Long-Term Crypto Investment Strategies That Work

William Sons

2 years ago

Long-Term Crypto Investment Strategies That Work

Investing is a long-term game. The general idea of long-term investing is to put money on the market and earn or sell interest when the price rises. As a result, investors can increase their savings or plan their retirement in any financial market: stocks, forex, cryptocurrencies and/or precious metals. However, long-term successful investments are not an easy task, especially in the cryptocurrency market.

Long-term cryptocurrency investing means investing in cryptocurrencies after a one-year horizon or holding. Long-term investing is very different from short-term speculation and investors need to understand what they are doing. Long-term investments require them to hold onto the money for at least a year. Therefore, being a long-term investor means accepting higher risk (which increases over time) in order to obtain higher returns.

In relation to cryptocurrencies, long-term investments carry inherent risks. This is because the market is still unknown to many people. However, the cryptocurrency market is becoming more famous day by day and institutions are keeping an eye on it. Therefore, it is a great investment opportunity for long-term investors looking to diversify their portfolios.

Furthermore, any investment decision without a systematic approach can become obsolete. For this reason, investors should focus on developing an investment strategy that includes both an adequate risk assessment and an exit strategy.

In the next section, we will provide a comprehensive guide to long-term crypto investment strategies.

What is a long-term investment?

In general, long-term investing is a form of trading strategy that aims to make a profit by holding assets for more than three years. A conventional long-term investment occurs when Company X owns a significant investment in Company Y without a majority vote. The purchase price is considered a balance sheet item, while short-term investment reserves are related to the company’s economic result. The sale of long-term investments would normally be classified among other items of comprehensive income unrelated to immediate profit/loss. Now let’s go through a practical example that best illustrates the idea of long-term investing.

Let’s start with two brothers, Bill and Joe. They saved $100 a month for their long-term investment plan and after 20 years each had $24,000 with the same 8% annual return. Bill started investing at age 36, while Joe waited until he was 46. At age 56, Bill’s total is $131,613 and Joe’s balance is $59,295.

In the example, the return on the same investment simply doubles because Bill started ten years before Joe. This illustrates how a long-term investment option is cheaper than a short-term investment (because of accrued interest).

In the cryptocurrency market, holding an investment for the long term is known as a “HODL”. It’s a misspelled version of the word “hold,” and became a cryptocurrency market meme after it was posted on the Bitcointalk forum in December 2013. (Some cryptocurrency investors wistfully interpret it as “hold animal life.”) Today, “HODL usually refers to a buy-and-hold investment strategy associated with the cryptocurrency market.

Why invest in long-term volatile markets?

Long-term investments are a reliable way to maximize returns on stable assets. Many people who are new to technical analysis and market behavior mainly rely on long-term investments. A general advantage of long-term investing is that it does not require daily or weekly market monitoring or making trading decisions based on intraday market analysis.

Investing in asset trading is not a long-term strategy. However, investors may choose it with the intention of selling it after a few years. In this case, it is treated as a non-current asset in the financial statements and the benefit is presented at fair value. On the other hand, the profit/loss of a short-term investment directly affects the profit/loss of institutions. Thus, it is effective for institutions that wish to increase the value of their assets and receive benefits as another broad income statement result. However, a long-term investment requires a significant investment amount, which is often difficult for many individuals or institutions to manage.

In short-term investing, traders make money from short-term price movements, which can be more profitable than simply owning the asset. Consequently, long-term investments are often risky, as it is not possible to change investment decisions after implementation. However, taking into account commissions, capital gains tax and professional fees, a long-term investment is cheaper and requires less effort.

In general, long-term investing is a great way to diversify your portfolio into emerging markets like Bitcoin or other cryptocurrencies, while maintaining short-term investments in traditional markets.

Types of cryptocurrencies for long-term investments

There are two ways to invest in the cryptocurrency market:

HODL extension
Active trade

With HODL, investors typically buy Bitcoin or other cryptocurrencies and hold them for a longer period of time, ignoring short-term fluctuations. In this case, it is not easy to find just one particular cryptocurrency or stock for a long-term investment. However, the cryptocurrencies that survived the 2018 crypto crash are important due to market stability and investor adoption.

Let’s take a look at five cryptocurrencies that survived the cryptocurrency crash of 2018:

bitcoins
Ethereum
bitcoins
Monero
XRP

Furthermore, dividend-bearing cryptocurrencies are also effective for long-term investments. Holding assets can provide investors with both dividends and price increases. Here is a list of such digital assets:

VeChain (FAT)
NEO (NEO)
Closed (DCR)
Convenient (KMD)
PIVX (PIVX)
Red Coin (RDD)
Navcoins (NAV)
Neblium (NEBL)

However, keep in mind that investing in the cryptocurrency market requires a systematic approach. A good investment strategy is mandatory for making any investment decision.

Investment strategy

Whatever we want to achieve, it’s important to have a plan. Long-term investment strategies consist of a comprehensive investment plan that considers investment objectives, risk assessment, time horizon, tax impact, and an income and exit plan. Investors need to have a well-researched trading strategy that is effective in the market and has a long history of returns. However, investing in the cryptocurrency market is different from the traditional forex or stock market. Therefore, it requires unique and effective investment strategies.

One such powerful investment strategy is “HODL” because investors only need to hold the asset. Another is Dollar Cost Averaging (DCA), a cryptocurrency investment strategy in which investors periodically distribute capital, a “big secret” for small investors who can’t build up the necessary investment all at once. Another strategy is asset redeployment, where investment decisions are made after analysis of macroeconomic factors.

The new path to long-term investing success hinges on execution and risk management. To maximize returns, investors need to incorporate time horizon and risk assessment into their strategy. They must have a clear idea of how long they want to hold their investment and how much risk they can afford.

The cost of long-term investments in cryptocurrencies

Long-term investing is cheaper than trading, but investors should worry about high fees before entering the market. Below are some of the long-term costs of investing in cryptocurrencies:

Financial Advisory Fee: A financial advisory fee is an amount that investors typically pay to investment, financial and monetary professionals. Many cryptocurrency advisory firms provide cryptocurrency investment guidelines or ratings, such as Vanguard’s long-term investment level, which often help identify a potential investment opportunity.
Spend ratio: Spend ratio refers to the amount of resources used for administrative and other business expenses. Investors should find potential crypto assets with a lower expense ratio.
Interest through loans and credit card payments: If your long-term investment in the cryptocurrency market includes money from loans and credit cards, interest will apply. If the yield is less than the interest expense, investors should avoid buying that asset.