Are you interested in diversifying your portfolio with the power of cryptocurrency? Crypto has made billionaires overnight, through high volatility that also yields some incredibly substantial rewards. One of the reasons it’s been able to achieve this is because it’s an extremely different type of investment than anything that has come before it. Strategizing your crypto investments will require knowledge of other types of trading, in addition to deep knowledge of the crypto market itself.
The “Penny Stock” Strategy: Investing in New Cryptocurrencies
There are a thousand of cryptocurrencies in existence, with new cryptocurrencies being created every day. Whenever a new cryptocurrency is introduced, there’s the chance of a breakaway hit. Something can go from having virtually no value whatsoever to having thousands of dollars of value in each coin. Investing in these new cryptocurrencies is essentially a way of betting that at least some of the currencies invested in will be hits of some form.
What are the challenges to this investment strategy? It can be difficult to determine which cryptos will take off and which will stagnate. It can take a while for a cryptocurrency to get off the ground. Further, investors may be tempted to purchase into a coin that becomes successful, only to see it eventually falter: trying to time the rise of new crypto is where many investors fail.
Still, this is a very low risk strategy for potentially high rewards, if an investor has a consistent methodology for when they will take profits and how they will diversify their purchasing. And while it can be hard to find more exotic, new cryptocurrencies, an exchange like i-Pandora can help by consolidating multiple markets and streamlining the process of trading.
The “News” Strategy: Following Cryptocurrency Trends
Cryptocurrency news has a dramatic impact on the market. The smaller and newer a coin is the more of an effect it has. While larger coins like BTC may have their own momentum, smaller coins are mostly valued based on news sentiment. Following crypto trade magazines and tech, information can help an investor determine whether these coins may be rising in popularity.
Just as many forex traders will trade based on news, many crypto traders will, too. Trading based on news requires that an investor frequently research information that’s coming up. As an example, new, restrictive regulations on cryptocurrency trading might have a temporary negative impact on the market. Continued adoption of cryptocurrency, especially by new countries, may boost the market.
The “Tech” Strategy: A New Type of Fundamentals
If a stock trader isn’t trading on news, they are generally trading on fundamentals. They are looking at the health of a company, its balance sheets, and its prospects, and determining whether they believe it will be successful. With cryptocurrency, the fundamentals are a little different: they’re rooted in technology. Is the technology strong? Is it backed by a good company? Is it achieving solid adoption?
Some cursory understanding of technology is necessary for investors who want to trade based on cryptocurrency fundamentals. There are many new currencies that emerge based on specific technological advances, such as greater levels of security and privacy. To know whether these currencies are a good investment requires that the investor know whether this technology is solid.
The “Hold” Strategy: Faith in Crypto as a Currency
Warren Buffett always says to purchase stocks with the idea that you’ll never sell them. With the stock market, this works: as long as you’re well-diversified, the economy is always going to continue growing. With the cryptocurrency market, this strategy works insofar as a trader believes that cryptocurrencies are going to continuously become more valuable.
Today, cryptocurrencies aren’t yet to be used as a widespread form of currency. However, the ultimate end goal for cryptocurrency is that it will become a decentralized, common currency that is used throughout the world. Once this happens, and crypto becomes a true currency, then the value will be consistently going up. Moreover, because it isn’t tethered to a particular country, it will be going up along with the world’s economy.
Hold strategies aren’t a way to “make it rich” overnight. Instead, they’re a method of building net worth over time through an emerging and disruptive technology.
The “Expert” Strategy: Following the Best Traders
With MetaTrader 5 and i-Pandora, investors can mimic the trades made by the best and most active crypto traders — essentially leveraging all of their combined knowledge. Investors can also follow experts for news and trading advice.
The expert strategy is essentially the creation of your own managed money account: instead of having to figure out crypto on your own, you can find an investor whose strategy philosophy matches your own. This is usually ideal for beginners or for those who don’t want to devote large volumes of time towards trading.
Key Takeaways
You may have noticed that while there are many traditional strategies that have analogs in the crypto market, we haven’t mentioned traditional signals and indicators. Trading signals and indicators are based on historical foundations within the trading community, and the crypto market does not have these historical foundations yet. While trading signals can be used through platforms like MetaTrader5, the crypto market needs to become more secure before these are easily readable to all but the most experienced and skilled of analysts.
That doesn’t mean that trading signals aren’t useful. They’re still incredibly important for gathering information about a given trade. However, other strategies — such as news trading and fundamentals — are more valuable when it comes to the crypto market.
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Learn more about the Cryptocurrency Trading Toolset from i-Pandora online at https://www.i-pandora.com/
