The first-ever cryptocurrency was launched in 2009, and the industry has grown a lot since then and gathered over 350 million users, traders and investors worldwide. This number continues to grow daily as more people are learning more about crypto and get into the scene.
With the global adoption of cryptocurrency increasing daily, it is best to educate beginners about how to get the most out of their investment and make the most out of their journey.
Keep reading to learn about crypto investment and five crypto investment strategies for beginners.
What Does It Mean To Invest In Crypto?
A cryptocurrency is a digital currency secured by blockchain technology. These digital currencies are not backed by real-life assets but can be invested in.
You can invest in cryptocurrency in many ways, such as purchasing crypto directly or investing in crypto companies.
5 Crypto Investment Strategies For Beginners
1. Apply Dollar-Cost Averaging (DCA):
Dollar-cost averaging is one of the most popular cryptocurrency investment strategies. It is the process of investing small and consistent amounts of money into crypto over a period instead of investing all at once. An example of applying dollar cost averaging is investing $10 into Bitcoin once a month over one year rather than investing $120 all at once.
This strategy has been tested and trusted and works well for crypto newbies and experts.
The DCA strategy helps you reduce risk in investment, but you have to be consistent with it by continuing to put in the same amount, no matter how the market is.
I understand how this might be a bit difficult, especially if you are one with commitment issues (yes, I said it), and the crypto market has not been smiling for a while. Keeping money in a market that does not seem favourable and has refused to rise might be discouraging, but keep in mind that while the market dips, a period will come when it shall increase again. So, keep at it; it will pay off in the long run.
2. Buy and Hold (HODLing):
This is one of the most popular crypto investment strategies, especially among beginners. This involves purchasing crypto from a cryptocurrency exchange platform, storing it in a crypto wallet for an extended period, and selling it when it has increased in value.
This is one of the best long-term investment strategies.
3. Crypto Day Trading:
Unlike the buy-and-hold strategy, day trading is a short-form investment strategy where crypto investors purchase cryptocurrency and sell it in a single trading session on the same day.
This investment strategy is one of the best ways to trade cryptocurrency without being affected by its volatility.
The essence of crypto day trading is to make a profit from small movements in the crypto market. Due to the volatile nature of cryptocurrencies, day trading may be quite rewarding.
4. Crypto Scalping:
Crypto scalp trading is a fast-paced strategy that depends on little price movements to make a profit. Rather than focusing on long-term investments and huge profits, scalpers depend on short-term trades that book little gains from little price changes repeatedly. Scalp traders study and analyze historical trends and volume levels before choosing a market entry point or exit within a day.
Although it has risks, an experienced scalp trader pays close attention to the margin need and the additional essential rules to have a good trading experience.
5. Crypto Arbitrage Trading:
Crypto arbitrage trading involves the purchase of a cryptocurrency from a crypto trading platform and selling it at a higher price on another trading platform to capitalize on the profit made.
Different exchanges offer different rates and prices for buying and selling crypto, so a crypto trader can capitalize on this by purchasing crypto from an exchange, deciding to hold on to it for a while, or selling immediately on another platform for a higher price.
For example, there are two exchanges- Exchange A and Exchange B.
Let’s say the price of Bitcoin on Exchange A is $20,000 and the price on Exchange B is $20,300. If you purchase from the first exchange and sell on the second, you make a profit of $300.
Bonus Tip: Only Invest What You Can Afford To Lose
Do not be alarmed; investing in crypto does not mean you will surely lose all your money, so you should invest with the mindset of pouring your money into a bottomless pit. What I mean by this is that you should only invest what you can afford. Some people have the habit of putting their entire life savings or money meant for something important into investments, which is wrong.
Like any investment type, cryptocurrency has risks, and because of its volatile nature, the market goes up and falls. These market dips lead to a loss of funds.
According to Ruan, he said that “A person new to crypto should consider around 5% of their income to the crypto market, a crypto enthusiast should look for around 10% of their income allocated to crypto, and a DeFi expert or trader should probably consider 20% or more to crypto“.
How To Choose Which Cryptocurrency To Invest In
There are over 12,000 cryptocurrencies in existence, and it might be tricky to decide which one to invest in first. While it is essential to diversify your portfolio and not invest in only one crypto asset, how do you decide which ones to invest in?
Before putting money into any crypto asset, you need to study your options and research them, their history, predictions, risks and more.
The price history and market capitalization of a specific crypto asset can give an insight into its stability and global adoption. It also shows the impact of numerous world events on its price.
Is It a Good Time To Invest In Crypto Right Now?
The market is going through bearish times, which means that the prices of cryptocurrencies have declined. While most people argue that this is the best time to “buy the dip”, it does not mean that advice should be followed blindly.
Before making any investment decisions, take time to research what you are getting into, the crypto assets you want to put money into and its history.
Like any other investment type, cryptocurrency is tricky and should not be treated as a harsh decision. Before delving into the crypto scene by making investments, research more about the industry and the specific assets you wish to put money into.
These strategies explained above can be utilized by beginners and experts. With these strategies, a crypto beginner can ease into the crypto scene and get the most out of their investment.
Note that none of the information above should be taken as financial advice, and careful research should be done before making investment decisions.