Long Term Cryptocurrency Investment Strategy [Hodl Method]

There are many different ways to invest in cryptocurrency UK. However, one of the most effective has been long term crypto investing, which has been proven very profitable.

It’s important to understand the cryptocurrency market cycles and bull markets vs bear markets before investing but it’s also essential to be aware of what makes a credible investment in cryptocurrency.

Learn how to invest in cryptocurrency UK and learn to do your own research because in long term crypto investing you must choose wisely as you’re going to be holding that digital currency for a long time. That means identifying popular future narratives and solid fundamentals is vital.

Many assets appreciate over time much more than gold or stocks. But you must also avoid those that correct more than 50% and never return to their previous price.

In this article we’ll explore everything you need to know about long term crypto investing.

What Is Long Term Cryptocurrency Investing?

Long term cryptocurrency investing is when you purchase a cryptocurrency token with the view of holding it for 1-3 years. You also expect the price to increase over time.

Long-term cryptocurrency investing is one of the best investment strategies for beginners. Once you’ve purchased your tokens you sit and wait for your price target to be reached and then sell.

Investments can be made over time using dollar cost averaging investing in crypto, which allows you to make small perdiocial investments over the long-term.

What Does ‘Hodl’ Mean In Cryptocurrency?

‘Hodl’ is a cryptocurrency slang term, which originated from a misspelling of ‘hold’ from a post from an early Bitcoin investor.

The term ‘Hodl’ is popular among crypto investors on social media like Twitter and Reddit. Over time it has come to mean ‘hold on for dear life’

Benefits of Long Term Cryptocurrency Investing

There are several key benefits for those considering a long term cryptocurrency investment strategy:

Proven Success
Looking at the top 100 assets in cryptocurrency over the last 5 years you can see the majority of tokens have delivered eye-watering returns. This includes Bitcoin and Ethereum.

Early long term cryptocurrency investments have appreciated over time and created a generation of wealth.

There is no other asset class or investing space in the world that delivers this amount of returns. The S&P 500 has a return rate of around 60% over the same time period whereas FTSE 100 is around 25%.

Historically, cryptocurrency bear markets have been a hotbed for early investors to pick their long term cryptocurrency investments up at low prices.

Lower Fees
When using cryptocurrency exchanges for trading you will be charged fees, after a while these will begin to add up.

If you’re using Uniswap or any other decentralised exchange to buy and sell cryptocurrency you will be charged ‘gas fees’ for using the platform. The more people using the platform at any one time the higher the fees will be.

Beginners end up paying a lot of money to rebalance their portfolio or even just because they either get bored and move assets around or get FOMO and swap tokens for the popular cryptocurrency that week.

Investing in cryptocurrency long-term allows you to avoid paying fees.

Less Risk
Moving in and out of the market can cause investors to miss buying and selling opportunities. When outside the market you’re not fully focused, which means narratives and profitable gaps can be missed.

When you have a long term cryptocurrency investment strategy you are always in the market and are less likely to miss opportunities.

Also, if you hold your tokens through a period of volatile price action you are less likely to experience emotion regarding your investment and FOMO into pumps. This causes a lot of beginners to lose money.

If you have done your research, are confident in your investment and plan to hold for a long time then the short term price actions should not affect you.

Requires Less Maintenance
If you’re looking to take part in cryptocurrency investing but don’t have a lot of time to dedicate to it then buy and hold for the long term is the ideal strategy.

If you’re comfortable with buying your cryptocurrency and then checking in every now and again this is much better than trying to trade or swing trade the market. It requires lots of time and effort as well as experience.

How to Choose a Crypto Asset for the Long-Term?

Investing in cryptocurrency long-term means you are confident that the digital asset you’ve chosen will increase in price over time.

There are several ways that you can assess this. For example looking at the future of the crypto you have chosen, what do they have coming out? Is the roadmap busy for the next 1-3 years? Do they have any token unlocks upcoming? These are all valid questions to ask yourself before investing.

Another point to note is the narrative. Before a specific category of cryptocurrency tokens appreciates in price there is usually a catalyst for it. So in the past play to earn gaming and DEFI have been two major narratives. This comes with research and reading the market sentiment.

There are plenty of reasons to look at a cryptocurrency token here’s some areas to research before investing:

Team

Check out the cryptocurrency website and browse the team. A reputable cryptocurrency project will have a page and write up about all the key players in their team. Research their experience, their connections, do they have a good reputation. These are all questions you want to ask yourself before investing in the token. A good, hardworking team is essential.

Utility

Does the digital asset have a use case? Is there a reason to hold the cryptocurrency token? It’s important to find out the underlying reason for the existence of the project. It’s always good to look at the current market and find out if it’s solving a known problem. If the cryptocurrency project is fixing a problem or entering into a market with lots of users it is more likely to gain traction and be adopted by more people. This is a good long term cryptocurrency investment.

Social Proof

Today, social media platforms are a great source of information, marketing and to get a genuine feeling about a product or service. This is the same with cryptocurrency. Browse Twitter and see how active the team is, is the sentiment around the project positive and do they have lots of real followers and a good community. If the marketing of the project is good and the community is active this is a great signal for the future of the project.

Also make sure to look at the market news. Is there a positive or negative view of your potential investment? What are the media saying about it. News catalysts can be a big part of price pumps and dumps.

Technology Developments

It’s important that the cryptocurrency you’re thinking about investing in for the long term is also thinking about the long term. View the technology and developments they have planned by reading their whitepapers and roadmap. Do they have a lot of exciting technology developments planned? If so, this is a sign that it could get adopted in the future and gain market share.

Backers & Partners

Always have a look who has backed the cryptocurrency project. There are many investing companies and funds out there so make sure they are trustworthy. Cryptocurrency projects also partner with other cryptocurrency projects as this is a great way to improve the technology and awareness. Partnerships are really important in this space. If your potential long term investment has partnered with a huge brand like Google or Microsoft for example, this is a great sign.

Transactions

How often are people transacting or using the technology? For example, Brave browser has their own token BAT (basic attention token). There are thousands of people using the browser thus being adopted and therefore has gained a huge market share in the space and the price has reflected this.

Make sure people are using the technology as this will ensure adoption and market share. This also feeds into the utility of the token, great utility will mean it will get used.

Metcalfe’s Law / Network Effect

In the above section we have discussed what to look out for when choosing a cryptocurrency to invest in for the long-term. Adoption has been mentioned a lot, which feeds into a concept called Metcalfe’s Law and the Network Effect.

The Network Effect is when a product or service (or in this case cryptocurrency) increases in value as more people use it. When the Network Effect is present each new user adds value to the overall product.

For example, when the internet first started out in the early 90s it was used by a select few users, fast forward to today and the internet has millions of users daily and is one of the most transformative and lucrative things available.

The Network Effect is essentially more usability attracts more users, which increases the value. The more people adopt something the more popular it becomes and the more market share it takes.

Which Cryptocurrency To Hold Long Term?

There are thousands of cryptocurrencies to invest in over the long-term. But for those of you who are just starting out, it would be wise to look at coins in the top 50 on Coinmarketcap. Otherwsie known as the best cryptocurrencies to invest in 2022. The top 50 coins are well-established technology projects and blockchains and are likely to appreciate in price over time.

Holding Bitcoin and Ethereum over the long term in the past has been proven to be very lucrative and the more cryptocurrency is adopted the higher they will go. For the whole market to improve the top two coins will likely increase in price first given the money flow concept in crypto.

The money flow chart in crypto starts with buying Bitcoin and then the flow of money filters down into large caps, medium caps, small caps and micro caps (caps being the market capitalisation).

Market Cap: For a cryptocurrency like Bitcoin, market capitalization (or market cap) is the total value of all the coins that have been mined. It’s calculated by multiplying the number of coins in circulation by the current market price of a single coin.

Large Caps – large caps usually include the likes of Ethereum and other large blockchains. These usually have a market cap of more than $10 billion. These are considered lower risk investments and well-established projects. They also have a much higher volume of transactions.

Medium Caps – medium caps are traditionally market cap cryptos between $1 – $10 billion. They are a little more niche in their utility and underlying technology. They are more risky but are understood to have much more untapped potential and therefore greater returns.

Small Caps – small caps have market caps of less than $1 billion and are very susceptible to price volatility and market news. However, picking up a small cap that grows into a large cap can create huge returns.

For those who want to do some in-depth research for long term cryptocurrency investments make sure to look for narratives and ecosystems. This is called altcoin investing. Within these larger ecosystems there are thousands of low market cap coins that help to run a specific blockchain. These are usually emerging technologies that can return eye-watering profits.

One of the most exciting narratives right now is electric vehicles and mobility technology. Which is why we have invested in Bloxmove (BLXM). To invest in more crypto picks and shovels make sure to do in-depth research and visit our other guides.

Bloxmove is a mobility project that aims to make waves in the electric vehicle space harnessing blockchain technology.

Is Cryptocurrency A Good Investment Long Term

Cryptocurrency has proven to be a fantastic long term investment. Over the past 10 years prices of cryptocurrencies have multiplied 100x and even 1000x creating millionaires. Let’s take Bitcoin for example, 10 years ago Bitcoin was worth less than $1 and now has reached over $60,000 per coin.

When you browse the charts of the top 20, 50 or 100 cryptocurrencies you can see the price journey and how much it has increased. No other investment or asset class on the planet has returned more than cryptocurrency digital assets.

Long Term Cryptocurrency Investment Strategy [How To Hodl]

Learning how to Hodl and keep you long term crypto investments safe can be easier said than done. However, here’s a step by step guide on how to get started. We’ll go through how to buy cryptocurrency and then store it for the long term:

• Select the exchange or investing platform you wish to use
• Research the market. Look at blockchain ecosystems, the top 50 coins, narratives and so on
• Buy the cryptocurrency you are confident will appreciate in price over time
• Store you crypto in a digital or hardware wallet of your choice
• Dollar cost average crypto investing each month
• Decide on either how long you are willing to hold or the price you want to sell
• Place your assets into a staking pool if possible and earn passive income
• Is Cryptocurrency Safe & How To Store It Long Term?

As with any long term investment you are speculating on the price going up over time. If we look at the history of the space we know that prices have increased dramatically and therefore will likely continue.

Also, if you’re planning to hold your crypto over the course of a few years it’s a good idea to take your assets off the platforms and exchanges. The best crypto software and hardware wallets and most safe option. The Exodus wallet is ideal for those looking to keep it all online but if it’s cold storage you prefer then a Nano Ledger or Trezor is the best option.

Both wallets support many different cryptocurrencies so you can add more and buy and sell using the downloadable apps. Your crypto can be retrieved easily and is kept safe using a variety of safety methods.

Long Term Investing & Dollar Cost Averaging

Holding cryptocurrency over the long term can create excellent returns as explained above. However, if you want to keep adding to your investment to make sure you take advantage of lower prices while growing your overall bag then dollar cost averaging in crypto, into your initial long term investment is a great idea.

The idea is to periodically invest the same amount each week or month and over time your stack will higher as the price appreciates and therefore bringing more returns. We’ve got a complete guide to dollar cost averaging in cryptocurrency, which you can browse for more useful information.

Staking Cryptocurrency Over The Long Term

As well as dollar cost averaging there are other ways to make your long term investment more effective. Instead of putting your cryptocurrency in a wallet and leaving it, try staking it.

Staking your cryptocurrency on a staking platform allows you to earn passive income simply by locking your cryptocurrency up for a period of time. DEFI (decentralised finance) have made huge strides forward to enable investors to do this.

You can either do this on an exchange like Coinbase or Swissborg or a specific app like BlockFi. In some cases, the interest you can earn on your cryptocurrency increases with price.

When staking your digital assets you can earn either fiat currency, more of your token or another brand new token. You can read our full guide on staking cryptocurrency and how to earn passive income.