Cryptocurrency can be both a long-term and short-term investment, and the success of your endeavor greatly depends on how well you manage it. Of course, some things you have no control over, such as volatility and unpredictable market changes. Others, like creating a solid crypto trading strategy that will help you control your assets to some degree, are entirely up to you.
As to why you should take your time to develop a good strategy and learn about the complicated but fascinating world of digital assets, all you have to do is take a look at how widespread its usage has become. Nowadays, crypto can be spent in a bunch of ways and at a plethora of places, starting with gift cards at your favorite places.
Whether interested in grabbing a bite with Uber Eats, shopping for new furniture at IKEA, or playing poker or roulette at crypto casinos with instant withdrawal options, BTC and ETH will likely pop up as possible methods of payment. Here’s what you need to know if you choose to dig deeper into the fascinating world of cryptocurrency.
Why do you need a trading strategy – and how to create one?
Cryptocurrency is no longer a novelty, which means that everyone interested in investing in it can find a lot of data on which to base their decision. Therefore, Bitcoin and Ethereum have long been considered the best long-term crypto investments, giving people a sense of security when acquiring these assets.
However, suppose you want to approach the situation more seriously and have the best chance of operating successfully within the crypto market. In that case, you’ll need to develop a well-informed and consistent approach to crypto trading, which will be based on a range of analytical tools.
Your carefully designed trading strategy will be your best tool for diversifying your investment portfolio, as it will help you identify good opportunities. It should also assist you in bypassing many of the risks associated with a market that’s as volatile as the crypto one.
When creating the perfect strategy that should help you bring your A game to the table, you’ll want to rely on insights from fundamental and technical analysis.
- Fundamental analysis is all about the real-world information. This includes company reports and market sentiment, which can be used when estimating the value of an asset in one geographical location.
- Technical analysis is concerned with predicting how a crypto’s price might fluctuate in the future. It uses data and patterns from crypto charts, which can contain great indicators that can help time entry and exit points.
Some popular trading strategies to consider
While many trading strategies can assist in better managing your assets, some have stood out as the most popular ones – take a look at three such examples.
Staking
Even if you’ve just entered the crypto market, you’ve probably already heard about the term staking. Staking refers to a crypto trading strategy that’s intended for long-term investments. With it, investors can use digital assets to make passive income by borrowing them to a PoS —or Proof of Stake—blockchain network.
If you’re thinking of using this strategy, it’s necessary to ensure you invest in a currency that supports it, especially if you plan to purchase new crypto. Some of the most popular options for staking include Ethereum, Solana, and Cardano, as staking is most common for decentralized exchanges.
HODLing
When you think of HODLing, you might as well think of the term ‘hold on for dear life’ – that greatly sums up what this crypto trading strategy is all about. It’s a very simple strategy that’s intended for long-term investors, and the premise is to buy and hold your digital asset for extended periods.
All those into HODLing believe their crypto asset will gain value over time. It’s important to acknowledge that it might not always be the case, as the crypto market is incredibly volatile, making it almost impossible to predict which way the pendulum will swing. Still, HODLing, when done right, is a great strategy for growing your crypto portfolio and profiting from it.
Yield farming
Yield farming is very similar to staking, as they both entail loaning your asset. With yield farming, an investor can use their assets to generate passive income by locking their crypto to a decentralized finance project or platform.
How much time your assets will spend in the DeFi project’s possession is determined ahead of time. During that period, investors will receive interest-like rewards, allowing them to keep their crypto reserve intact while also profiting from it.
How to choose the right one?
If you already have some investment ideas and you want to be as successful as possible with bringing them to life, there are some questions you need to ask yourself:
- What kind of investor am I? Are you in it long-term or not?
- Am I investing for value? Then you might want to find an undervalued cryptocurrency by relying on fundamental and technical analysis.
- Am I investing for growth? Then analyze the crypto ecosystem to find a cryptoasset that’s predicted to grow at a rate that’s not typical for the market.
Once you have an answer to these questions, you’ll be able to have a much clearer perspective. You’ll know what your needs, goals, and possibilities are, which will help you select the optimal crypto trading strategy for your situation.
Final thoughts
All investment strategies carry certain risks, as does the crypto market in general. It’s up to each investor to assess the risks and decide how much of it they can tolerate. Both technical and fundamental performance indicators will serve for this purpose, giving you all the important insights into the crypto landscape.
And remember – if you’re new to the game, it’s best to play it somewhat safe. Stick to a strategy that prioritises risk management, even if it might not be the most profitable one. It’s easy to work your way up once you gain some knowledge and experience.
Tags:
