Bitcoin investments became popular around the second quarter of 2010 when some companies began accepting Bitcoin payments along with fiat money. It didn’t take much for Bitcoin to break the market since it brought something new to the technological environment ―a decentralized peer-to-peer network through which users would control their assets and choose different investment paths.
Nowadays, Bitcoin is compared to gold, as it provides rapid returns despite its high volatility. Although gold is considered stable generally, it also suffered considerable changes but has only provided limited growth potential. Like gold, Bitcoin has become a staple in the world of cryptocurrencies, so if you want to know where to buy Bitcoin, plenty of exchanges and establishments provide the possibility to acquire Bitcoin easily, fast and safely.
However, if you get into investing, improving specific skills and using professional technology to yield significant results and cover your initial upfront costs is best. Here are some efficient strategies.
Hold on for dear life
Hold on for dear life, or HODL is an investment method coming from a meme but has proven to be the most efficient. It implies that regardless of market volatility, investors must resist the urge to sell their assets and keep their portfolio in the same state as before a bear run, for example.
Although it may seem simple, HODL is quite tricky because it requires confidence and patience, as the average crypto investor would be affected by FOMO (fear of missing out) and sell their Bitcoins to catch the opportunity of making a profit.
However, it’s always best to maintain a stable buying and selling strategy in the long term to avoid massive price changes affecting your portfolio. Therefore, market fluctuations are less noticeable when you’ve held your assets for a long time, and they’ve gained considerable value.
HODL also has disadvantages ―such as the lack of cash flow, unlike stocks or real estate. At the same time, if one of your cryptocurrency projects falls, the entire investment can fail, so you must choose your projects wisely.
Day trading
Day trading involves a more dynamic approach, where rather than holding assets for a long time, you make small movements during the day to yield rapid returns. This means you buy and sell Bitcoin on the same day, making it one of the most rewarding strategies. If you’re able to watch for short-term price movements based on technical analysis and investment patterns, you can take it easier with volatility since Bitcoin value doesn’t move that fast.
Day trading can be done in several ways. You can approach scalping, where you make small profits from slight price changes, which has a low risk and medium reward. There’s also swing trading that leverages pre-determined support and resistance levels, posing high risks and rewards. Finally, news-based training is based on using the news to make the next move, with medium threats and rewards.
Typically, day trading is considered dangerous, especially for beginners, because the risks can sometimes surpass income, and managing such risks requires skills that are acquired in time and with experience and funds.
Dollar-cost averaging
Dollar-cost averaging is a more balanced method where you invest specific amounts of crypto regularly to manage timing risks. It’s considered that the best time for investments is when prices are low, but forecasting these changes is difficult, so the dollar-cost averaging counteracts this by investing a fixed number of Bitcoins frequently, despite the share price. This method can lower your average cost per share after some time doing it, which is significantly more lucrative than buying Bitcoin when it was more expensive.
If you’re not used to long-term investment strategies, dollar-cost averaging is a great way to build discipline in this field. Usually, people don’t create a strategy or follow a guideline, so they fail, but when you stick to a specific program, your chances of safeguarding the portfolio are higher. At the same time, dollar-cost averaging keeps you open to opportunities.
However, you should be careful with dollar-cost averaging depending on your goals. Considering how the market tends to go up in time, investing more crypto in the beginning seems like a better idea than smaller amounts over the years. At the same time, you must still thoroughly research the best projects because this strategy doesn’t protect you from market fluctuation that much.
Buy low, sell high
This strategy is also used in bonds and stocks but has been approached by crypto investors since it has the potential to offer considerable returns. It involves a simple activity of watching the prices change and adapting your movement. Hence, when the Bitcoin market drops, you buy more coins and sell them at higher prices for consistent income. This implies holding the assets for the time being.
To master this strategy, you must time the market by comparing market cycles. Typically, investors use four-year market cycles to identify certain movements, considering the Bitcoin halving that happens every four years. This event lowers the miners’ rewards and affects the market, so you must analyze its development closely. You must also be fast when buying or selling Bitcoin and act confidently because otherwise, you might lose the chance of getting sustainable income.
However, one of the biggest challenges in this strategy is that proper research is never enough, as new projects are continuously delivered, and old ones can fail at any time. This implies you must be connected to the news, communicate with worldwide investors and be up-to-date with the latest technological changes that you might not have time for anything else. So, you either are all-in and make a living out of this or choose another crypto investment method.
Bottom line
Investing in Bitcoin for high returns is every investor’s dream. Still, it’s also one of the most difficult due to market volatility and the industry’s increasing popularity that drives prices upward. Hence, you must approach a few strategies according to your lifestyle, from holding your Bitcoins to buying low and selling high when the market changes to minimize risks.
