Cryptocurrency Investment Strategy

These two approaches are found among many different crypto platforms. TradeStation and Kraken are examples of platforms more suited for active trading, as they offer a great variety of tools suited for that type of investing. Importantly, while some investors might naturally lean towards passive or active investing, there’s no need to commit to just one approach. Many investors incorporate both styles in their wealth management strategies. In this arbitrage strategy, cryptocurrency investors buy assets on these bigger exchanges before selling them on smaller ones.

Such funds generally require larger minimum investments upwards of US$100,000. We’ve also seen standardized futures markets pop up for Bitcoin and other more liquid Cryptocurrency Investment Strategy cryptocurrencies, such as Ethereum. Firstly, we should make the distinction between investing and trading – the biggest difference being the time horizon.

Choose your involvement level

Our estimates are based on past market performance, and past performance is not a guarantee of future performance. Most crypto exchanges, for example, have a minimum trade that might be $5 or $10. Further, volatility-based investing is easier to achieve with cryptocurrency derivatives like cryptocurrency futures contracts, cryptocurrency put options, and cryptocurrency call options. Leverage can also be used to invest in cryptocurrency via margin accounts, which uses borrowed money to increase the exposure to an investment and amplifies both potential gains as well as losses.

Cryptocurrency Investment Strategy

For example, they could invest in a privacy coin index instead of picking an individual privacy coin. This way, they can bet on privacy coins as a sector while eliminating the risk of betting on a single coin. Scalping can be an especially lucrative strategy if a trader finds a market inefficiency that happens over and over again, and that they can exploit. Each time it happens, they can make small profits that add up over time. Scalping is generally ideal for markets with higher liquidity, where getting in and out positions is relatively smooth and predictable.

Don’t invest more than you can afford to lose

Once upon a time, investing in cryptocurrency was perceived to be a reckless move by a small group of experienced investors. They believed they knew investments better than anyone else, and considered the more traditional strategies to be the most profitable. However, as we have already highlighted throughout this content, the short-term fluctuations in cryptocurrency prices makes any strategy with short-term goals very risky. Imagine, for example, that you identify the price difference between two brokers and perform the arbitration to profit on the transaction in the same morning.

  • It’s worth noting that diversification alone is not a guarantee of success, and it’s still important to conduct your own due diligence before making any investment decisions.
  • However, if your research is correct, these efforts are generally worth it as the returns can be substantial.
  • Compared to value investors, growth investors do not care about the market price or the intrinsic value of an asset.
  • To minimize the impact of mistakes, figure out your specific investment objectives, risk tolerance, available funds, and particular preferences.
  • Earning a yield involves holding your assets, but earning passive income while you hold – like how a savings account pays interest on your balance.
  • When you spend enough time researching cryptocurrencies, you might find picking the right one for you is easier than you expect.

Many experts even indicate that it is essential to work with this level of predictability, as this keeps the investor focused on their goals. The good news is that, in the long run, the price trend of good assets has always been upward. OTC trading can offer several advantages over traditional exchange trading, including greater liquidity and the ability to make larger trades without affecting the market. OTC trading is often used by institutional investors and high-net-worth individuals looking to make large purchases or sales without affecting the overall market.

Decide Which Cryptocurrency To Buy

In the case of the Grayscale Bitcoin Trust, an S-3 filing must be approved, which is a simplified security registration form for businesses that have met other reporting requirements. In view of this, it is very important to know the cryptocurrency community, its members, the work schedule for the coming periods and the progress already made by the main leaders of the project. With this type of information you can even identify the next big cryptocurrency to hit the market and profit considerably from it. With that in mind, we prepared this article with several tips and information about what to evaluate when developing your strategy. We will discuss possible criteria that can be adopted and bring some examples of approaches that can be used in the market. For example, you may be required to hold onto the tokens for a certain period of time or to meet certain conditions in order to be eligible for the rewards.

Cryptocurrency Investment Strategy

These exchanges typically sell crypto at market rates, and they make money on fees for various aspects of their services. Though centralized exchanges are relatively easy to use, they also can be an attractive target for hackers given the volume of crypto (and cash) that flows through them. Some of the most popular coins include Ethereum, Dogecoin, Cardano and XRP. If your financial investment is not backed by an asset or cash flow, it could end up being worth nothing.