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Cryptocurrency Investment Strategy The Complete Guide

Cryptocurrency Investment Strategy: The Complete Guide

  • 1 June 2022
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You don’t have to be a professional investor to know that cryptocurrencies are hot right now. Thousands of digital currencies have launched live over the past decade – with several cryptos such as Bitcoin and Ethereum quickly becoming household names. But the truth is that not all cryptos are created equal. The prices of some crypto assets have proven to be quite volatile and as such, you must understand both the risks and rewards that come with investing in crypto. More importantly, you understand the basic Cryptocurrency Investment Strategy so you can invest in crypto in a way that suits your risk tolerance.

This guide explains what crypto is, how to invest in crypto, and some different Cryptocurrency Investment strategies.

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So what is crypto?

Before we dive into Cryptocurrency Investment Strategy, let’s take a few steps back and talk about what exactly crypto is and how it works.

Crypto (or “cryptocurrency”) is a digital currency based on a globally distributed computer network.

Unlike traditional currencies, cryptocurrencies are not issued or regulated by a government central bank. This allows cryptos to operate as an asset class outside of the control of central authorities or individual governments.

As you might have guessed, cryptocurrency gets its name from the encryption techniques used to secure each digital currency’s networks.

In general, the vast majority of cryptos use cryptography to protect their network and investors. Most cryptos do not have physical coins or paper notes that you can trade. Instead, “cryptocoin” balances are held in a public ledger that anyone in the world can access.

Although every transaction record on the public ledger (or “blockchain“) is accessible to everyone, individual records are encrypted to protect the privacy of all parties involved in a transaction. New crypto transactions are processed using a computer process known as “mining”.

While investing in crypto might sound a bit complicated at first, it’s pretty easy once you get the hang of it — and the crypto market has grown by leaps and bounds over the past few years.

The global market cap of the cryptocurrency sector is now estimated at $2.13 trillion and this market is populated by a large number of cryptos.

Cryptocurrency Investment Strategy The Complete Guide

Cryptocurrency

You’ve probably heard of the most popular cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH). But as of December 2021, there are more than 8,300 cryptocurrencies.

Since cryptos are a fairly new asset class, not all digital currencies are created equal. Some are more sustainable and resilient over the long term, while others start and disappear after a few months or years.

That being said, market leaders like Bitcoin, Ethereum, Binance Coin (BNB), and Tether (USDT) have proven to be sustainable (and quite lucrative) over the past decade.

When you buy a crypto coin, you store that coin in a “digital wallet.” A digital wallet is a secure account that you can set up through a crypto exchange or payment service provider (PSP) to store your encrypted digital currency.

You can then use this wallet to buy and hold additional crypto, pay for purchases directly with the contents of your digital wallet, or sell your crypto coins and convert them back to a traditional currency like US dollars (USD).

How do you invest in crypto?

Now that we’ve discussed what crypto is and how it works, let’s dig a little deeper and take a look at how you can invest in cryptocurrencies.

There are four popular options you can choose as a crypto investor. You can either:

  • Buy a single crypto coin
  • Invest in a crypto fund
  • Invest in a Crypto Exchange Traded Fund (ETF)
  • And invest in a crypto index fund

Crypto mutual funds give you access to cryptocurrency markets through futures contracts.

When you invest in a crypto mutual fund, you are placing traditional currencies like USD in a managed fund. This money is then invested in front-month futures contracts.

Futures contracts say that your fund manager will buy an asset (in this case cryptocurrency) at a predetermined price on a future date. Then, when that date approaches, the asset is usually worth more than the predetermined price and can be sold at a profit.

With cryptocurrency, fund managers typically sell the contract before it expires, so you never actually own crypto coins.

The money from each expiring contract is then used to invest in new contracts the following month – slowly increasing the fund’s value.

Cryptocurrency exchange-traded funds (ETFs) can track either a single cryptocoin or a basket of different crypto coins or digital currencies.

Another emerging crypto investment solution is the crypto index fund. With a crypto index fund, investors put traditional currencies into a fund that tracks one of several crypto indices. The funds are then weighted by market capitalization.

However, note that these three ways to invest in crypto are all still in development.

The final investment option (and perhaps the simplest) is to buy a single crypto coin (or “crypto token”).

How to buy crypto

The process of buying crypto is pretty simple. The first step is choosing a crypto broker or crypto exchange.

While you can choose either of these options to buy coins, there are some key differences between the two that you should be aware of.

First, let’s talk about the exchange.

A cryptocurrency exchange like Gemini is a platform where buyers and sellers meet to trade cryptocurrencies. The main benefit of using an exchange is that they usually have fairly low fees.

In contrast, cryptocurrency brokers allow you to buy crypto with an easy-to-use app. The broker interacts with the exchange for you, which greatly simplifies the buying process.

But eliminating this hassle comes at a price – crypto brokers are notorious for charging hefty fees that you could otherwise have avoided.

After choosing an exchange or broker, you can deposit the money you want to invest. You can often deposit cash directly into a digital wallet or crypto account as part of a one-time authorized transaction. It is also possible to directly link your bank account to a crypto account.

Depending on the funding method you choose for your crypto account, you may have to wait a few days before you can use the traditional currency you have deposited to purchase your crypto.

Cryptocurrency exchanges

You should also note that many credit card companies tend to process crypto purchases as cash advances. This means your card company will charge you a higher interest rate than you would with a regular purchase, and additional fees may apply.

Once you have deposited traditional currency like US dollars into your crypto account, you can place your first crypto order. There are thousands of coins to choose from, so it’s important to do your homework here.

Research each coin, take a look at its short, medium, and long-term market performance, and make sure you choose crypto that fits your investment style. From there, with most brokers and exchanges, all you have to do is enter the ticker symbol of the crypto you want to buy and the quantity.

Many crypto exchanges allow you to buy a fraction of a cryptocurrency – which is important for many investors as there are many leading cryptos like Bitcoin.

It is that easy. From there, you can store your crypto in a digital wallet. There are two main types of digital wallets to choose from: “hot wallets” and “cold wallets”.

Hot wallets are digital wallets that are online-based. Meanwhile, cold crypto wallets are not connected to the internet. They usually take the form of an external USB drive or hard drive.


Why Bitcoin cloud mining?

An unknown individual or group called Satoshi Nakamoto introduced the Bitcoin network in 2009. In 2021, there will be more than 10,000 different projects in cryptocurrencies. So each of them has its role in building the future of money.

The market value of cryptocurrencies reached $ 1 trillion for the first time in January 2021. It passed $ 2.5 trillion less than three months later. So it shows that this market is one of the growing markets favoring its investors.

Minerland Bitcoin Cloud Mining is the process by which you participate in a mining pool to a cloud miner website and purchase a certain amount of hash power. In this pool, the profit will distribute equally among all participants who have participated in the mining pool. It will happen based on hash power. Also, the cloud mining platform allows you to mine your BTC without installing any hardware and at no extra cost. So Minerland, the best crypto cloud mining service to earn Bitcoin, helps you invest in Bitcoin easily and with low risk. For more information about us, you can follow Minerland’s Instagram account.


What Are Different Cryptocurrency Investment Strategy?

It’s one thing to just buy some crypto coins. But applying a strategy when investing is a whole different ball game.

In its simplest form, a Cryptocurrency Investment Strategy is just a set of instructions that can help an investor make decisions, e.g. B. which asset classes he buys, when he invests, and how much money he invests.

Crypto investing and crypto trading strategies differ quite dramatically.

For example, you might opt for a conservative strategy that focuses on low-risk portfolios and assets. This strategy would focus on the goal of asset protection. But at the other end of the spectrum, you might opt for an aggressive strategy with high-risk, high-yield investments. The goal here would be capital appreciation (make money faster).

Every strategy has both risks and benefits. But to help you get a rough idea of how to invest in digital currencies, let’s examine some of the most common crypto investment strategies.

Buy and hold strategy

The top Cryptocurrency Investment Strategy is called the “buy and hold strategy”. Many crypto investors refer to this strategy as “HODL”.

Interesting Fact: Most people think this is a typo that has become more prominent over the years. But others claim that HODL is an acronym for “hold on for dear life.”

HODLing is when you buy a digital asset and then hold it in your digital wallet for a relatively long period. If you go for the buy-and-hold strategy, you won’t do much cryptocurrency trading. You simply buy coins and archive them.

If you haven’t been looking to sell any of your assets for years, the HODL strategy is probably a good choice for you – especially if you’re trying to build a nest egg for the kids in your life.

Generate returns

Another common crypto investing strategy is “earning a return”. With this strategy, you buy crypto and then hold onto it to earn a financial return over some time.

The difference between earning a return and HODLing is that when you earn a return, you are only holding onto your crypto for a specific amount of time. The goal is to buy your coins at one price and then sell them at a higher price.

A benefit of this Cryptocurrency Investment Strategy is that you can often earn passive income while holding assets – similar to how a savings account pays interest on your existing balance.

Dollar-cost averaging

Dollar-cost averaging is a Cryptocurrency Investment Strategy that focuses on investing fixed amounts of your money in cryptocurrencies regularly.

This strategy is based on the fact that the crypto market often exhibits volatility, which means timing is difficult. In theory, by regularly investing relatively smaller amounts of money, you should be able to minimize your risk while maximizing your market exposure.

Essentially, dollar cost averaging spreads your investments overtime to protect you from rapid price movements. This means that the cost of your investment is averaged over time.

Value investing

Value investing is a crypto investing strategy that assumes that most assets are undervalued – meaning their actual value is higher than the assets they are trading for.

If you’ve ever heard of investor Warren Buffet, he’s the one responsible for making value investing a fairly common Cryptocurrency Investment Strategy.

Value investing is about finding an asset that you think is trading for less than it’s worth. You would then buy that asset assuming its market price would increase over time.

The biggest challenge here is figuring out which assets are truly undervalued. This strategy requires a lot of time, research, and practice if you want to make a profit.

Conclusion

At the end of the day, one thing is certain: crypto is not going anywhere. There are now over 8,000 cryptocurrencies to choose from, and many of these cryptos have appreciated.

You just need to carefully consider which Cryptocurrency Investment Strategy is right for you and your investment style.

16 responses to “Cryptocurrency Investment Strategy: The Complete Guide”

  1. Herve Fodouop says:

    Good

  2. Isaac ihaza says:

    The main advantage of Bitcoin investing for beginners is that you can potentially get a huge profit return it’s a challenge, but it’s possible.
    There are other crypto that is taking over bitcoin today

  3. Rodrigo Melara says:

    Wow, there are a lot of cryptos and is interesting the way that a person can invest in

  4. Alfred Tetteh says:

    Investing in cryptocurrency is profitable in the long term however one can also make alot of money by buying mining packages to make quick money

  5. Christian Jara says:

    Great, the main advantage of Bitcoin investing for beginners is that you can potentially get a good profit return it’s a challenge, but possible.

  6. Khairul aznan says:

    Sangat membantu untuk yang baru pelajari crypto..

  7. Cameron says:

    Great Information

  8. Salman says:

    it’s interesting. This plan can be useful. Thankful.

  9. Amobi Izuchukwu says:

    Crypto currency, digital currency is the feature.

    Now check, how much is 1bitcoin to dollar?

    So amazing right?

  10. Kristaps says:

    Hi my name is Kristaps Nice information and a lot about cryptocurrency

  11. Fidele Tuyambaze says:

    Wonderful

  12. Graham Juanpierre says:

    Exellent

  13. Angel Ken says:

    Another good one

  14. Joel Nando Bertorelli says:

    The strategies in this article are very specific to investing as a career. If you just want to have some fun, then by all means try it yourself and find out.

  15. Isaac ihaza says:

    Thanks

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