When it comes to investing, there are many options available to you. Be it the options of buying stocks and shares, standard retirement accounts/401Ks, or saving up on side hustles – people of all ages have some means(no matter their age) for investing in their future. But what are the trends at the moment in cryptocurrency investment? Let’s find out today.
Cryptocurrency investment is a highly volatile and risky activity, however, most people invest in cryptocurrencies as an alternative way of making money. They believe that the prices will continue to rise, so they invest money in smaller amounts over time.
Others buy cryptocurrency in bulk, or in one single purchase, as an investment and hope to sell it at a higher price in the future.
Regardless of why someone invests in cryptocurrency, they should take precautions before making a decision. It is important to have realistic expectations about how much money they can make and what risks they are taking.
In this article, we’ll explore some popular strategies used by highly successful individuals and young experts.
Dollar Cost Averaging (DCA)
For some, the sky’s the limit as to how much money they can make from this new digital asset class. But for others, the DCA crypto strategy is a safer approach, read this guide to learn more.
Here’s how it works:
- This strategy involves investing a fixed amount of money, over time, into a cryptocurrency portfolio. This approach helps to reduce the risk involved in cryptocurrency investment, while also providing investors with stability and predictability.
- Some key considerations when constructing a dollar cost averaging plan include choosing the correct cryptocurrency investment amount and duration. Additionally, portfolio construction must take into account tax implications and other financial considerations.
- Start by creating a budget for how much money you want to invest in cryptocurrency and set a schedule for investing. Set a target date when you want your investment to reach your goal value.
- Then purchase a fixed amount of cryptocurrency every week or so based on this budgeted amount. This will help keep your investment mix consistent and maximize potential gains while avoiding most of the emotional pitfalls that long-term investors face.
Buy and Hold
By following a buy-and-hold strategy, investors can increase their chances of making a steady return while minimizing the risk of losing all their money, if they have good timing with their first investment.
Some professionals prefer to use a buy-and-hold strategy when investing in cryptocurrencies because it allows them to hold onto their investments for an extended period of time if they can get in early on a positive trend. Also, by following this approach, you are able to avoid the risks associated with day-to-day market fluctuations.
Another advantage of using a buy-and-hold strategy is that it allows investors to maintain strategic control over their investments. By owning a cryptocurrency, users can determine its price and decide when and how to sell it. This type of control gives users more ability to make financial decisions based on their own needs rather than relying on the whims of the market.
It also combats the continuously rising inflation by actively fleeing from fiat-denominated investments.
ETF Investing
ETFs, or exchange-traded funds, allow investors to gain exposure to a variety of cryptocurrencies while maintaining the security and liquidity of traditional investment vehicles like stocks.
Here are three cryptocurrency ETFs that you should take a closer look at:
- VanEck SolidX Bitcoin Trust: This ETF allows investors to gain exposure to bitcoin and bitcoin-based securities. The trust will hold both physical and digital assets, allowing for a diverse range of investment options.
- ProShares Bitcoin Producers (CBOE): This ETF allows investors to gain exposure to bitcoin production companies, giving them exposure to growth opportunities in the sector. The fund also tracks an index of bitcoin-based securities, making it easy for investors to follow the performance of their holdings.
- Grayscale Bitcoin Investment Trust (GBTC): This ETF is designed specifically for institutional investors and allows them to gain exposure to bitcoin without having to deal with the volatility associated with cryptocurrency trading. The trust is backed by solid management and experienced traders, ensuring that your investments will be protected.
Micro-investing
Micro investing is a strategy in which you invest very small amounts of money in a variety of cryptocurrencies and tokens. This allows you to gain an understanding of the market before investing a larger sum, and it puts less stress on your monthly budget. Some things to consider before starting:
- Do your research. The first step in any micro-investment is doing your research. Before investing in any cryptocurrency or token, be sure to learn as much as possible about it. This includes understanding the basics of blockchain technology, what goes into creating a coin, and whether or not the project has reasonable potential.
- Aim for the long run. One of the best ways to make money with micro-investing is to have a long time horizon with your investments. A small initial stake will not produce large gains until a few years ahead in time. It is important to stay focused on longevity above all else.
- Stay disciplined. Just because you’re making money with micro-investing doesn’t mean you have to invest everything you get your hands on. Remember to stay disciplined and only invest what you can afford. If there’s something you bought that doesn’t work out, you can sell it and use the profit to invest in a more promising project.
Re-investing your crypto profits
One common strategy is to re-invest any profits earned in cryptos. This allows you to gain exposure to new coins while also securing your original investment. You can also use these profits to buy altcoins or tokens on exchanges, which can offer greater returns than traditional investments.
Additionally, cryptocurrency taxes can be confusing and complex, so it is important to consult with a tax professional if you plan on investing in cryptocurrencies.
Conclusion
As the world of cryptocurrency continues to grow and evolve, so too does the way young professionals invest their money. Many of these strategies are reliant on market price fluctuations and can be difficult to keep track of over a prolonged period of time.
That said, there are a few key cryptocurrency investment strategies that young investors tend to use, and understanding how they work can help you make smarter investment choices in the future.
So whether you’re looking for an entry point into the cryptocurrency world or want to develop a more comprehensive strategy, explore some of these options.
