When you invest in crypto today, you become part of the 8% of the world’s population who do the same. But that number would double during the impending bull run.
As shown in the chart below, the previous bull run(2021-2022) saw a high influx on Google for the search term ‘Crypto investment’.
And with a bull run coming soon, more beginners will want to explore crypto investments.
This guide breaks down the key things you need to know and the right crypto investment strategies for beginners to help you get started on the right foot.
What it Means to Invest in Crypto
Investing in cryptocurrency is different from traditional markets like stocks or bonds. Here’s what it means to be a crypto investor:
- High volatility: Cryptocurrencies can see price swings of 10% or more in a single day. While this creates opportunities for high returns, it also brings higher risks.
- Decentralization: Unlike stocks, cryptocurrencies are not controlled by a central authority like a government or corporation. This provides more freedom but also exposes you to different risks, such as regulatory changes or security threats.
- Ownership: When you own cryptocurrency, you are your own bank. You are responsible for securing your assets using wallets and security measures.
Investing in crypto requires balancing risk and reward, understanding market trends, and staying informed. The potential for high returns exists, but you should be prepared for the volatility and risks that come with it.
Things to Know Before You Invest in Crypto
- Understand the Basics of Cryptocurrency
Before you begin investing, you should understand what cryptocurrency is. In simple terms, crypto is digital or virtual money that operates on blockchain technology, using cryptography for security. It makes use of the following:
- Blockchain: A decentralized ledger that records all transactions.
- Wallets: Digital tools to store your crypto securely, either through software or hardware wallets.
- Exchanges: Platforms where you buy, sell, or trade cryptocurrencies, such as Binance or Coinbase.
Learning these basics will help you understand how crypto works and the risks involved.
- Have a Clear Investment Goal
This is very key to your investment journey. Ask yourself:
- Why are you investing in crypto? Is it to grow wealth over time, or are you looking for quick gains?
- What’s your risk tolerance? Crypto is highly volatile. Only invest money you’re comfortable with losing.
Your goals will determine your strategy, whether you are in for the long haul or looking for short-term opportunities.
- Start Small and Research Before You Diversify
As a beginner, it’s better to start small and research thoroughly before investing in multiple coins. Don’t jump into diversification without first:
- Studying different coins: Learn about Bitcoin, Ethereum, and smaller altcoins.
- Understanding market trends: Keep an eye on how different coins react to market shifts.
By starting with a small investment, you can learn the market without risking large amounts of capital. Once you’re comfortable, you can gradually diversify your portfolio.
Investment Strategies for Beginners
Once you understand the basics and have set clear goals, it’s time to explore the different strategies you can use as a beginner investor.
#1. Dollar-Cost Averaging (DCA)
Dollar-cost averaging is one of the easiest and most effective strategies for beginners. With DCA, you invest a fixed amount of money at regular intervals, regardless of the price.
Why use DCA?
It reduces the pressure of trying to “time the market.”
It also helps to minimize risk. By spreading your investments over time, you avoid putting all your money in at a market peak.
DCA is a great way to gradually build your crypto holdings without worrying about market volatility.
#2. HODL for the Long Term
HODL (Hold On for Dear Life) is a popular term in the crypto space. It refers to holding your cryptocurrency for the long term, regardless of market fluctuations.
As well known, the crypto market often experiences extreme volatility in the short term.
However, historically, coins like Bitcoin and Ethereum have increased in value over the long term.
And in crypto, patience often pays off. Don’t make the mistake of new investors who may panic and sell when prices drop.
HODLing requires discipline, but it’s a proven strategy for long-term growth.
#3. Arbitrage Trading
Arbitrage trading involves buying cryptocurrency from one exchange where the price is low and selling it on another exchange where the price is higher.
For example: If Bitcoin is priced at $50,000 on Exchange A and $50,500 on Exchange B, you could buy from A and sell on B to pocket the difference.
Arbitrage trading works because price differences can occur due to liquidity, demand, and trading volume across exchanges.
However, you have to monitor your trades carefully and transact fast to avoid losses.
#4. Scalp Trading
Scalp trading focuses on making small, quick profits from minor price fluctuations throughout the day. Scalp traders enter and exit trades within minutes or hours.
To scalp, you need to have speed, discipline, and the ability to read charts and market movements.
Scalping is ideal for those looking for short-term gains and who are willing to monitor the market closely.
#5. Day Trading
Day trading involves buying and selling cryptocurrencies within a single day to profit from price movements.
The goal is to capitalize on short-term price changes without holding positions overnight.
Successful day traders use technical analysis, news monitoring, and trading platforms that offer advanced features like real-time data.
Day trading is risky but can be lucrative if you’re skilled at reading market trends.
#6. Copy Trading
Copy trading allows beginners to replicate the trades of more experienced investors. Platforms like Binance offer copy trading features.
This is how it works:
1. You sign up on a copy trading platform.
2. You choose a successful trader to follow
3. And your account will automatically copy their trades.
This strategy is ideal for beginners who don’t have time to analyze the market but still want to benefit from expert strategies.
However, copy trading doesn’t eliminate risks, so choose traders with a proven track record.
When to Invest in Crypto
Timing your investments is important, but it can be tricky in the crypto space due to high volatility. Here are a few tips on when to invest:
- Buy during dips: Prices in the crypto market fluctuate frequently. Buying during a market correction or dip can offer you a better entry point.
- Avoid buying at all-time highs: Purchasing when the market is peaking can lead to short-term losses if prices drop suddenly.
- Use technical analysis: Tools like moving averages, support and resistance levels, and trading volumes can help predict favorable buying conditions.
Ultimately, there’s no perfect time to invest in crypto. The best approach is to focus on long-term growth rather than trying to time the market perfectly.
Conclusion
Crypto investing doesn’t have to be complex. By understanding the basics and using beginner-friendly strategies, you can start investing confidently. Then, as you gain experience, you can explore more advanced strategies.
