Home
Blog
Crypto Market Analysis
5 Investment Strategies to Start Investing In Crypto

5 Investment Strategies to Start Investing In Crypto

By Guest Author

November 19, 2024

Initially dismissed as a passing fad, cryptocurrency has since evolved into a billion-dollar industry. The sector employs thousands globally and continues to pique the interest of ambitious investors despite stringent regulations in certain jurisdictions.

Cryptocurrency provides a reliable avenue for investors seeking to diversify their portfolios into one of the most lucrative passive income sectors.

However, as with any industry, success as a crypto trader depends on your investment strategies. We’ve taken the liberty of putting together the five most ingenious ways to become a cryptocurrency investor today.

1. Spread Your Investment Across Multiple Coins

Cryptocurrency investing can take numerous forms. But before you explore more intricate investment instruments like crypto funds and companies, start easy by purchasing crypto coins.

The easiest place to find the best cryptocurrency to invest today is on reputable exchange platforms. Sample multiple coins, then hunker down on those with higher market capitalization and year-on-year (YOY) returns.

A cryptocurrency’s market capitalization refers to the total value of the coin traded on the stock market. It’s assessed by multiplying the total number of shares associated with the coin with the current share price. On the other hand, YOY compares the performance of a cryptocurrency across two consecutive years. It’s a critical metric for gauging a coin’s stability vis-à-vis its volatility.

As you research the most profitable cryptocurrencies to buy, be sure to also understand how their respective exchange platforms operate.

2. Diversify Into Tokens

Cryptocurrency tokens are a step up from crypto coins.

Unlike cryptocurrencies designed exclusively as a means of payment or store of value, crypto tokens represent ownership or access rights to certain digital assets or services.

Tokens provide more robust functionalities, such as powering decentralized applications.

To diversify into tokens, start by researching a blockchain’s reputation. Note that the demand for tokens depends primarily on their hosting blockchains.

Besides, note that tokens differ by their full range of capabilities. While payment tokens like Bitcoin serve primarily as mediums of exchange, utility tokens like Ether serve specific use cases. For instance, Ether's use case is to pay transaction fees for writing certain infrastructure on the Ethereum network.

3. Combine Day Trading With HODLing

Short-term cryptocurrency investments provide high liquidity, while long-term investments promise hefty returns. Fortunately, you can unlock the best of both worlds by combining day trading with HODLing.

Day trading entails buying cryptocurrency at the beginning of a day’s trading session and selling it on the same day.

For instance, you could purchase 0.001 Bitcoins (currently trading at USD 626.44) at the start of a trading session and then sell it for, say, $630.00 at the close of the trading period on the same day. While a $4 profit may appear marginal, it can translate into significant amounts over several days.

Becoming a day trader is an ingenious way to harness cryptocurrency’s high volatility. You can either net quick profits or suffer minimal losses, depending on whichever direction the pendulum swings.

If you’re a bit more risk-tolerant, then HODling might suit you better. HODling, an acronym for ‘holding on for dear life,’ is a strategy for optimistic cryptocurrency traders who believe their investments will break even however long it takes.

4. Take Your Chances With Crypto Staking

Staking is a cryptocurrency investment strategy that entails buying a sizable amount of crypto assets and locking them in a wallet in exchange for rewards.

Cryptocurrency staking is a critical element of ‘proof-of-stake,’ a blockchain system that grants investors who own significant crypto assets the right to validate transactions in specific blockchain databases.

Like HODLing, crypto staking is ideal for long-haul investors.

Binance currently pays out the highest staking dividends, an average of 7.50%. The commission is payable for locking down an asset for 365 days.

However, note that all blockchains impose restrictions on the minimum number of coins you must possess to become a validator. Other conditions may apply, too, so ensure you read the fine print before exploring this cryptocurrency investment option.

5. Apply Dollar-Cost Averaging (DCA)

Dollar-cost averaging, or DCA, involves investing a relatively low but fixed amount of money consistently into a project over an extended duration. It’s a great strategy for risk-averse cryptocurrency traders.

For instance, you could commit $20 of your monthly earnings to Bitcoin and maintain the momentum for a considerable period. $20 translates to $240 in a year, the latter of which might be difficult to set aside at once.

Since dollar-cost-averaging involves injecting a minimal amount into a crypto project, consistency is key. Consider the commitment as a debt you must settle each month.

Besides, DCA requires active monitoring of the performance of your preferred cryptocurrency.

It’s okay to take a leap of faith and invest routinely in a crypto coin for one year. But after the twelfth month, you’ll want to track the coin’s volatility to ensure you’re not on a loss-making streak.

Wrap Up

Implementing the above pointers is a critical step in launching a successful cryptocurrency business. As a parting shot, strive to diversify your portfolio into multiple crypto ventures rather than lock all your investments in a single instrument.

That way, you can maximize your returns if the industry maintains a bullish run and minimize losses if things head south.

Ethereum Killer | Lightchain AI

Sponsored

Join the Lightchain AI Protocol Presale | Lock in your 100x Gains Today!