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Cryptocurrency investment has become popular in recent years. Many crypto investors are looking for the best way to maximize their returns. While short-term crypto investments can be lucrative, long-term investments may offer more security and stability.
Let’s compare various crypto investment strategies and their historical returns. And then learn the importance of an effective strategy and how to choose the right one.
Is It Still Profitable to Invest in Cryptocurrency?
Cryptocurrency investment offers lucrative potential if you know the proper strategies. Understanding the volatile nature of crypto allows you to make sound investment decisions. It can also help you maximize your profits.
You must do due diligence by paying attention to news relating to your investments. This helps you cut your losses while also increasing your returns.
For long-term crypto investments, you want to choose projects with a strong foundation. Examples include Bitcoin and Ethereum. For quicker returns, consider investing in altcoins with a smaller market cap but higher volatility.
You can automate crypto trading with Haru Invest
Enjoy the highest earning rates in the market with top performing trading strategies.
You can automate crypto trading with Haru Invest
Enjoy the highest earning rates in the market with top performing trading strategies.
Why Is It Important to Have a Strategy?
Having a crypto investment strategy is essential for any crypto investor. That way, you can avoid making rash decisions that may lead to significant losses of capital.
An effective crypto investment strategy considers a project’s long-term potential and current market value. It also considers the crypto investor’s risk tolerance and goals. Furthermore, it informs you about when to buy, sell, and hold crypto assets.
How to Choose the Right Strategy
Choosing a strategy tailored to your needs is essential when investing in cryptocurrency. To do this, you must consider your risk tolerance, budget, and the crypto assets you want to invest in. Additionally, decide whether you prefer short-term or long-term crypto investments.
Short-term crypto investments offer quick returns. However, the risks are higher than long-term investments. Long-term crypto investments provide more security and stability. But it requires more patience and dedication.
The next step is to consider which crypto assets best suit your financial goals. Conduct a detailed review before investing. Look into their fundamentals, whitepaper, market capitalization, and liquidity. The review will ultimately help you choose a suitable crypto investment strategy.
For long-term crypto investments, experts recommend dollar-cost averaging and portfolio diversification. If you’re considering a short-term crypto investment, choose scalping or swing trading.
Long-term Crypto Investment Strategies
Long-term crypto investment strategies involve keeping crypto assets for a prolonged period. The goal is to achieve long-term gains and prevent potential losses in the crypto market.
Let’s look at some of the best long-term crypto investment strategies today.
Buy and Hold
The “buy and hold” strategy is one concept that many investors are familiar with. In the world of crypto, it is often referred to as the HODL or “hold on for dear life” strategy.
The HODL strategy involves buying and holding crypto for an extended amount of time. It assumes that attempting to time the market can lead to losses. Therefore, once investors buy a coin or asset, they hold on to it for several months or years.
Crypto markets are known for their wild swings in value. Even though investing via HODL might seem tedious, it often yields favorable returns if done correctly throughout both bull and bear markets.
For example, Bitcoin has demonstrated an average annual return of more than 300% since 2017. Meanwhile, Ethereum has seen an average annual return of over 400%. This demonstrates the potential profitability of long-term crypto investments in extended bull markets.
Dollar-cost Averaging
Dollar-cost averaging is a strategy where investors make smaller, equal buys on an ongoing basis instead of large or irregular purchases. Investing a set amount regularly helps spread out risk due to market volatility and reduces the possibility of large losses. It also allows investors to buy more coins during dips and fewer coins when prices rise, lowering their overall cost.
Historically, dollar-cost averaging has seen positive returns in crypto markets. According to a report, investors who used dollar-cost averaging over the past four years have seen an average return of 61.8% compared to those who didn’t.
Regularly buying your favorite coins lets you grow your holdings without worrying about timing. To use this strategy, you need to decide how much money you want to allocate towards it each period (weekly, bi-weekly, monthly, etc.). Divide that amount among your chosen cryptocurrencies.
Depending on their respective values and risk levels, you can choose different amounts for different coins.
Diversification
Diversifying your portfolio is another excellent long-term crypto investment strategy. It involves spreading your funds across different coins, tokens, and projects.
Investing in multiple cryptos lets you leverage their combined potential for maximum gains. It also minimizes potential risks associated with any single coin or token.
Diversification helps balance the impact of market changes on your portfolio by allocating funds to the most suitable asset classes. This process may vary depending on the tokens’ performance trends. However, research shows that diversifying your portfolios can lead to returns of up to 10%.
In addition to dollar cost averaging and buy and hold, diversification can also be considered as a side strategy.
Short-term Crypto Investment Strategies
Short-term crypto trading strategies focus on profiting from crypto market volatility and short-term price movements. These strategies typically involve trading crypto assets within a short time, often daily or even hourly.
With Haru Invest, you can invest in cryptocurrencies long-term while benefiting from short-term strategies with a high level of automation.
Here are a few short-term crypto investment strategies:
Day Trading
Day trading cryptocurrencies is a way of buying and selling digital coins on the market within a single day. It involves setting up buy and sell orders for specific prices, either manually or through automated software.
This short-term crypto trading strategy capitalizes on immediate price fluctuations. Traders use technical indicators like moving averages, trend lines, relative strength index (RSI), and other chart patterns to identify potential opportunities.
Day trading crypto assets can be a lucrative investment strategy for experienced traders. Recent studies show that crypto day traders can generate an average return of 5% to 6% over a week.
Researchers BRAD M. BARBER, YI-TSUNG LEE, YU-JANE LIU, and TERRANCE ODEA found that less than 1% of day traders are able to consistently profit. The full report can be found here.
Scalping
Scalp trading crypto involves taking advantage of the volatility and liquidity of the crypto market to make quick profits. This strategy exploits the small price movements that occur in a very short period.
This short-term investment strategy can be lucrative if you know how to use it. You can scalp crypto by using methods like averaging, stop-loss orders, momentum trading, and trend following. Research shows that crypto scalpers generate returns anywhere from 0.5% to 1.5% per day on average, with some seeing returns as high as 5-10%.
Scalping is considered a waste of time by most individuals since they have to compete against more well-equipped traders and institutions. With high level automation, very few institutions generate returns from scalping.
Swing Trading
Swing trading crypto seeks to capture profits from crypto price changes over the course of one or two days. Swing traders identify short-term trends and ride them until they reach their peak. After which, investors will then sell off their positions.
Unlike day traders, who look for small profits, swing traders aim to take larger profits and can hold positions overnight.
Swing trading crypto has become popular with traders over the past few years. Recent studies show that swing traders can generate returns of 5% on average, per week. HOnly a very small percentage of traders are accurate in this regard.
Arbitrage Trading
Arbitrage trading takes advantage of price differences across different crypto exchanges. It involves buying crypto from one exchange and then immediately selling it on another for a higher price. This strategy capitalizes on crypto’s volatility.
According to recent data, crypto arbitrage traders have seen an average return of 0.2% and 2.5% per day. Additionally, crypto arbitrage can provide a steady income stream with minimal risk. However, it requires highly automated algorithms and a proper data feed.
Yet, crypto arbitrage is not without its risks. Many arbitrage opportunities can be short-lived.
Comparison – Short-term vs. Long-term Crypto Investment: Which Is Better?
The following table compares the most common cryptocurrency investment strategies.
| Strategy | Risk Level | Average Return | Success Rate | Required Effort |
| Buy and Hold (HODL) | Low | Very High | Very High | Very Low |
| Dollar-Cost Averaging (DCA) | Low | Very High | Very High | Very Low |
| Diversification | Low | Average | Very High | Low |
| Day Trading | Very High | High | Very Low | Very High |
| Scalping | Very High | Very High | Very Low | Very High |
| Swing Trading | Very High | Average | Low | High |
| Arbitrage Trading | Low | Average | Low | Very High |
The debate between short-term and long-term crypto investment is an ongoing one. The volatility of crypto assets often benefits short-term investors, since price movements can lead to quick profits. However, this approach is highly risky since short-term prices are less predictable than long-term ones. Investors who hold their investments for a long time benefit from enduring some market fluctuations while still profiting in the long run.
Long-term crypto investments are often the better choice than short-term crypto investments.
Given the unpredictable nature of cryptocurrencies, the right choice for any investor depends on their unique financial situation and risk profile. Whichever option they choose, it is always important for crypto investors to properly research their investments and remain informed about market developments in order to get the best results for their investment strategy.
One of the primary benefits of making a long-term crypto investment is that it can give you time to research and select your options. This allows you more room to analyze potential risks and rewards. You can look at past price movements, examine trading patterns, read news reports, and consider expert opinion before deciding.
Additionally, a long-term investment strategy lets you enjoy compounding returns on your portfolio. Compounding allows you to reinvest your gains and build up your portfolio rather than withdrawing them immediately.
Short-term crypto investments come with significant disadvantages that you should not overlook. Short-term crypto investments often involve high levels of risk due to the volatility of crypto markets. Crypto prices can swing in any direction, and traders may not be able to exit the market fast enough to avoid losses.
With Haru Invest, you can invest in cryptocurrencies long-term while benefiting from short-term strategies with a high level of automation.
Why Invest Long-term With Haru Invest?
At Haru Invest, we believe that committing to a long-term crypto-investing strategy is the key to unlocking your portfolio’s potential in today’s unpredictable crypto markets. Our platform allows you to easily manage and monitor your investments with powerful tools and analytics.
Find out more about Haru Invest Asset Management and its products.
