
3 Cryptocurrency Investment Strategies for the Long Term
For a significant part of its existence, the cryptocurrency market was typified by short-term trading strategies intended to capitalize on sharp momentum swings and high levels of volatility. With the recent arrival of institutional investors and new theories of how cryptocurrencies might represent an entirely new asset class, that appears to be changing, though.
It’s great news for all individual investors that more thought is being given to how to incorporate cryptocurrencies into a long-term, well-diversified portfolio. Therefore, if you’re thinking about investing in cryptocurrencies for the long run, give these three popular investment strategies a closer look.
1. Buy-and-hold Cryptocurrency
A plain buy-and-hold strategy is the most straightforward way to invest in cryptocurrencies. It sounds just like this: You find one or more cryptocurrency that you like, and you hoard them for a very long time. The idea behind this is that even if many of the most popular cryptocurrencies are volatile in the short term, they will increase significantly in value over time.
Naturally, Bitcoin (CRYPTO: BTC) is the one cryptocurrency that sticks out in this situation. With a $1.3 trillion market capitalization, it is still the largest cryptocurrency globally. For good reason, it is frequently the first cryptocurrency purchased by both individual and institutional investors. It has been among the world’s best-performing investments over the last ten years.
It’s crucial to commit to a long holding period as a result. According to Cathie Wood of ARK Invest, if you are ready to keep onto Bitcoin for at least five years, you may likely earn significantly from it.
This five-year holding period is particularly crucial for cryptocurrency millionaires, as Wood recently estimated that the price of Bitcoin would reach $1 million by 2030.
2. Dollar-cost averaging
A analogous crypto method is dollar-cost averaging. While the classic “buy and hold” approach usually predicts a single large purchase, the dollar-cost averaging methodology suggests a series of smaller, repeated purchases.
It’s critical to keep in mind that, regardless of the situation of the market, you are guaranteeing to always buy a given quantity of a cryptocurrency for a specific amount of money. For example, you could decide to buy $10
This might be a really helpful strategy if you wish to cut emotion out of the investment process. Instead of checking your portfolio every few days, perhaps you merely do it once a month. This suggests that you can choose to shield yourself from the dire effects of bitcoin’s volatility by ignoring market instability.
This is especially important for cryptocurrency investors compared to those in stocks, due to the much higher volatility in the crypto market. It can be nerve-wracking to see your Bitcoin investment change by 10% or more in a single day.
3. ETFs for diversification
Finally, exchange-traded funds (ETFs) offer a means of diversifying a long-term bitcoin portfolio. Investors who would prefer not to make direct investments in the bitcoin market particularly enjoy them.
The recently launched spot Bitcoin ETFs are one way to invest in digital currency similarly to tech equities. These days, two of the most popular spot Bitcoin ETFs are the iShares Bitcoin Trust (NASDAQ: IBIT) and the Fidelity Wise Origin Bitcoin Fund (NYSEMKT: FBTC).
Due to the early success of the spot Bitcoin ETFs, it is anticipated that other cryptocurrencies may soon get their own spot ETFs.
Using conventional exchange-traded funds (ETFs) to diversify your bitcoin holdings is not insurmountable. One way to have a broad exposure to the bitcoin mining industry is to buy shares in the Valkyrie Bitcoin Miners ETF (NASDAQ: WGMI). Alternatively, if you would desire wide exposure to blockchain technology businesses, you might invest in an ETF like the Amplify Transformational Data Sharing ETF (NYSEMKT: BLOK).
Here, diversification is the main concept. With a single ETF, portfolio diversification is far simpler than it is with several stocks. Stated differently, you have the option of purchasing a single Bitcoin mining stock or a bundle of the top 20 mining stocks.
Read More : top-5-eco-friendly-crypto-coins
Remain long-term oriented.
Just keep in mind that investing in cryptocurrencies requires maintaining a long-term perspective. It’s simple to become sidetracked by the newest meme coins or transient momentum strategies. You can prevent this by using one of the above-mentioned solutions. Alternatively, you might concentrate on developing a long-term, diverse portfolio that generates actual wealth.
Is today the ideal time to invest $1,000 in Bitcoin?
Think about the following before purchasing Bitcoin stock:
The Motley Fool Stock Advisor analyst team has determined the top ten stocks that investors should purchase right now. and one of them wasn’t Bitcoin. In the upcoming years, the ten equities that made the cut might yield enormous profits.
Considering that Nvidia created this list on April 15, 2005, at the time of our recommendation, $1,000 would have earned you $652,342!*
A comprehensive portfolio building guide, monthly stock recommendations, and frequent analyst updates are just a few of the tools that Stock Advisor provides to clients to help them succeed. The Stock Advisor service has more than twice the S&P 500’s return since 2002*.