Invest in Crypto – 5 Best Strategies to Satisfy Every Need

Digital Assets have pretty much been a topic of intense discussion over the last few years, both among retail and institutional players. With media resources like Real Vision having episodes dedicated specifically to discussing this new asset class, it gains ever-more credibility and recognition among the participants of the financial sector. These discussions, initially fueled by the stories originated from the 2017 mania (how many times have we heard stories of people becoming overnight millionaires and, at the same time, stories of people who lost hundreds of thousands of dollars hoping to make a quick buck?), are becoming more rational as understanding of the phenomenon deepens.

The question stands, however - how do you make money on this?

We’ve come up with five widely-known strategies.

  • Make a portfolio of top-performing assets in the space and benefit from the growth of the industry pace-setters.

In once sentence, this strategy is similar to making an index. For example, the Bloomberg Galaxy Crypto Index (BGCI), which is the most referenced crypto-index, is designed to measure the performance of the largest cryptocurrencies traded in USD. The BGCI is market capitalization-weighted and includes cryptocurrencies such as Bitcoin, Ethereum, Monero, Ripple and Zcash. The index constituents are diversified across different categories of digital assets, including stores of value, mediums of exchange, smart contract protocols and privacy assets.

You can have your own basket of digital assets. For example, if Bitcoin and Cardano seem like the most promising projects to you - split the portfolio on a 75/25 basis between the two.

  • Invest in Mining

Another way to make money on this new asset class is by investing in secondary things, one of which is mining. Bitcoin mining is the process of adding transaction records to Bitcoin's public ledger of past transactions or blockchain. This ledger of past transactions is called the blockchain as it is a chain of blocks. The blockchain serves to confirm transactions to the rest of the network as having taken place.

Bitcoin nodes use the blockchain to distinguish legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.
You can look for guides on how to set up your own mining rig to mine not only Bitcoin but also some of the more profitable assets and not have to worry too much about the fluctuations in prices.

  • Learn to day-trade

Essentially, this is the longest road, yet a one with the most potential to bring significant profits and elevate the size of your portfolio. People who have mastered the craft of day trading can generate as much as 15% monthly on their portfolio, all the while using consistent and low-risk techniques.

It may sound much easier than it actually is, and if you choose to learn day trading successfully, you might want to bear in mind that 80% of those who attempt it, quit within the first two months, and only about 1% of all day traders are able to predictably profit net of fees - according to Tradeciety.

  • Dollar-cost Average your position in the most promising digital assets

Another commonly used strategy, which came from the world of traditional finance, is called Dollar-Cost Averaging (DCA). DCA is an investment strategy in which an investor divides up the total amount to be invested across periodic purchases of a target asset in an effort to reduce the impact of volatility on the overall purchase. The purchases occur regardless of the asset's price and at regular intervals; in effect, this strategy removes much of the detailed work of attempting to time the market in order to make purchases of equities at the best prices. Dollar-cost averaging is also known as the constant dollar plan.

  • Trade on a macro-level

One of the most actively practised, yet least recommended strategies - holding positions for an extended period and base your trades on macro indicators, not looking at short-term factors or news events. 

While this strategy is the closest we have to the actual “set and forget” investing, it’s enough to remember that since January 2018, just short of 95% of the digital assets have lost as much as 95% of their value - and macro investors in this space were the ones to take the losses to their chests.

Having said that, this strategy still deserves recognition and some attention. However, if you are going to pursue macro-level investing - make sure to learn what underlying fundamentals actually influence the long-term success of a given coin or token, and base your decision on rigorous research and historical data.

That will be it for this week’s article. To sum up - there are probably a lot more ways to make money in this space, and not just from trading or investing. However, if you were to pursue any of the methods above, give it a thorough evaluation and always measure your risk against what you can afford to lose.

Also, read our previous article on 5 Tips For Successful Trading in Late 2019 - and don’t forget to subscribe to BitQuant blog for more awesome content.