Cryptocurrency is quickly becoming one of the best investment opportunities available of the decade. While this is true, it is not without its risks. The main risk when trading and investing in cryptocurrency is the high volatility. Investing in cryptocurrencies needs a well planned strategy to maximise profits and taking all the steps possible to minimise the risks.

Whether you are new to cryptocurrency and are just starting out on your journey or you are an experienced crypto trader, setting out a clear and structured approach can be the difference between gaining profits from your investments and losing a great deal of money.

Today, we are going to take you through the basics of creating a profitable investment strategy within the cryptocurrency space. If you are looking for more help with managing your portfolio, or further advice and guides, why not head over to our website? Click here to be taken to Crypto Analyst now!

Step One – Understanding The Basics.

Before you consider jumping into the world of cryptocurrency, it’s important to understand the basics. You can follow our guide on Key Crypto Terms Every Beginner Should Know, making sure to read The Five Top Mistakes in Crypto & How To Avoid Them to give you a good idea where to start and what to watch out for.

Moving forward you should also make sure you have learnt about the different types of cryptocurrencies, blockchain technology and how the crypto market functions in general before attempting to make any kind of investment.

Some aspects of cryptocurrency that will help you move forward include:

– Bitcoin Vs Altcoins: Bitcoin was the first cryptocurrency and is currently the most widely adopted, but there are thousands of different kinds of Altcoins on the market today.

– Blockchain Technology: This is the decentralised system that is the power behind all the different cryptocurrencies.

– Different Market Trends & Cycles: Understanding how and when the market moves, along with what can cause such movements will help you make informed investment decisions.

Identify Your Investment Goals.

You cannot develop a successful strategy for investing, unless you first identify your goals and what you hope to achieve. Be honest with yourself about what you hope to achieve, and more importantly be realistic. Don’t go into the cryptocurrency market thinking you are going to be the next “overnight millionaire”. This thinking has caused plenty of people to make risky, un-informed decisions which can prove very costly.

– Are you looking for short-term gains or long-term growth in your portfolio?

– How much risk are you willing to take with your investments?

– How much are you willing to invest in a given month?

– What returns are you expecting on your investments and how fast are you expecting them?

These are just some of the questions that you need to ask yourself before you consider investing anything in cryptocurrency. Moving forward with a clear plan will make decision making and sticking to limits and within your means much easier in the long run.

Choosing The Right Investment Strategy For You.

If you look online, there are people pushing hundreds of different investment strategies for investing in the crypto markets. So, how are you supposed to know what the best way to go is for you?

Below are the most common strategies, with a short breakdown in how they work:

– HODLing – For Long Term Investing: HODLing is a long-term investment strategy and as the name suggests, involves purchasing cryptocurrencies with the intention of holding them for an extended period of time, regardless of what is happening within the crypto market. This approuch is best suited to assets that have a strong user base, are well established and have a clear purpose. Examples of these would be Bitcoin and Ethereum.

– Day Trading: Becoming a day trader involves buying and selling various cryptocurrencies each day to attempt to take advantage of price changes in the crypto market as they happen. While this strategy can be very effective, it requires an advance understanding of the markets, the ability to make fast paced decisions and a very deep understanding of market trends. We would not recommend this strategy for any beginners in the world of cryptocurrency.

– Swing Trading: Swing trading is a mix of the two strategies above, as it involves taking advantage of the price changes on the market on a slightly longer basis. Users attempting to trade with this strategy would hold tokens for a few days, possibly weeks to try and make small to medium gains during swings in the crypto market.

– Staking & Yield Farming: More and more cryptocurrencies today are encouraging users to earn passive income through “staking” their purchased tokens or yield farming. This type of trading involves “locking” your funds for a set amount of time on the chosen currencies network to earn rewards.

Always Diversify Your Portfolio.

Ensuring that you have a mix of investment opportunities in your portfolio not only allows you the best shot at success, it also minimises the risks of holding all your funds in one asset.

Don’t invest all your money in one cryptocurrency, you should look at spreading your investment across multiple assets:

– Large-Cap Crypto’s such as Bitcoin, Ethereum or Solana.

– Mid-Cap and Small-Cap Altcoins, such as Dogecoin, Stellar and Cardano.

– Stablecoins to protect you against market volatility. Examples of these would be USDC and Tether.

Always Do Your Own Research.

The crypto market is littered with various opportunities, all promising to be the “next big thing”, but not every project is capable of achieving what it has been set up to do, and worse than that, not every project is being honest about what they are attempting to do.

There are various things you should look for in a crypto project, below are some examples of where to start.

– Project team and token/network development.

– What are the use cases for the cryptocurrency?

– Market demand and token liquidity.

– Security and any risks surrounding the crypto.

The Most Important Step. Using Risk Managament.

Like any investment, investing in cryptocurrencies comes with risk, so it is all but essential to implement some form of risk management into your strategy.

– Only invest money that you can afford to lose. Never take out loans or borrow money for the purpose of investing in cryptocurrency.

– Avoid FOMO and panic selling. Try not to make “emotional” decisions when trading, as this often leads to regretting the decision that has been made.

Crypto Analyst‘s Final Thoughts.

Creating a profitable crypto portfolio requires a well designed strategy as well has plenty of thought being put into how to achieve and maintain such a portfolio. By understanding cryptocurrency basics, understanding the markets and managing your risks you are increasing your chances of successfully achieving this. Remember, always invest responsibly and stay patient!