The Ultimate Cryptocurrency Investment Strategy 2022
This 2022 cryptocurrency investment guide educates you about maximising gains and minimising losses while managing risks.
Cryptocurrencies, also known as digital currencies, are virtual coins that are managed through a network of computers. Crypto coins have no physical manifestation, such as a coin or note, and are tracked digitally. The coins are created through a process called “mining”, where miners use powerful computers to solve complex mathematical problems in order to verify transactions on the blockchain and earn the coins.
Cryptocurrency is often used as a medium of exchange and a store of value. But the value of cryptocurrencies is volatile, meaning that the price of one coin can change rapidly. This high volatility allures millennials and that’s exactly why cryptocurrency has seen more adoption as an investment amongst young people. Investing in cryptocurrency promises huge returns and sometimes losses too. In both cases, investments and investors have never decreased.
Why Invest In Crypto Coins
Cryptocurrency is the latest craze in investing. In recent years, more and more people are looking to cryptocurrency as a way of making money. Today, we’re in the midst of the greatest technological revolution since the internet. The cryptocurrency market has grown exponentially over the past few years and it shows no signs of slowing down any time soon.
With all the buzz surrounding blockchain technology, Bitcoin, Ethereum, and other cryptocurrencies, more and more people are interested in investing in this new digital gold rush. But with this new technology, there’s an onslaught of questions about how to invest in cryptocurrency and what to do next. We’ve created this guide to help make sense of it all for you to start your journey into cryptocurrency investing.
Getting started with Crypto Investments
To put it simply, investing in cryptocurrency means buying and holding a cryptocoin. You buy a coin at a lower price and watch its value soar with time, and sell it. The return on investment (ROI) is your profit. Thus the lower you buy and higher you sell, the more ROI is generated. This is a basic cryptocurrency investment strategy.
Another method of investing is to buy a coin at any valuation and hold it for a longer period of time. Just like early investors of bitcoin. The value surges with time and your investment yields a multibagger return. Through proven techniques and tricks, investing can prove to be profitable. These tricks and techniques are crypto investing strategies that rely on technical as well as research analysis. Some of them have been discussed below to make your investment journey a seamless experience.
Strategies for Cryptocurrency Investing
The world of cryptocurrency investing can be intimidating for those who don’t have much experience. But it’s just like investing in the traditional stock markets. Investing in cryptocurrencies can be a smart way to build wealth over the long term. The key is to invest wisely. And don’t let the fear of losing prevent you from taking advantage of the opportunities that investing in cryptocurrencies can offer. With that in mind, here are some of the best long term crypto investment strategies to help you build wealth with cryptocurrency investments.
Diversify Your Crypto Portfolio
One of the best long term crypto investment strategy is to diversify your portfolio.Diversification is allocation of capital in multiple projects differing in ecosystem and utility. Diversifying your portfolio is always a better practice than going all-in on one. It significantly reduces loss exposure. Suppose you have $1000 to invest. Upon research you came across some coins that you believe have a good growth and upside potential.
Now, either you can go all-in on one digital asset or choose to share it equally between 4 options. So you invest $250 in 4 coins. Even if you happen to lose 25% of investment in each of two coins and gain 50% in the other two. You still take roughly 11.25% in profit.The essentiality being emphasized here is the prevention of loss and strategizing profit making. It is one the fundamental cryptocurrency investment strategy
Dollar Cost Averaging
DCA is the act of purchasing an asset using a fixed amount of money for a fixed period of time. As a cryptocurrency investment strategy, it allows investors to buy an asset at a lower price than if they had bought it all at once.
The approach minimizes the impact of short-term fluctuations-volatility and enables investors to build wealth and grow their assets. Fundamentally Dollar Cost Averaging mitigates the risk involving market fluctuations. Market volatility is one of the most difficult aspects of investments. Meaning that even if the trade idea is correct, it might not be favoured by market sentiment. Thus what could have been a perfect profit making trade could end up in all reds.
Book Your Profits
Even though profit booking is not talked about much as a strategy, it still is an essential cryptocurrency investment strategy. When you buy a cryptocoin at a very low price and see it really going-to-the-moon, you better book your profits there only. Once it starts to track back to the earth, your profits will reduce dramatically. Don’t we know the Doge and Shib phase? Respect your targets. That’s a word from the wise investors.
Liquidity Is Your Friend
To put in perspective of cryptocurrency investment strategy, liquidity is the ease of getting a quote price for an order. This is largely driven due to the demand of a cryptocurrency. If there is liquidity in the market, you can buy and sell crypto assets without facing much difficulty.
This is one of the fundamental reasons as to why you may find a plethora of bitcoin buyers and sellers on any crypto trading platforms. This scenario changes drastically with alt coins as some of them haven’t been able to attract mass adoption.
Respect Your Stop-Loss
If veteran investors are to be believed, “write your targets with a pencil and stoploss with a permanent marker.” This sentence is a golden rule of cryptocurrency investment strategy. If a crypto asset doesn’t sustain the growth trajectory and traces back to hit your stop-loss, you need to act on that urgently.
It's more important to minimize your losses than to book profits. Even if you miss a profit booking target, you still have some profit to take. But with losses, the margin of financial loss increases with every percentage drop.
Buy and Hold - Hodling
Buy and hold strategy involves investing in a cryptocurrency and holding it as a long term crypto investment. It requires patience and a tolerance for volatility, since the value of a cryptocurrency is often unpredictable.
The theory behind buy and hold is that a long-term investment will yield better returns than a short-term strategy. This isn’t always the case, but in general, buy and hold is a sound cryptocurrency investment strategy to maximize return on your investment.
In the context of investing, hedging refers to the process of reducing investment risk without reducing expected returns. It can be used to protect against the risk of a market movement, such as a market crash, or to protect against other kinds of risks, such as the risk of an interest rate rise. One aspect of hedging is perpetual swaps. Perpetual swaps are derivatives that allow you to buy or sell the value of an underlying asset without having to worry about it expiring (you can choose when to take or exit a position).
In the crypto market, perpetual swaps as a crypto investment strategy has expediently gained traction. It allows traders to leverage on positions that do not have an expiration date. You must first assess your collateral's funding rate mechanism and potential returns before employing perpetual swaps as a hedging method.You should also be aware of the leverage that the exchange you choose allows (derivatives can allow up to 100x leverage).
C-Trade is a crypto derivatives exchange with three distinct qualities that sets it apart from the competition:
- C-Trade offers Bitcoin perpetual contracts with up to 150x leverage.
- Our platform can handle up to ten million transactions per second.
- C-Trade uses machine learning to detect market manipulation to help secure your investments.
Now that you know which investment strategy to follow, finding a growth promising crypto coin is equally important for a profitable investment. That’s why we have made a list of crypto coins based on ecosystem and utility to assist you in focusing more on investing and less on crypto coin scouting.
Cryptocurrencies to Invest in 2022
There are more than 10,000, yes more than Ten Thousand cryptocurrencies circulating presently according to statista.com. You surely don’t want to be the next Mark Cuban and lose $200,000 on a Titan coin. Which cryptocoin to choose and how long to hold it, is one of the premiere most query of first time investors. Investing in a growth promising cryptocurrency with a strong cryptocurrency investment strategy can yield more than decent returns. Wondering which cryptocoin options to invest in for maximum returns, we have got you covered.
The Conventional Trio
Don’t worry if you missed the bitcoin bullrun. Presently at the $40,000 mark, bitcoin promises a new ride only if you dare to take it. Cryptocurrency market has grown exponentially over the past few years. With all the buzz surrounding blockchain technology, more and more people are investing in the new digital gold rush. Bitcoin and Alternative coins again outperformed other investment options.
Stock and real estate investing is finding it hard to match up with the digital asset investing revolution. Risk-free diversified portfolio with sustained lucrative gains promptly attracts millennials. Bitcoin, Ethereum and Ripple, have been the most consistent and admired investing options for millions of crypto enthusiasts. Not only have they withered every bear slap but charged back strongly to reach ever high valuations. All three of them offer excellent return on investment with a good cryptocurrency investment strategy.
The new era of internet, web 3.0, also known as metaverse, promises exceptional investment opportunities. With virtual reality and augmented reality taking over the conventional means of communication, projects contributing to the development of metaverse are about to explode. The advent of metaverse has completely revolutionized the decentralized economic model giving users diversified investment options.
Crypto coins like Axie Infinity and VeChain (Vet) with a strong hold in virtual reality are good investment options. So if you are looking for investment opportunities while leveraging the development of gaming metaverse, Axie Infinity and VeChain are a good pick for your portfolio.
DeFi is the catch-all term for the growing ecosystem of financial products and services built on decentralized technologies. DeFi is a broad category that includes different types of products, each serving a different purpose, all designed to offer users a better deal than what traditional financial products offer.
The current trend in DeFi is the rise of cryptocurrency-based products. These products use the underlying technology of Bitcoin and other cryptocurrencies to offer users a wide variety of financial services, typically at much lower costs and with greater privacy than traditional services. Take for instance the growth and impact of Terra LUNA and Chainlink.
Terra LUNA is the second largest Defi platform after Ethereum, even though it launched in April 2019 only. Chainlink oracle integrates data and digital infrastructure to blockchain networks. It facilitates the smooth transaction of data and services provided by data providers, IoT networks, websites, and enterprises to blockchain networks.
These crypto coins have already amassed huge profits for early investors and still look promising. The scalability of defi protocols will largely occur through these two platforms due to their market dominance and penetration. This presents a very good investment opportunity.
New Blockchain Protocols
The emergence of new blockchain protocol is to reduce time consumption of a transaction. Bitcoin takes roughly 10 minutes to 15 minutes to verify a transaction. Ethereum came up with a fast, lighter version of blockchain and verified transactions in 10 seconds.
As we dive further into the products of blockchain and emerging technologies, speed and reliability will be of utmost importance. The alternate protocols came up with much faster and integrated infrastructure to achieve this feat in even lesser time.
Internet Computer Protocol
For instance, the internet computers protocol(ICP) or Dfinity tries to achieve transaction verification in merely 2 seconds. Making it 500% speed efficient while being 100% secure than the previous fast protocol.
Officially launched in March 2020, Solana is the fastest growing blockchain ecosystem. Processing more than 50000 transactions per second (TPS), Solana has more than 350 projects. With a staggering rise of 16000% in price, many believe it to be the “Ethereum Killer.”
The fifth-most valuable cryptocurrency, Cardano has a market capitalization of $18.8 billion.Specific goal of Cardano is to overcome issues of growth, integration, and sustainability on cryptocurrency systems.
Investments are bound to risks, with proper knowledge, sound strategy and risk management, losses can be averted to a great extent. But not investing due to the fear of loss is the worst decision making. When bitcoin was trading at $10, it was a risk for thousands of investors, now when it is trading at $40,000 it is a risk for millions. One thing this scenario depicts is that opportunities should never be undermined. Investing according to the capacity with a good cryptocurrency investment strategy can reap benefits beyond profits.