Get the weekly summary of crypto market analysis, news, and forecasts! This Week’s Summary The crypto market ends the week at a total market capitalization of $2,17 trillion. Bitcoin continues to trade at around $62,300. Ethereum experiences no changes and stagnates at around $2,400. XRP is down by 2%, Solana by 1%, and Dogecoin by 3%. Almost all altcoins are trading in the red, with very few exceptions. The DeFi sector decreased the total value of protocols (TVL) to around…
Top 4 Cryptocurrency Investing Strategies to Try Out
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It is not an understatement when seasoned investors and traders in the crypto market say that cryptocurrencies are volatile. Cryptocurrencies are the most volatile asset class the world of finance has ever seen. It doesn’t help that differences in the base protocol of a cryptocurrency also affect its growth to top it off. This type of inter-asset dependence is unprecedented.
When investing in cryptocurrencies, just like any other asset, it is given there is no alternative to hands-on research (DYOR). But, if there is no precedent in investing strategies, how does one ensure a stable income?
The Difference in Perception – Crypto vs. Traditional Assets
Cryptocurrency represents a new form of investing mechanism. However, the market’s high volatility scares long-term traditional investors and new entrants. Many have tried to find patterns and correlations, but the task seems unachievable, given its nascent origins.
When it comes to traditional financial assets like Stocks, Bonds, Debt Instruments, etc., the market has developed dozens of strategies to make the best buck out of one’s investment. For example, billionaire Warren Buffet is an avid proponent of the Value Investing Strategy. In comparison, Peter Lynch is known to be a Growth Investor. There are centuries of data to develop, so finding profitable strategies is not that hard.
Although still nascent, investors and traders have a lot they can carry over into the crypto market. Yes, it is volatile, but having an investment strategy will act as a safety net. It is like having an instruction booklet guiding you through the investment process. It will help you discard many potential investments that may perform poorly over time or are not suitable for the investment goals you are looking to achieve.
Here is our top 4 crypto investing strategies.
Risk Preference Approach
Finding out the investor’s risk preference is more important than any other component. If an investor’s risk preference is low and does not wish to enter a market with unstable returns, the crypto market is not what they want. Dozens of Financial Institutions have termed the crypto market a hazardous venture, and seasoned traders in the market would agree. The market returns are unpredictable, to say the least, and not for the light-hearted. Once the risk preference is determined, the investor can look for highly liquid and undervalued tokens that show great potential. Although the risk is high, the potential reward of an exponential increase is also high.
Portfolio Diversification
Diversifying the assets is one way to balance risk and reward in an investment portfolio. Traditionally, Portfolio Diversification has been known to be the most simple and effective strategy. This strategy has many complex iterations, but its root is spreading the portfolio across several assets. Users can invest in various tokens, such as remittance, utility, security, etc. It is a suitable hedging mechanism. Diversification can help mitigate the risk and volatility in a portfolio. Although diversification does not ensure a profit or guarantee against loss, it is a stable and trustworthy approach if done right.
Long Term Approach
Long Term Approach is an investment strategy that focuses on capital appreciation. In this strategy, investors select a few risky but highly undervalued tokens that show great long-term potential. Long Term Investing has traditionally been one of the best strategies as it does not involve periodical and time-staking effort to keep looking at the market. Instead, investors need to form a basket of crypto assets representing huge market potential. In the crypto market, Bitcoin is still considered the king of long-term investment, but dozens still seem lucrative for investment.
Profit In, Cash Out
Short Term traders prefer the profit-in and Cash out approach. It is quite a simple strategy with just one aim – take in profit and move on. The profit In process requires traders to avoid favoritism and market bias. The traders should generally refrain from getting into an asset that will have them waiting. If one finds a short-term window where a reasonable profit can be made, they should get in and get out as soon as they reach their goal. The trader should not wait to see if the asset goes up or down or keeps rising. If a profit is made, no matter how small, it is considered a good trade.
Conclusion
Setting up your investment strategy is like buying a new car. Before looking at the different models, one must figure out what style suits them best. And just like cars, there are many styles to choose from when creating an investment strategy. When choosing the right investing strategy, some questions must be answered first. What is your investment horizon? What returns are you seeking to achieve? What amount of risk are you able to tolerate? What are the funds in this investment to be used for?
As the years pass, the main expectation is that the data grows and patterns in the crypto market are identifiable. Although it does not fully represent traditional assets, using market-tested strategies from other instruments can come in handy.
Btc
Bitcoin
$62.547
price
price
0.84959%
price change
With more data, it will be easier to understand if traditional strategies can be brought forward or if new ones need to be developed.
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