In the world of cryptocurrency, there are more than 1,500 different types of digital coins and tokens. But only a handful have proven to be reliable, disruptive technologies that can generate significant profits for investors. In this article, we will look at six investment strategies that savvy traders employ when investing in cryptocurrencies.
This is the most common strategy employed by short-term traders who buy and sell their tokens within seconds or minutes. The goal of day trading is to make quick gains using small price fluctuations and not to capture long-term trends like swing traders and long-term investors do.
This investment approach combines elements of both swing trading and day trading. Rather than holding a cryptocurrency for days or weeks, swing traders hold their coins for several hours or days. The goal is to capture gains when the price goes up, but cut losses when it drops.
This strategy involves buying cryptocurrencies and holding them for months or years in anticipation of long-term price appreciation. Investors who follow this strategy often employ dollar cost averaging (DCA), which means they buy equal amounts of a coin on a regular schedule, regardless of the price. While DCA reduces risk, it also limits profits because these investors miss out on significant surges in prices during bull markets.
A penny stock is any cryptocurrency that trades below 10 cents per coin. These are very risky investments since they are usually traded over-the-counter and allow for manipulative tactics such as pump-and-dump schemes. Penny stocks are easily manipulated because of the small number of shares being traded.
Buying tokens during an Initial Coin Offering (ICO) is a new way to invest in cryptocurrencies without buying coins directly from exchanges. In 2017 alone, over 100 projects raised more than $1 billion through their ICOs. Since you can typically buy these coins at a lower price before they hit the exchanges, it is possible to earn huge returns by investing early on.
There are a growing number of funds that invest exclusively in cryptocurrency markets. The first cryptocurrency fund was launched in 2013 and it has been slowly gaining momentum since then. In early 2017, one fund managing more than $100 million raised more capital in a single day than had been invested in all cryptocurrency funds during the first three years of their existence.
Crypto news says that if you want to make the most out of your cryptocurrency investments, you will need to familiarize yourself with these strategies and choose one that best suits your needs. The good news is that even long-term investors can benefit from employing some of these strategies, especially swing trading and investing in ICOs.