Just as with any investment, your best chances for success require clear financial goals and a plan. Since cryptocurrency investments are not backed by any sort of assets or cash flow, they are ripe for heinous losses … which could be the ruin of your whole portfolio.

The simplest possible way to de-risk crypto investments is to use a strategy known as dollar-cost averaging (DCA). This is a method of buying where, instead of buying a lump sum in one go, the capital is divided up and gradually invested in more manageable amounts over time.

Buy-and-Hold Strategy

Buy-and-Hold – as the name gives away – is a venerable investment strategy meant to generate long-term financial profits. Buying low, then holding until the price goes up is the essence of this approach. Those investors need not pay taxes on long-term capital gains, can buy and sell for little cost and, because of the rules, do little or no work. In theory, by sticking to their portfolios, ignoring bad news about the market, and riding out inevitable gales within the markets, investors should get superior returns. Alternatively, temptation may have them buy high and sell low, which could decimate their returns. Buy-and-Hold approaches, for example, may be better suited to investors with longer time horizons and a risk tolerance that allows them to withstand the volatility over the short term, while dollar cost averaging and psychotrading may generate more attractive returns inside shorter objectives or more conservative investment portfolios. There are a number of other ways for the inexperienced trader to enter the crypto market without actually purchasing bitcoin directly; Exchange Traded Funds offer many alternative indirect investing options into the space providing exposure.

Short-Term Trading

Just as with the stock market, while the rewards for crypto trading are on the up because they can be extremely significant, so the risk is up there with it, particularly for those who find it difficult to make snap decisions without losing their calm and ability to stick to a plan in the face of consistently changing markets. Movements in one crypto’s value have domino effects on everyone else’s, while news from anywhere in the world can have immediate repercussions on prices. Instead of making idiosyncratic bets on isolated sets of data, you need to know the contours of every market, and look at what people around the globe are buying or selling in order to spot inflections of mood. Recognising price patterns using technical analysis tools is critical for this kind of trading. After picking up promising opportunities, decisions are made to exploit them. Long-term investing also benefits greatly from diversification of one’s portfolio. For many cryptocurrencies that are created based purely on markets where there are no hard assets to back them up, and where insiders might manipulate transactions or where traders could ‘rug pull’ a coin after inflating prices, there are few barriers to outright fraud.

Arbitrage Arbitrage

Strategy is a riskless strategy to trade different cryptocurrency markets when there is a misprice between those markets. The idea is, that by purchasing and selling your assets on different markets you are guaranteed profit as long as there is a difference in price. But such advocacy is hard to put into practice when modern markets are so efficient that differences in pricing between apparently identical assets rarely persist for more than a few milliseconds before markets adjust and transaction costs (such as payment for order flow, i.e. the rebates paid by an exchange to a broker for routing trading flow to that exchange, as well as taxes) erode any potential gains. Arbitrage trading is often done on behalf of large financial institutions that have the resources and fast-computing power to spot opportunities, which sometimes dissolve almost as fast as they appear – lucrative though they are; interest rate differentials between different countries, for example, could lead to arbitrage opportunities, but might take time to be realised.

Long-Term Trading

This needn’t be an issue provided that the volatility of cryptocurrency markets is appreciated, and that you approach your first few investments wearing your business head along with the emotional attachment that it’s natural to feel when placing your hard-earned money. Two great ways to reduce the influence of emotional attachment are to diversify with stop-loss orders on the order book, to limit maximum risks and reduce the need for highly emotional responses, and remain focused with psychotrading fundamental principles in mind, along with knowing what exactly you’re buying – not all digital currencies work the same and not all have the same potential for return. Advised for those investors who can keep up, long-term trading is a great way to get involved in cryptocurrency, as you can put your emotions aside for the sake of personal wealth. While at times it can seem slower compared to short-term trading, at the end of the day long-term investing could bring you better profits. But really, proper long-term investment is about having your finger on the pulse of the current crypto world/trends, while also monitoring your weekly charts to see what is going on in the long-term. It’s also key to steer well clear of crypto that seems to be being promoted on social media; these might be just a pump-and-dump cryptocurrency design.