- What Is A Crypto Investing Strategy?
- 8 Best Strategies To Invest In Cryptocurrency
- How To Choose The Right Cryptocurrency Investing Strategy
- Cryptocurrency Investing – Long Term vs Short Term
- Taking Profits On Your Investments
The cryptocurrency market has grown 9.7x in the last 18 months (from March 2020 to January 2022).
The exponential growth of crypto is attracting countries, the world’s biggest banks and investment funds, huge brands like Facebook, Paypal, Tesla and even the UK Government. All of the biggest money bags in the world want a slice of the cryptocurrency pie.
But investing in cryptocurrency in the UK is accessible for everyone. Most new investors face questions like: how to invest in cryptocurrency UK? What is the best cryptocurrency investing strategy? What’s the best cryptocurrency to invest in?
It’s vital to have a solid crypto investing strategy if you want to take advantage of how generous the market can be. Buying crypto without an investment strategy is like building a house with no instructions – the foundations are unsteady.
What Is A Crypto Investing Strategy?
A cryptocurrency investment strategy for beginners is a specific method or set of rules designed to help the investor make investment decisions. The method allows the investor to stick to a plan. This includes how and when to deploy capital into the market, how often and how much to buy. A solid investing strategy also helps the investor to take profits at the right times.
There are many different ways to invest in the crypto market. Each investment strategy has its own risk appetite, wealth protection and portfolio management.
The strategy you decide to go with also depends on the type of crypto investor you are and how much money you want to invest.
For example, do you want to trade or hold for the long-term? Or do you want to buy and sell over a medium time period and deploy profits into staking to grow your wealth?
While all investing strategies in the crypto market come with their risks and rewards you must choose the one which is right for you. Below we highlight some of the best strategies to invest in cryptocurrency from beginners to advanced.
8 Best Strategies To Invest In Cryptocurrency
Hodl Method (buy and hold – long-term investing)
This is a long-term crypto investment strategy that has proven to be one of the best and easiest ways to make money in crypto.
To Hodl (misspelling on the word hold) is to buy tokens and hold them in your cryptocurrency wallet and wait.
It’s simple, first you learn how to invest in cryptocurrency, once you have decided on the exchange or investing platform you will use, you then buy your tokens and send them to your wallet and wait for the token to reach the price target you are willing to sell at.
Those who believe in the cryptocurrency space and blockchain technology for the long-term may buy and hodl tokens they believe will rise in price.
A pick-and-shovel play in crypto is an investment strategy that invests in the underlying technology needed to produce a good or service instead of in the final output.
For example, Cardano being the final product and the smaller projects built on Cardano being the underlying technology – the ecosystem.
If you’re wondering how to find ecosystems, here’s how:
- Visit Coingeko
- Click ‘All Categories’
- Type ‘Ecosystem’ in the search bar
- Choose the ecosystem to view
The best cryptocurrency to invest in usually comes with their own ecosystems. This is the smaller cryptos that belong to the main blockchain. For example, Cardano has an ecosystem of projects smaller than it. These cryptocurrencies usually follow the news and price of the head of the ecosystem but are much more volatile in their price action.
Investing in the ecosystem cryptocurrencies of the bigger tokens has been one of the most lucrative investing strategies in recent times. Why? Because capital filters down into the smaller projects within that ecosystem and because the smaller currencies are more receptive to value being added, the price action represents it.
Dollar Cost Averaging
Dollar cost averaging DCA investing in crypto includes deploying capital to an investment periodically, such as buying £200 worth of Bitcoin every 2 weeks.
Example: If you bought £200 worth of Bitcoin every 2 weeks for 5 years (starting 5 years ago) you would have invested £26,350 and your investment return would be £263,501
It’s a smart way to invest in cryptocurrency as you don’t need to worry about short term volatility. The aim is to acquire more over time at a lower average price point.
It’s a great long-term crypto investing strategy when you are dollar cost averaging into a cryptocurrency with strong fundamentals as they tend to increase over time.
Timing the market is very hard, even the most experienced investors aren’t always right, which can lead to major losses.
The earning yield strategy is similar to hodling but it’s a much smarter way to grow your wealth. But how do you earn passive income with crypto? Glad you asked, it means you buy your cryptocurrency and place it into a yield wallet earning you passive income over time.
Passive income wallets offer different APY and there are a lot of different wallets and ways to do it.
To buy and Hodl you are expecting the asset to increase over time. But placing it in a yield wallet means if the price drops for a significant period of time you are still able to earn on it.
Swissborg’s Smart Yield Wallet allows you to earn on cryptos like USDC, USDT, Bitcoin, Ethereum, Swissborg’s native toke CHSB and more.
Lump Sum Investing
This crypto strategy is for those who wish to invest a lump some all at once, essentially it’s the ‘all in’ method. It’s the opposite of dollar cost averaging. As mentioned above, depending on your situation can depend on your crypto investment strategy. For those who have little time to maintain a portfolio this would be ideal.
Perhaps you have some money available at a specific time and it’s right for you to go ahead with the investment.
Learn more about lump sum investing
What is value investing? It’s an investment strategy that focuses on finding undervalued cryptocurrencies, meaning the actual value is higher. The thought behind investing in this way is that undervalued cryptocurrencies will increase in value over time and therefore create profits.
It’s very hard to find undervalued cryptocurrencies because there are so many. However, if you know what to look for and learn how to do your own crypto research this crypto investing strategy can yield significant returns.
We must also touch on crypto market cycles. There are bull markets and bear markets. It’s a lot easier to find undervalued cryptos in a bear market, a bear market meaning investors are wary and most assets have dropped in value significantly.
Learn more about value investing
Swing trading is a style of trading that is quite popular. It’s a short-to-medium term cryptocurrency investing strategy (a few weeks to several months).
Traders will use technical analysis for the setups. Without technical analysis it’s very hard to time the markets based on news and twitter updates.
This type of investing strategy is for the more advanced people in the space.
Learn more about swing trading
An altcoin is any cryptocurrency that is not Bitcoin. Altcoin investing is very popular and is where life-changing profits are made.
There are different levels of risk involved in Altcoin investing. For example, cryptocurrencies in the top 100 are generally revolutionary technologies that have huge market capitalisation and giant investment funds backing them to the tune of billions.
Altcoin gems are cryptocurrencies with market caps as low as £10 million. These are very small cryptocurrencies we call ‘microcaps’. It is in this area of the crypto space where huge life-changing wealth is created given the right investment.
Investing in microcaps involves a lot more risk but offers a lot more return. This investment style requires you to implement a mixture of strategies but it’s essential to have a solid research plan. Learning how to do your own cryptocurrency research is perhaps the most valued skill to master.
How To Choose The Right Cryptocurrency Investing Strategy
- What are your crypto investing goals
Some cryptocurrency investors have short-term goals and some have long-term goals. As discussed above, these time frames come with different investing strategies.
Instead of time, your goal could be to do with how much profit you want to make or how much crypto you wish to acquire.
Is your starting investment a lump sum, if so do you want to grow it through trading or do you want to leave it to grow passively. Some investors might want to reap their rewards each month or wait for years for it to grow. It can depend if the investor can afford to let their capital go for a while or if it’s a quick flip.
Ultimately, what return are you willing to walk away for. If you make a £1000 investment and have a goal of £10,000 returns over 1 year then this will have an impact on the strategy you choose to reach the goal.
Those who believe in the future of cryptocurrencies may want to deploy capital each month over the course of 10 years (DCA) and at the end believe they will significantly grow their wealth.
All of the above factors go into the decision of what crypto investing strategy you should choose.
- What is your risk tolerance
Cryptocurrency investing is high risk but with this comes more potential for bigger rewards. Your risk tolerance can depend on a range of factors: age, experience, time frame and goals, portfolio size, personality type.
Those who are younger and who have less responsibility generally have a higher risk tolerance. However this comes with less money to lose in the first place.
A conservative investor looks for marginal returns. By accepting lower returns over a longer period of time the risk becomes lower. A conservative investor will buy and hold just Bitcoin. Perhaps place their Bitcoin in a yield wallet for extra passive income.
The strategy: Hodl, DCA, Yield
A moderate investor will diversify their portfolio with the majority being low risk cryptocurrency like Bitcoin and Ethereum. They will allocate a small portion of their portfolio to Altcoins with strong fundamentals, perhaps in the top 50-100 by market cap.
The strategy: Hodl, DCA, Value Invest
An aggressive investor is happy to accept great risk for great rewards. An aggressive investor could earn a lot more than the other two but would face much more volatility. They will allocate the majority of their portfolio to low cap and microcap altcoins, which they have researched and believe will grow to be top players over time.
The strategy: Altcoin Investing, Swing Trading. Hodl
- How much time do you have
How much time do you have to dedicate to your investments. If you’re working a full time job or have a family you may wish to be a more passive investor, which is a buy and hold mentality and a great way to grow your wealth.
Those who want to be an active investor would sell assets regularly for profits and always be on the lookout for undervalued cryptocurrencies. This would include trading and value investing. Trading and investing are two different concepts with completely different investing mindsets.
Cryptocurrency Investing – Long Term vs Short Term
The main difference between long and short term cryptocurrency investing is that long term investing allows you to grow your portfolio over several years minimising risk. Whereas short term investing is for those who have a short term goal in mind or perhaps wish to trade for quicker results.
Learn more about long term vs short term investing
Taking Profits On Your Investments
One of the most important strategies for investing in cryptocurrency is taking profits. If you don’t take profits you open yourself to risk of losing any profits made. Crypto is volatile.
By taking profits it allows you to diversify and grow your portfolio, perhaps taking on more risk for a bigger reward. Even long-term holders, at some point need to realise their profits.
Bull and bear markets and market cycles play a big part in this. Taking profits on the way up allows you to buy back at a smaller price and therefore growing your overall stacks.
There are many different ways to take profits from your investments and there are also strategies to use when using the profits.
Learn more about how to take profits