Long-term investing when it relates to the stock market usually means years. When we discuss it in terms of the cryptocurrency market we think in terms of a couple of months to a year due to how fast everything moves. Volatility causes things to move up and down so quickly that strategy cannot be implemented in a timeframe longer than that.
This guide will discuss implementing a long-term look at cryptocurrency investing for your cryptocurrency portfolio.
Long-Term Investing
Let’s start with the basics. If you want to invest in the stock market or cryptocurrency you need to be prepared for the drawdowns. How many times have you told yourself, “Don’t worry it will come back up in 2 days.” The human factor comes from outliving your money by a couple of years.
The biggest challenge with long-term investing when it comes to cryptocurrency is the volatile nature of the market. A day doesn’t go by when Bitcoin and other cryptocurrencies move up and down and anyone holding anything other than Bitcoin has to worry about adapting to the new levels.
At this time you should have a strong opinion and belief whether Bitcoin, the entire cryptocurrency market, or an individual cryptocurrency, will still be around in five years. If it doesn’t look promising to you then all bets are off and you should consider other investments.
Smart Investing
There are many theories on investing. Smart investors follow their gut. Their gut usually means they have done their research and have spent plenty of time looking into a particular investment.
Spend the time doing research into your investment. Buy and hold investors will be rewarded as the market becomes more mature, but it requires patience.
Buy Low
If the market is running low on drama and appears to be stable then it’s likely about ready to start another climb. This means investing at this time can be a very smart move. Buy your investment and hold it.
When the market is all-time high then it’s time to go buy yourself something nice. Do not invest if the price of your investment is still going up and is at an all-time high.
Limit your Risk
If you invest on the top of a mountain then there’s no way to limit your losses, as they are as high as the mountain. Our interest in cryptocurrency to this point is that it is still like the early days of the gold rush when nearly anyone had a chance of striking it rich.
If you are new to cryptocurrency investments and want to get into them, it is my advice that you never invest more than you can afford to lose. The best way to do this is to put a small amount into the market every so often.
Don’t Invest More than You Can Afford to Lose
The attraction of buying and selling Bitcoin is that the potential gains are huge. But forget about that and remember about dollar-cost averaging, instead. If you set aside $100 per month, you will be buying $100 worth of Bitcoins each month, regardless of the price.
Try to find coins that are undervalued on a per coin basis, and also be patient and wait for favorable market conditions before substantial positions are initiated.
It’s Not Too Late To Invest
There’s no doubt about it in the last 12 months the market has been in a parabolic move. The good thing about parabolic moves is that they usually move very fast and don’t last forever.
So far no one has been able to explain to me what is going on in the cryptocurrency market other than we are seeing a bubble that will likely end up as a spit in the next couple of years.
Make sure to take advantage of the increase in the markets. As long as something isn’t going vertical it’s likely a good time to buy.
Buy and Hold
Buying and holding is generally a good strategy for cryptocurrency. At this time, however, if you are wrong in your choice you will be holding for a long time. Luckily we have already entered a phase in which the trends are slower and there is less volatility.
The market is now bracing for Bitcoin to hit some type of government regulation, taxation, or further acceptance, so the days of 100% moves per day are about over.
Get into the habit of looking at the market a couple of times a week, at least, at the beginning of your cryptocurrency journey.
Sometimes it is better to just sit on your investment and wait for it to come back to you than to sell at a loss.
The first ultimate goal with investing in cryptocurrency is to break even, and the second is to make money. Once you have achieved those goals spend the remainder of your time looking for the next opportunity.
HODL
The term is an important one when it comes to investing in cryptocurrency, and “HODL” refers to holding onto a cryptocurrency and not selling it in the middle of a crash or downturn. Many people have sold their cryptocurrency at a loss, unable to handle and comprehend the bear market we have been experiencing.
“If you ain’t HODLing, you ain’t winning.”
The above quote sums up everything about the importance of HODLing, and it simply means holding on no matter how bad the market looks.
It takes nerves of steel to pull off HODLing every time. It’s not easy to watch Bitcoin fall and feel like you’re going to lose half of your money.
When you HODL you will be rewarded, every time. The problem with the current trend is that it’s been so quick and long that anyone who sold has already lost their shirt.
Cryptocurrency Change of Heart
This is a classic chart that shows the value of Bitcoin going back to the beginning. The early adopters had chances to get into the action and make a lot of money a few times over.
Eventually, these opportunities will run out, and the value of a Bitcoin will be in the single digits. At this time cryptocurrencies will make changes in their structure, so there will be little room for huge moves like this.
The same chart can be applied to most of the cryptocurrencies on the market today. Don’t feel like you have to invest in Bitcoin if you don’t want to, the same opportunities are out there.
This article is not financial advice and people should do their own due diligence before investing in anything.
Long Term Strategy Vs Short Term Strategy
The market is divided into long-term investors and short-term investors. For the long-term strategy, it makes sense to invest in a cryptocurrency that will be around for the long haul.
Ideally, this means a cryptocurrency that has enough support to work its way through regulation, taxation, and all of the other hurdles that will eventually pop up.
The short-term strategy involves investing in a cryptocurrency that shows promise, with a quick sell strategy, before giving it a test run. It is harder to get the timing right for the short-term Strategy than the long-term strategy.
Asset Allocation
It gets easier as investors become more experienced to differentiate the high-risk investments from the low-risk ones. Generally speaking, the majority of your investments should be in stable investments with no real chance of dropping huge percentages in a short amount of time.
As you increase your level of experience you can get more creative in your approach to risk. This is referred to as asset allocation. As you realize how these different assets respond to changes in market conditions, you can use this knowledge to your advantage.
By creating an allocation of assets that you prefer you will also have a better understanding of how the market works.
Always have a Plan
Have a plan for every scenario. Case in point, Thanksgiving dinner. How much are you going to spend and how much will it cost? Think about your future and try to prepare for it to the best of your ability.
You don’t want to be one of the people who spends everything they have now because they don’t have a plan for the future. The same goes for your investments.
The market has been going up so far and it is hard to know that it will keep going, but it’s smart to take advantage of the opportunity while you can.
You’re going to be healthier in the short-term if you are more frugal, but risk never goes away. Invest or spend all of your money now, because one day you will have less.
Don’t try to time the market. Wait for the volatility to slowly die down and you’ll be able to make the best decisions to invest.
Emotions
Emotions are the enemy of making smart decisions, and people are by nature emotional creatures who can make bad decisions. Research and analysis can combat this.
A recent survey by CoinDesk shows a lot of people are still thinking cryptocurrency is only for highly technical people without any real knowledge on anything. They also stated that the only people who should invest in it are people who can be blind to risk.
The study showed that about 67% of people who actually know about cryptocurrency feel it is risky and they are more scared of it than the stock market. In fact, it’s been shown that most people are more scared of investing in cryptocurrencies than they are of investing in the stock market.
This is also known as the fear of missing out or FOMO. When one cryptocurrency is doing well, .com is still a big deal and everyone just wants in.
Emotions are going to run high when you are buying and selling cryptocurrency. The only way to overcome them is to be diligent in making smart decisions. This involves research, analysis, and planning.
With crypto coins, there is so much to learn and many people jump into it without really understanding it all. Also, they don’t understand the elements of risk.
Cryptocurrency Crash Course
Many people have been affected by the cryptocurrency crash. It’s hard to remember how much money you have lost and it’s hard to believe that it’s possible to lose the amount you did.
As the market goes up, no one is worried about the risk of a cryptocurrency crash. When the market goes down, there is a knee-jerk reaction.
Everyone is excited to get involved because they assume it will go up to the moon, or maybe they see the signs in the market that it’s time to cash out before it all comes crashing down. Of course, we all know that the market has been doing the latter lately.
Some people might not have the emotional stamina to endure a cryptocurrency crash, so it’s good to look at some potential crashes and compare them to the current situation we’re in now.
It might not be as bad as you think it will be, and it’s important not to give in to the fear of missing out.
