There are many things that you can do to be a successful crypto investor/trader: using a safe wallet, a cryptocurrency tracker, doing research, etc.
But nothing beats a good strategy.
So let’s take a look at three of them!
Diversification is a strategy that capitalizes the cryptocurrency market opportunities by distributing investment risk by owning multiple cryptocurrencies.
A diversified portfolio reduces risk by not relying on only one asset. This means that if a certain crypto coin in your portfolio loses value, the other coins stay relatively steady in price stabilizing your portfolio. By diversifying your crypto funds you minimize losses.
This strategy also helps to increase profit during bull runs. In the cryptocurrency sphere, most coins follow the lead of their forefather, Bitcoin. Price trends are usually defined by Bitcoin. However, during a bull market, smaller crypto coins usually rise higher. Owning other crypto coins in your portfolio will help to improve gains.
There are many ways you can go about diversifying your portfolio. One method is buying from the TOP 10 or 20 coins. This can be an optimal strategy for you if you want to stay relatively safe.
Of course, the volatile nature of digital assets doesn’t allow for much safety. Yet, the crypto coins with the bigger market cap also have high liquidity, volume and are relatively immune to market manipulation.
Another safer approach to diversification is to add stable coins in your portfolio. By being pegged to stable asset classes, they offer the most stability among cryptocurrency. However, people that use cryptocurrency because of its decentralized nature tend to dislike stable coins since they are heavily connected to the traditional financial system.
A more risk-averse way to diversify your portfolio is by adding mostly “secure” crypto coins and spending 10-20% of your funds on newer speculatory coins. Small coins tend to grow faster during bull runs guaranteeing more income. On the other hand, they may be used for fraud, illegal activity and are highly prone to market manipulation. It is best for new investors to stay away from such assets until they gain more experience.
2. HODL, but be smart about it
HODLing is the equivalent of the buy-and-hold strategy in traditional markets. HODLing means buying and holing positions no matter the price. This is a strategy frequently used by Bitcoin investors that has been proven to work.
Cryptocurrencies usually generate better profits in the long run so hodling seems like a good strategy. Yet, it can be too risky if the coin’s market price goes too low.
This is why you need to have stop losses and profit targets. Establishing when you’re going to leave the market if the price drops or goes too high is crucial for good investors.
Exiting the market at some point during the bear market will cut losses if the price doesn’t go up again. On the other hand, being greedy and staying at the market for far too long can also damage your portfolio.
Hodling is a smarter and safer strategy when you have an exit plan.
3. Consider Market Cap and Total Supply
As previously mentioned crypto coins with a big market cap are considered safer investments. Small market cap coins can generate higher profits in the short term.
However, the rate at which the price will grow strongly depends on the supply of the cryptocurrency. Total Supply is the established amount of coins that can exist. For instance, the total supply of Bitcoin is 21 million. Some cryptocurrencies have an infinite supply.
If the supply of the cryptocurrency is lower and the demand becomes higher the price will go up much faster than for other cryptocurrencies. That is why both market capitalization and total supply should be considered when investing in a cryptocurrency.
To become a successful crypto investor check out this cryptocurrency portfolio tracker guide.