Crypto Investing Strategies: A Beginner’s Guide

The cryptocurrency market is and has been in boom for quite a while now. With constant changes happening in the cryptocurrency market, several crypto coins emerge and recede from the crypto arena in a matter of hours. This makes crypto investing strategies for investing in reliable cryptocurrencies an even more crucial part.

This article walks you through different crypto investing strategies you can benefit from and various precautionary steps to assist you in crypto investing.

What is cryptocurrency?

Cryptocurrency is a digital currency in which secure transactions and a new unit’s creation are controlled using cryptography. It is maintained by a decentralized system, which means this currency isn’t issued or regulated by a central authority. The transactions are recorded on a publicly distributed ledger called a blockchain.

The creation of new cryptocurrencies is done through a process called mining, where complex problems are solved by specialized hardware, earning new cryptocurrencies as rewards. This currency is maintained and secured by blockchain technology, ensuring security and transparency. Furthermore, the benefits of diversification and easy accessibility can also be attained with this currency. But along with the benefits come several drawbacks too. The cryptocurrency is relatively new and extremely volatile, making it complex with rapid and unpredictable price changes.

Why do you need crypto investing strategies?

Reckless investing in the crypto market, or any market for that matter, often leads to more losses than the gains one makes from them. Proper guidance and strategies act like the guiding light to help you distinguish and choose what would work best for you. There are several more reasons why you need crypto investing strategies. Some of the key reasons are mentioned below.

1. Risk Management

The main and most important reason for needing crypto investing strategies is to seek help from several strategies and diversifications to navigate one’s way through the constant price fluctuations in the cryptocurrency market. These strategies help ensure that you aren’t overly exposed to the potential risks.

2. Planning and Controlling

You can rely on crypto investing strategies like dollar-cost averaging and diversification to maintain emotional control and avoid any impulsive decisions. Moreover, strategies like the buy-and-hold strategy and swing trading can help ensure that your returns are maximized over some time.

3. Education and Understanding

Sufficient knowledge and understanding of a market and its workings are a must to ensure informed decision-making. This not only helps you avoid making costly mistakes but also ensures your chances of profit from the cryptocurrency market. These criteria can be met with the help of crypto investing strategies too.

4. Long-Term Goals

The fluctuations, especially in the short term, in the cryptocurrency market are comparatively high, making the option of long-term investing far more attractive. Crypto investing strategies to study crypto indicators help you focus on the long-term potential of your investments.

5. Tax Planning

While investing in the cryptocurrency market, it is crucial to consider the tax implications of your investments and plan accordingly. This helps ensure that their tax liabilities are minimized.

These are a few reasons why crypto investing strategies are crucial for anyone trading/about to trade in the cryptocurrency market.

Crypto Investing Strategies

When it comes to investing in cryptocurrency, there are several strategies that people use to ensure profits. Some of these strategies are instant hits, while others land you on the wrong side of the boat. So, to ease the burden of having to research and spend hours finding the best crypto investing strategies, here is a list of prevalent strategies in the crypto market.

1. Dollar-Cost Averaging Strategy

The foremost strategy on our list is the dollar-cost averaging strategy. In this crypto investing strategy, the same amount of money is invested in target security at regular intervals over some time, regardless of what the price is. A small, recurring purchase is made as per the predetermined schedule; it can be monthly or weekly, rather than purchasing manually each time.

In this strategy, an investor buys more cryptocurrency when the price drops and the same investor tends to buy less cryptocurrency when the price of that cryptocurrency rises. The investor also frequently makes opportunistic additional purchases whenever the market experiences a dip.

2. Buy-and-Hold Strategy

As per this crypto investing strategy, the investor determines the cryptocurrency he believes in and holds that particular cryptocurrency indefinitely. By doing so, the investor increases the likelihood of substantial gains from the given cryptocurrency. This strategy is quite popular, especially among investors who are committed to the long-term potential and payout of crypto.

3. Day Trading Strategy

This crypto investing strategy is especially for investors who want to invest in the crypto market in the short term. The investor profits from short-term cryptocurrency price movements by buying and selling on the same day. This strategy is the opposite of the buy-and-hold strategy. But with the profits earned comes a high level of risk and energy involved in using this strategy.

4. Swing Trading Strategy

As per this crypto investing strategy, the investor capitalises on the short-term and medium-term price swings by holding positions for several days, even weeks. The positions are held using several technology indicators that help identify entry and exit points in the market.

5. Diversification Strategy

As per this crypto investing strategy, investors invest in cryptocurrencies from different slabs to avoid situations of overexposure to losses.
Exchange-traded funds (ETFs) are SEC-registered investment companies that allow investors to pool their money in a fund that invests in assets such as stocks, bonds, and more. ETFs can be used to diversify a portfolio and gain exposure to various crypto assets.

6. Arbitrage Strategy

In this crypto investing strategy, investors trade on multiple platforms or exchanges to earn profits. The investor looks for the given cryptocurrency at the minimum price across all platforms. He then purchases that at lower prices before sell the same cryptocurrency for a higher price on another platform. The purchase and sale of the given cryptocurrency on different platforms is how investors using this strategy earn profits.

7. Staking Strategy

This crypto investing strategy encourages the investor to hold and lock their assets in a wallet, which further supports the operations of blockchain networks. In return for holding and locking assets, the investor earns rewards, which are the same as earning interest. This strategy is less active but is considered a potentially rewarding one.

8. Masternodes Strategy

This crypto-investing strategy is another form of staking. In this strategy, the investor holds a significant amount of cryptocurrency to support network operations and validate transactions. This strategy is particularly attractive for those investors who are willing to commit substantial resources because of the rewards one earns for participating in the network.

These were some of the most widely used strategies while investing in the cryptocurrency market. Apart from these strategies, there are other key points that you should keep in mind while investing in the crypto market. The below-mentioned points are crucial as well to ensure that you are investing right in the crypto market.

• Taking advantage of airdrops 

Airdrops are free tokens that are distributed to create awareness about a new cryptocurrency in the market. These airdrops can be used by investors for investment, trading, or converting into cash.

• Liquidity Considerations

Good investors prefer cryptocurrencies with higher liquidity, as this helps reduce price volatility and enhance overall stability.

• Crypto Indicators

Some commonly used crypto indicators are moving averages, relative strength, crossovers, on-chain activity, and mempool size. These technical indicators, when used with blockchain analysis, ensure a more complete perspective for investors.

• Courts and Regulations 

Legal cases, regulatory developments, and legislative proposals (domestic or international) alter stake yields, development funding, and other dynamics. This further affects the price of cryptocurrency and its adoption.

• Use Safe Storage 

Investors can store their cryptocurrency in a hardware wallet (like Trezor and Ledger) or with a trusted crypto custodian. This ensures that the investor has reinforced security protections.

• Invest what you can afford to lose 

The crypto market is comparatively new and extremely volatile, meaning that there are significant gains and losses. The main reason is the scepticism and opportunism in the crypto market. Thus, one shouldn’t invest more than 5% of their portfolio.

With this, we come to the end of crypto investing strategies and precautions that you can keep in mind the next time you invest in the crypto market.

Top Cryptocurrencies in the Market 

This segment of the article talks about the top cryptocurrencies to invest in the market at present.

There are over 10,000+ cryptocurrencies around the world. Some of the currently trending currencies are:

Ethereum (ETH)

Bitcoin (BTC)

Solana (SOL)

Binance Coin (BNB)

Dogecoin (DOGE)

Toncoin (TON)

Ripple (XRP)

Frequently Asked Questions

Q1. Which are the best crypto investing strategies?

The best crypto investing strategies include the buy-and-hold strategy, dollar-cost averaging strategy, swing trading, arbitrage strategy, and staking strategy. There are other strategies too, like the diversification strategy, the day-trading strategy, and the masternote strategy, that are equally popular.

Q2. Which crypto gives the highest return?

Some of the cryptocurrencies with higher returns include Bitcoin (BTC) and Ethereum (ETH). The market capitalization of Bitcoin is $1.39 trillion, whereas the market capitalization of Ethereum is $455 billion.

Q3. Are there any tax implications to consider when implementing to consider when implementing a crypto investing strategy?

Yes, you should take into consideration certain tax implications while investing in the crypto market, as they affect the gains and losses of your investment. For instance, Under Section 115BBH, gains from the sale of cryptocurrency are subject to a flat tax rate of 30%.

Q4. What are the top cryptocurrencies in the market at present?

The top cryptocurrencies present in the crypto market at present are:

• Bitcoin (BTC)
• Ethereum (ETH)
• Solana (SOL)
• Binance Coin (BNB)
• Dogecoin (DOGE)

Q5. How do you strategically buy cryptocurrency?

The key to strategically buying cryptocurrency is following the procedure of setting a budget, followed by choosing an investing strategy and carrying out thorough research and analysis of the fundamentals. You should also maintain emotional control and stay informed about the changes taking place in the crypto market.