choose a coin with high liquidity to easily trade and generate profits.
Best Cryptocurrency Investment Strategies
As a crypto trader, you need to use a variety of strategies to earn consistent returns. You must familiarize yourself with a few trading strategies if you wish to be a successful crypto trader. Here are a few crypto investment strategies that you should know.
1. Buy and hold
The buy-and-hold crypto investment strategy is the fundamental strategy in almost all financial markets. Investors hold their assets for an extended period of time to profit from the long-term value appreciation. On the other hand, traders are highly active in transactions and look for returns by buying at lesser prices and selling at high prices.
Cryptocurrencies have a highly volatile nature and provide excellent opportunities for traders. However, the buying and holding strategy can give safety to investors.
2. Dollar-cost averaging (DCA)
DCA is a long-term strategy wherein an investor regularly buys small amounts of assets over time, no matter the price. The investor is always on the lookout to decrease the effect of price volatility by spreading purchases across predefined intervals. Since the capital is spread across intervals, the strategy will smoothen your purchase prices throughout the investment.
It is also worth mentioning that DCA is more effective in the bear market. While most investors are too afraid to buy, your DCA plan would provide you with an investment framework for buying the dip.
3. Asset allocation
Your crypto portfolio may contain one or more most promising cryptocurrencies in addition to some of the other countless more minor currencies that are available and have much smaller market caps. Asset allocation refers to a strategy that outlines how your capital should be allocated between asset classes in an investment portfolio. This strategy aims at maximizing the expected returns while minimizing the potential risk. It encompasses factors like your time horizon, risk tolerance, economic conditions, etc.
4. Crypto day trading
Crypto-day trading is the type of trading that happens during the day and within a day. This means that you would have to buy and sell the assets for profits within a day. Due to this characteristic, day trading is also known as intraday trading.
In comparison to long-term trading, day trading requires the trader to focus on small movements of value. You cannot keep the asset overnight and wait for it to gain value the next day. Similarly, day trading works on business days of the week. This is a skill that you can master only through practice.
5. Crypto scalping
Crypto scalping trading strategy is a short-term trading strategy when a trader generates small but relies on numerous trades per day. Traders utilize this strategy through a quick response to market movements. There are two approaches to crypto scalp trading – manual and automated. Manual crypto scalp trading requires the trader to focus on the market movements, continuously monitor trades, and open or close the positions in time to earn a profit.
Automated crypto scalp trading is a system that enables traders to create a unique program to support their defined strategies. This is designed to mitigate risks and perform the traders while traders are away from their desks. In most cases, a scalper has to make a trading decision on specific assets without having the time to think about the transaction.
6. Use cryptocurrency investment trading bots
Trading automation is on the rise, and rightly so. If you still haven’t automated your trades, here are 4 reasons why you should automate your trades as soon as possible. For trade automation, you should make the most of crypto trading bots. These bots use historical data to test out strategies and offer you a helping hand. Crypto trading bots are also programmed to execute trades based on certain triggers like volume or price. This helps you grow consistently, minimize risks and limit losses on cross-exchanges. So, you can sleep while you trade and generate consistent returns. Check out these strategies to minimize risk while crypto trading.
Final Thoughts
With the right cryptocurrency investment strategies and a cool head, it is possible to generate consistent returns during all market conditions. Scalping, buying the bottom, following the trend, and buying staking assets are proven tools in a trader’s arsenal. However, it is always advised to do thorough research before you invest or trade anywhere. Make sure you know about the trading mistakes that you need to avoid at all costs.
If you want to invest in expert trading strategies through automated trading bots and sleep while you trade, then Mudrex is the platform you are looking for. Mudrex helps people invest in 100% automated trading bots created by expert traders with total security and reliability. At Mudrex, users do not need to pay any platform fee but a small fee when they invest in a strategy, which can be as low as $5. It is safe to say, Mudrex is the high-performing automated trading platform you are looking for.
Let your trades work on autopilot. Get consistent returns with Mudrex.
FAQs
1. How do I choose a crypto strategy?
Choosing a crypto investment strategy could be a crucial step in your investment journey. If you are a long-term investor, you may just Buy and HODL, or if you are a trader, you can explore various trading strategies and select the one that best suits you.
2. What is the rule for investing in cryptocurrency?
There is no single rule to go by while investing in cryptocurrency, but doing your research thoroughly before investing should be your mantra. Additionally, while supporting your hard-earned money in a volatile market like crypto, you must be cautious.
3. How long should I hold cryptocurrency?
According to a famous investment strategy called HODL (Hold on for your Dear Life!) suggests that the longer you hold your investments, the better the return on investment will be. But there is no fixed period as to how long one should hold their cryptocurrency.
4. How do I become a smart crypto investor?
Smart crypto investors stand by their mantras firmly– Researching the project thoroughly, investing through dollar cost averaging, and diversifying the portfolio. Studying the market is also one of the skills you can adopt.
