Developing Your Cryptocurrency Investment Strategy

Couple noting down ideas in paper note book.

When you buy into crypto for the first time, you don’t necessarily need a detailed investment plan – it’s enough to open a digital wallet, buy a popular currency such as Bitcoin or Ethereum and hope for the best.

As long as you’re not spending more than you can afford, this kind of investment can be fine for a beginner who just wants to see what all the fuss is about.

However, if you really want to maximise your profits and make the most of every investment opportunity, you’ll eventually need to start developing a strategy.

Start with a specific goal

Why are you investing in crypto? Saying that you want to make money isn’t enough – you need a clear goal that will become your guiding principle over the coming years. Perhaps you want to invest so that you can have enough money to retire by a certain age. Think about the exact amount that you will need, and when you hope to have raised it by.

Having a clear target will help you to avoid getting carried away with risky investment opportunity, and stay focussed.

Think carefully about which coins you want to invest in

There are now literally hundreds of cryptocurrencies available, and each one will perform in a slightly different way. New and exciting coins often gain value quickly, but can crash just as rapidly and may never recover. A lot of investors choose to stick with the ‘blue-chip’ currencies – Bitcoin, Ethereum and Litecoin are three of the main ones, but if you look at a list of top 10 coins then they’re all likely to be good investment options.

Over time, you could consider investing a small amount in several different coins. A balanced portfolio is important no matter what asset you choose to invest in, as it helps you to reduce your overall risk.

Establish how long you are going to be investing for

Are you going to keep your investment for several years – perhaps even decades – before you need to withdraw the money? Or will it be a case of saving towards a shorter-term goal? When your investment has many years to mature, you can afford to take a more adventurous approach, buying riskier assets with the hope of seeing a bigger return over time and riding out any losses. For shorter term investments, advisors typically recommend a more conservative approach.

Decide how active you want to be

One of the best strategies for crypto investors is to ‘set it and forget it’ – once you’ve invested, you just leave your new assets alone and wait for them to accrue value. This can help you avoid getting anxious about the natural day-to-day price fluctuations, and gives your investment the time that it needs to grow.

For some investors, though, managing the fund is a big part of the fun. If this sounds like you, then you may want to think about trading as an alternative to passive investment. Trading software such as Crypto GPS gives you access to the cryptocurrency market, and also offers comprehensive analysis so that you can make smart trading decisions. Click here to get started.

Always have an exit strategy

An exit strategy is simple but important: it just means knowing the point at which you’ll trade your assets back into cash. Once you’ve reached the goal that you determined at the start, you should take the opportunity to sell up. It can be tempting to continue investing, but having a clear exit strategy is the best way to meet your investment goals.

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