The first crypto winter was registered in 2014–2015 and lasted 427 days. At that time, the bitcoin exchange rate decreased by 87%, which negatively affected altcoin quotes. The situation was repeated in 2017–2018, when the growth of the bitcoin exchange rate, which began in the fall, was replaced by a sharp decline — from 20 thousand dollars per coin to 8 thousand, or even less.
For several months now, experts have been speculating about the possible onset of crypto winter. New assumptions appeared almost every week, and the deadlines were constantly pushed back. It looks like it happened after all.
However, the market is cyclical — a period of growth is always followed by a fall and vice versa. Any downturn creates enrichment opportunities, so in this article, we will look at the topic of investing in cryptocurrency.
I will point out that we are not giving financial advice — we’re just collecting information about the main investment strategies, the main market participants, and patterns that may be useful.
Crypto Investment Strategies
There are different approaches to making money on investments in digital assets. We offer you to get acquainted with the three most popular strategies.
Hodl
Hodl is a popular term in the crypto community, which network users employ to denote the purchase of cryptocurrency for its long–term retention. Working under this scheme implies earning on the growth of the asset rate for a long time. For example, investors who purchased 1 bitcoin 6 years ago, as of the time of writing, were able to increase their investments by 17547%.
Scalping
The term scalping usually means income from short-term changes in the exchange rate of an asset. Most often, the influence of news on the digital asset market is used to make money using the scheme.
Here's how it can work:
An investor saw that a couple of minutes ago, Tesla published a report stating that the organization invested a large amount in bitcoin. It can be assumed that the news will positively affect the behavior of the cryptocurrency exchange rate.
To make money on the market reaction, the investor buys bitcoin.
At the moment when the cryptocurrency exchange rate starts to rise, the investor gets the opportunity to sell the asset at a higher price. The difference in the cost of buying and selling will become his profit.
Also, for scalping, you can use technical analysis of the behavior of the asset rate according to the schedule.
Averaging
The essence of the strategy is to purchase an asset for an extended time on a certain day of the week/month (or with other frequency), regardless of the current position of the cryptocurrency.
Market participants who choose this strategy believe that this approach allows them to earn money by averaging risks.
Staking
This term refers to the intentional retention of assets in the account, to organize a source of passive income. In the staking market, you can find offers with high profitability. One of them is available on the ROY Club platform. Within the walls of the site, up to 40% of new coins can be generated monthly on the UMI cryptocurrency staking. At the same time, you can start earning in a few minutes after registering in the system.
All the steps that you need to go through to start earning are accompanied by detailed instructions. If necessary, the user will be able to get advice on working in a dialog box on the site.
How to Increase the Efficiency of Investments in Cryptocurrency
Many investors have their secrets to improving the efficiency of investments in cryptocurrency. Among them, there are several universal tips.
Here are some of them:
- Investments should be diversified. A distributed portfolio of assets reduces the likelihood of losing all investments due to a sudden drop in the exchange rate of one cryptocurrency.
- There is no need to buy digital assets with the last money. The market can be unpredictable. It is worth investing only what you can afford to lose.
- Investments need to be planned. It is worth determining in advance how much you are willing to invest in cryptocurrency.
Also, experienced market participants are advised to keep records and record all their operations in the market, so that, if necessary, they have information at hand to analyze the effectiveness of solutions.
There are different investment strategies for users who want to make money on the movement of the cryptocurrency exchange rate. For those who are not in a hurry, the hodl scheme is suitable. Users who are ready for increased risk for the sake of instant earnings should pay attention to scalping. Those who want to combine the high profitability of different strategies with the security of investments may be interested in staking.
Ways to Analyze Digital Assets
Technical Analysis
Technical analysis is based on historical market data because history develops in a circle and repeats itself. It includes an overview of past pricing trends. Technical analysis aims to identify recurring patterns and make calculated forecasts for the growth or decline of trends. The main assumption here is that prices are not random and they can be foreseen if you look into the past. Although technical analysis performed correctly can be quite useful and effective, it does not always work. In most cases, the success of technical analytics depends on the person conducting the research. That's why some people prefer fundamental analysis of crypto.
Fundamental Analysis
Fundamental analysis aims to cover a somewhat broader picture compared to technical analysis. It takes into account both qualitative and quantitative factors that can affect the value to understand whether an asset is overvalued or undervalued compared to its current market price. Since there are no public financial statements that can be verified on the cryptocurrency market, it is more difficult to do this type of analysis, especially for beginners. It is necessary to take into account the volume of transactions, user activity, the unique functions of the cryptocurrency, and even some global economic events that can significantly affect the cryptocurrency market.
It is better for a beginner to learn how to use both methods. Understanding cryptocurrency fundamentals will help you make smarter decisions, plan your strategy both in the short and long term, and ultimately become a better investor.
Choosing the Best Crypto to Invest In
Polygon (MATIC)
This is a level 2 cryptocurrency for Ethereum decentralized application platforms. Polygon is a promising blockchain ecosystem designed to develop infrastructure and help scale the Ethereum network.
The Matic Network and the Polygon token also offered a second-level solution — transferring transactions directly on the Ethereum network to another coin platform. This allowed the Matic network to reach a speed of 7,200 transactions per second (TPS). For comparison, the throughput of Ethereum does not exceed 15 transactions per second.
In 2021, the network was rebranded — it became known as Polygon. But in addition to the new name, it also has new functions. Now it is a platform for creating interconnected blockchain networks. In other words, with the help of Polygon, everyone can write their blockchain for any purpose. In the future, Polygon will become the basis of web3 networks.
Loopring (LRC)
A promising cryptocurrency of the decentralized exchange of the same name. To make DEX more scalable and reduce the commission, ZK accumulative packages are used.
Loopring gives DEX the ability to choose between storing transactions on-chain or off-chain at any given time. This on-chain data availability (OCDA) combined with ring miners and order rings provides greater scalability of DEX. Loopring offline storage provides 16,400 transactions per second (TPS).
Chainlink (LINK)
It is the digital currency of the decentralized Oracle programming network. The goal of Chainlink is to solve the problem of securely connecting smart contracts to real events. Smart contracts are code fragments that embody a given business logic (for example, when to pay interest on loans).
Ripple (XRP)
This promising cryptocurrency project from San Francisco has become a truly global crypto intermediary (bridge currency) used in cross-border settlements. We are talking about multibillion-dollar transactions mainly between financial institutions, corporations, banks, and payment systems of all countries of the world ("payment corridors").
The second advantage of XRP is the phenomenal speed of financial transactions conducted in the Ripple ecosystem. It is more than 10 thousand operations per second (in particular, in Ripple Net the hash rate is at least 50,000 TPS).
Cardano (ADA)
It is a fully decentralized platform operating on the principle of open source. The distinctive features of Cardano are complete anonymity, the absence of restrictions, and other complicating circumstances such as KYC.
It was created in 2017 and became one of the first ecosystems operating on the PoS (Proof-of-stake — "proof of ownership") network protocol. It is actively used in the architectonics of smart contracts and Dapps. The recommended investment horizon is from one year.
Stellar (XLM)
This is a promising cryptocurrency that is used in various systems — from gaming platforms to online stores. It was created in 2014.
The main feature is the unification of various ecosystems and blockchains. Stellar is a universal medium of exchange with minimal fees for financial transactions. The cooperation of the platform with IBM and MoneyGram International.
Criteria for Selecting Promising Blockchain Projects
In 2009, Bitcoin was the only cryptocurrency on the market. Today, the number of digital tokens has exceeded 1000. In such an assortment, it is easy to get lost even for experienced investors, not to mention beginners.
When choosing the optimal cryptocurrency for long-term investment or earning on exchange rate fluctuations, we were guided by the following criteria:
- The fame of the project and its reputation;
- Capitalization size;
- The number of exchanges on which the selected cryptocurrency is traded;
- The number of coins in circulation;
- The volatility of the exchange rate and the dynamics of quotations;
- Technical data of the network;
- Social activity. Cryptocurrencies that are actively discussed on forums and in chat rooms have more prospects for growth.
Conclusions
It is quite possible to be friends with the risks that the volatility of digital assets carries. By carefully monitoring and analyzing all small price movements, experienced traders have learned to extract income from them by buying and selling coins at the right moment.
Such a flair comes with practice, but at the same time, it is backed up by knowledge — studying trading tools, helps not only not to go into negative territory, but also to make a profit.
Is crypto a good investment? The cryptocurrency market is volatile and unpredictable, and many experts do not recommend it for long-term investment. But bitcoin has been around for more than 10 years — and this is much longer than the same experts predicted. And although we are seeing periodic ups and downs, in the long term, the crypto market is still expected to grow consistently.
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