Four possible strategies when investing in crypto
Dernière mise à jour : 25 sept. 2021
Each investor is unique and has his/her tolerance to risk. There are as many strategies as investors but there are roughly four different strategies when investing in crypto:
1. Go for the Big Ones
Invest in established currencies. Although the crypto market is still very volatile and that no such investment can be described as 'safe' or bullet-proof, some cryptos are more 'established' than others.
Basically, the top 5 crypto currencies in market cap can be considered safer bets for investors:
- Bitcoin (BTC) (₿) - Decentralized digital currency invented in 2008. The first and leading crypto currency. Drives most movments on the crypto market.
- Ethereum (ETH) - Decentralized, open-source blockchain with smart contract functionality. Ether is the crypto currency of the Ethereum platform. Transactions going through the platform are paid in ETH.
- Cardano (ADA) - public blockchain platform launched in 2017. It is open source and decentralized, with consensus achieved using proof of stake. It can facilitate peer-to-peer transactions with its internal cryptocurrency Ada
- Polkadot (DOT) is a heterogeneous multi-chain interchange and translation architecture launched in 2017 which enables customised side-chains to connect with public blockchains.
- Binance (BNB) - Binance is one of the largest crypto exchanges. It launched its own coin, the BNB in JUne 2017.
See top 5 crypto by market cap: https://coinmarketcap.com/
The high volatility of the crypto market means that investment on any coin (even the leading ones described above) can be considered very risky. But let's not forget that high risk also brings potential high reward. One does not go without the other...
On the crypto market it is not rare to experience price variations of + or - 20% in a single day, even hours. These variations are almost unheard of on larger markets like the stock market, commodities markets or the Forex market.
The easiest and most straightfoward approaches may be to invest on Bitcoins and hold it through its upwards and downwards "tantrums".
Although it is never advisable to mortgage your house, take debts and invest on BTC. Investors should only invest on crypto the amounts that they would be willing to lose. This is key.
At the date of writing this article, the crypto market still follows closely in BTC's footsteps. Hence, holding a share of BTC (for example 0.1 BTC) is akin to investing on a crypto market index like S&P500 (i.e. free-float weighted measurement stock market index of 500 of the largest companies listed on stock exchanges in the US).
Invest in mid-tier 'Alt Coins' (crypto currencies with market caps usually between $1.5bn and $20bn).
These Alt coins are no longer considered as hidden gems and their price has increased a lot but part of their growth probably still lies ahead.
These mid-tier Alt coins like Algorand, Zilliqa, Enjin, Cosmos, Kusama, Iota, Aave, Theta, Tron, VeChain,etc. can potentially explode and make you rich in the coming weeks/months/years... or go up in flames in a split second...who knows (?).
See ranking of crypto coins by market cap: https://coinmarketcap.com/
3. Venture Capital
Invest in brand new projects. But adopting this strategy you invest in brand new project that can be very profitable if you find the next 1000x or more crypto.
However, most projects never make it and you will need hard-work and luck to select the future gems.
Some investors will review all the fortcoming ICOs and do their due diligence on their own.
4. Poo Coins and Day Trading
What we call 'poo coin strategy' consists of buying new coins or purely hype coin and day trade them for maximum profit.
This is the full 'pump and dump' approach.
Due to the crypto market being still unregulated, it is especially subject to market manipulations. Some investors find new 'promising' coins at a low price and resell them once their price start increasing. They are not interest in mid-term or long term strategies. This is not investment but pure short-term speculation.
While this strategy is possible in a bull market, it may not be as profitable in a bear market where money will tend to go primarily to more valuable projects.
Crypto investors may go for one of the above strategies or mix them to match their risk appetance.
For example an investor with $10,000$ may want to invest $2,000 on a launchpad token (for example in BscPad or TrustSwap), invest $2,000 on BTC or ETH. Invest $2,000 on mid-tier alt coins and invest the reamining $4,000 in new projects, either released through the launchpad(s) of their choice or directly on the exchange after the initial ICO/IDO has been completed. Their goal may then be to create an ecosystem that could generate some short term profits to reinvest in new projects and at the same time take some profits to be reinvested in BTC/ETH/BNB or in stablecoins... or in fiat currency (taken out of the crypto world).
Beware: This blog expresses our personal views, the results of our research and experience. Bear in mind that we are not a financial, legal or tax advisors. Please refer to the relevant professionals before investing. Always act responsibly before investing or making financial decisions.
We do not endorse any products or services described on this article. This article is purely for educational and entertainment purpose.