Crypto Investing: 5 Highly Effective Strategies for Your Portfolio

Investments are the key piece of any financial planning puzzle. These investments can be in market related instruments such as stocks, shares and bonds or financial institution related savings and fixed deposit accounts or in gold, real estate or avenues such as art, fine wine, cigars, antiques and other artifacts. A new entrant to this group is investing through cryptocurrencies. Several reasons have contributed to cryptocurrencies outperforming more traditional forms of investment in recent times. Regardless of which cryptocurrency or token a person invests in, some inherent characteristics of all cryptocurrencies have made them a darling of everyone, especially new-age investors.

For starters, any transactions involving crypto are extremely low risk because all crypto is without control from any monetary authority or central bank. A big plus for crypto is that changing economic factors play no role in its rise or fall. Its decentralized position, reliability and efficiency have made it one of the best and fastest options to increase your investment very quickly.

While a set of regulatory guidelines is yet to be established in India to follow when transacting in cryptocurrencies, the advantages and benefits cannot be disputed. Over the past decade or so, the mindset of investors has changed, with many more inclined to adopt cryptocurrency as their primary source of investment to achieve substantial returns. The dazzling advancements in the world of blockchain technology and fintech should get a lot of credit for getting more and more investors to switch to investing and trading in cryptocurrencies.

However, investing in cryptocurrencies, as in other forms of investment, must be done strategically, which links back to the financial goals of the investor. Since this form of investment is still very much in its infancy, there are several strategies that investors can choose from, but the ones given are not only popular but also successfully tested.

1) Buy and Hold The most popular strategy for cryptocurrency investors is Buy and Hold. Investors in this strategy hold onto their crypto investments for the long term. Investors who follow this strategy as part of their financial planning remain committed to the long-term potential and payoff of the crypto. Commonly called the ‘Hold on Dear Life or HODL’ strategy goes a long way to test the faith, resilience and patience of investors.

2) Day Trading The opposite investment strategy to HODL that has grown in popularity is the Day Trading Strategy. In this strategy, investors are focused on small movements in the market and adjust their activity to make quick returns. A short-term strategy where crypto is bought and sold in the trading session of the same day. This strategy has grown in popularity due to crypto being removed from any volatility of the financial markets, which can go a long way in making it a rewarding strategy to follow. 3) DCAA strategy that forces investors to save is the Dollar Cost Averaging strategy, where people invest a fixed amount in cryptocurrencies at predetermined intervals. This creates a routine in the lives of the investors as they would in the case of investing in other traditional forms of investment such as a SIP or Fixed Plans. This regularity will help to stabilize the crypto investment portfolio and regulate the ebb and flow of the cryptocurrency market, which will help to adjust and, if necessary, of course, correct the earlier financial planning strategy. 4) Buy Low, Sell High A strategy that is rapidly gaining acceptance and is being adopted by many cryptocurrency investors is the simplest form of Buy Low, Sell High. Simply put, people invest in crypto when the price is low and hold on to the token or digital assets until the price has risen significantly, resulting in the possibility of a pretty tidy profit. However, getting it right is not simple. To be successful in using this strategy, investors use tools and algorithms such as indicators that analyze and track the movement of a portfolio of cryptocurrencies. The most common indicator used is the monthly or weekly moving average which is used to track trends over a specified period of time.

5) ArbitrageArbitrage Trading is a strategy where investors trade on various platforms or exchanges. In Arbitrage trading, investors buy crypto on an exchange where it is priced lower than others, and depending on when they want to sell, they will sell the assets on an exchange where the price is higher than the exchange where the crypto was bought.

The aforementioned strategies have been extensively tried and tested and have consistently shown high levels of effectiveness in generating substantial profits. It is recommended that investors do thorough research and implement the strategy that best aligns with their financial planning goals. It is essential for all investors and traders to thoroughly analyze the potential risks associated with different strategies through thorough research before committing to a specific investment approach. Additionally, it is crucial to remain patient, maintain a long-term perspective, and prioritize staying abreast of the ever-evolving landscape of cryptocurrency investing.

(Roshan Aslam is the co-founder and CEO of GoSats)