- Sticking to the best strategy rigorously can help investors build long-term wealth
- Researching and analyzing the data is very important, irrespective of the strategy
It took a decade for crypto exchanges and investment apps to go mainstream and become widely accepted as a form of payment and trade. However, the market can be volatile and risky; therefore, it is important to select a rational investment strategy that can return the desired yields. So, this article looks at some of the best strategies that one can follow rigorously.
Buy and Hold
Most investors go with this long-term passive strategy. This strategy eliminates the risk and helps to maintain a stable portfolio. The main focus is on value creation rather than short-term gains for instant gratification. In the terminology of the crypto ecosystem, this strategy is popularly referred to as ‘HOLD’ (Hold On for Life Dear)
One of the most popular and common strategies in crypto market investment is DCA (Dollar-Cost Averaging). This is pretty much similar to the model of SIP investment in the parallel world of fiat currency. At regular intervals, one has to invest in increments. It mitigates the impact of volatility and takes away the insistence on finding the right time to invest.
Investment in Value
This strategy is perceived as quite effective and efficient at the same time. As a value investor, one has to research thoroughly to gain a conviction. Value investment works in the framework of investing in an asset that one believes is underpriced as compared to its perceived value. Various factors like Scalability, Tokenomics, Competitive landscape, etc. are to be considered before investing.
Buy less, Sell high
This strategy might sound simple. Yes! Indeed, it is, but there’s a catch to it. It can be complicated to determine and specify whether the price is low enough to buy or high enough to sell. Hence, using indicators like the monthly moving average (MA) helps in the critical analysis of the price fluctuation.
A balanced portfolio deals with plowing capital into multiple options and investing in the asset class as a whole. It seeks to gain from the overall growth of the cryptocurrency market. Hence, the loss incorporated into one or two crypto assets won’t disrupt the portfolio as a whole.
Just like in the value investing strategy, research is necessary in the growth investing strategy too. The whole idea of this strategy is that instead of looking at the prominent and popular cryptocurrencies like Bitcoin or Litecoin, it is better to look at a newer cryptocurrency, which will have a lower market cap but possess a higher potential to skyrocket into a bigger and better value in the near future.
A contradiction to a balanced portfolio, this strategy works on the idea of creating a biased portfolio with a higher allocation of the invested funds towards a selected few cryptos. Some investors’ portfolios have made selective investments in blue chip cryptos, which have proved to be beneficial for them in the long term.