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Cryptocurrencies can generate profits for investors who decide to delve into the topic of digital assets. However, potential earnings depend on many factors – primarily, of course, on the amount invested, as well as the chosen strategy. Both long-term options and short-term investments are available.
Which is better to choose? When is it worth opting for long-term investments, and when is it better to focus on rapid trading? You will find the most important information on this topic below.
Digital Assets in the World of Cryptocurrencies – Can You Earn from Them?
Cryptocurrencies can indeed be a good investment – both for experienced investors and for complete newcomers who are just beginning their journey in the crypto world. However, before you start earning money, you need to think carefully about how you plan to do it.
Before investing, you should get to know the entire cryptocurrency market and earning options as well as possible. For example, you can seek profits in cryptocurrency mining, which you could read about in our article: “Is Cryptocurrency Mining Profitable?”. Another solution is buying and selling cryptocurrencies when they reach favorable values. Due to the price fluctuations of digital assets, on one hand, in the case of currencies operating on blockchain technology, one can speak of an option providing a lot of growth potential. On the other hand, the price of a cryptocurrency can plummet, as many Bitcoin owners have experienced in recent years.
So, what should cryptocurrency investing look like, whose value offers a chance for profits thanks to a high potential return rate, but also does not guarantee protection against a significant loss?
Cryptocurrency Investment Strategy – Long-term Investments
In the world of cryptocurrencies, a long-term action strategy has been a popular earning model for some time. This means buying a specific cryptocurrency to sell it in the longer term. Short-term changes and fluctuations in exchange rates are ignored, even if there is a drop of several tens of percent. Unfortunately, this often involves freezing capital for several years if it started in a bear market. However, during a bull market, it may sometimes pay off to sell the purchased crypto even after a few months to enjoy the profits.
Such investments mean stability and less susceptibility to stress caused by temporary changes in cryptocurrency exchanges – and there are really a lot of them! This is a course of action in which experienced investors achieve good results, but it often proves right for beginner investors as well. However, even such a static investment method can involve risks if an inappropriate project is chosen for purchase. Therefore, it is worth considering diversifying the portfolio and investing funds in at least several cryptocurrencies, stored in a well-secured place.
Short-term Investment Strategies on the Cryptocurrency Exchange
On the opposite pole of investing in digital assets is cryptocurrency trading, i.e., transactions on virtual money intended to generate profits from the differences between the buying and selling price on cryptocurrency exchanges in a short time.
Short-term traders operate within very narrow time frames, based on which one can distinguish, for example:
- Scalping (transactions closed even after a few minutes),
- Day trading (closing transactions within one day),
- Swing trading (a perspective of several, a dozen days).
Trading allows for standard earnings, but also offers the possibility of using financial leverage to increase potential profits in the cryptocurrency market (which is rather dedicated to more experienced investors).
Many people trade independently, based on their knowledge, market analysis, and possibly automated tools, such as EazyBot (a way to minimize the risk of loss).
A beginner investor can also benefit from the experience and skills of a broker. His work is based on speculations concerning specific cryptocurrency pairs – he issues futures contracts, contracts for differences, etc., but he is only an intermediary, buying on behalf of the investor who commissions him.
Cryptocurrency Trading or Longer Investment – What to Choose?
How to start investing in cryptocurrencies? Is long-term investment or short-term trading better? It all depends on individual preferences, abilities, and experience, as well as partly on the available funds. A longer period of investing capital in the world of cryptocurrencies means peace and stability, as well as a significant growth potential. It can generate large profits (especially when a larger pool is allocated at the start), although it means freezing funds for a longer time and carries the risk of bigger problems in case of a mistake – especially if one forgets about diversifying the investment portfolio.
Trading is an option for investors preferring dynamic actions. It offers a chance for quicker profits. However, it requires experience and knowledge, as well as monitoring the market and trends (fundamental analysis). To start trading, you don’t need to have large amounts on your account. Experts also say that automated tools can be an effective aid. However, this is an option for people resistant to stress and capable of making decisions under time pressure, in difficult moments, when the risk of loss can be really high, and every second can radically change the situation.
Investing in the Shorter and Longer Term – Summary
Contrary to appearances, cryptocurrencies can provide a chance for profits that both experienced and beginner investors can enjoy. However, it is necessary to make a sensible decision about choosing a strategy and also to monitor changing market trends, in accordance with the chosen model of action. Each cryptocurrency (Bitcoin, Ethereum, or newly entering projects) offers a chance for profit. At the same time, however, there is a risk of loss, which can never be completely eliminated.