Investments are essentially strategy games–they offer anyone the opportunity to make big profits, but only if they play smart. Recently, cryptocurrency has been all over the news, with high prices on the line in the latest developments of the Bitcoin evolution. The Bitcoin price has surged to all-time highs, closing at $29,000 in 2020 and reaching a massive $57,000 in Q1 of 2021 (updated February 24, 2021).
Following BTC’s recent rally are altcoins with huge potential to grow within the next five years. Economists have rolled out their Ethereum price prediction, Cardano price prediction, XRP price prediction, and more, showing optimistic forecasts up to 2025. This wave of success for the cryptocurrency market may have piqued your interest–enough to decide to make investments.
Investing in cryptocurrency is a little different from traditional stocks, bonds, forex, and the like. You’re going to need a specific cryptocurrency trading strategy to brave the volatile market. Here, we share some of the best Bitcoin trading strategies for new and seasoned investors.
Let’s start by dispelling some Bitcoin day trading strategies that absolutely don’t work.
1. Buying in Bulk Without a Hedge
Some people swear by this crypto trading strategy: buying coins in bulk–or, in other words, purchasing large amounts of crypto with a lump sum. Putting in larger investments is indeed going to merit you bigger profits if the market explodes upwards. But it also increases the risk of losing everything overnight.
A good cryptocurrency strategy is to find a middle-ground, such as making big investments, but not big enough to put you in the red. It means that instead of pouring all your money into one extremely volatile coin, consider diversifying your portfolio by hedging or exploring secondary investments.
The Bitcoin price is extremely high, so most people own less than one BTC. That’s no problem at all, so don’t feel pressured to own 100 BTC at once. If you’re looking to own more coins at a lower value, you may want to consider other options, such as Cardano.
The Cardano price prediction over the next few years indicates that it’s ideal only for long-term investments. When day trading cryptocurrency, it’s important to keep up-to-date with expert analyses to help you choose the right coins for your investment preferences.
2. Making One Small Investment
While it’s not advisable to throw your entire net worth into one investment, it’s also not advisable to only make one minuscule purchase. You might think that buying a small amount of BTC as a compromise for the high Bitcoin price will mean that the full value goes into your wallet. But you have to take into account the buying cost. On Coinbase, you will be charged $1 for purchasing $10 of BTC. If you pay via credit card, there’s a 4% transaction charge on top of the $1 flat rate.
One of the Bitcoin trading strategies you can adopt is calculating the buying cost charged by your exchange-of-choice and subtracting that value from the actual number of coins you buy. That will help you adjust how much you really have to spend to get the exact number of BTC you intend to hold.
What is the best strategy for Buying Bitcoin?
The best strategies for Bitcoin trading 101 is what's called constant buying.
Simply put, constant buying is exactly as it sounds–you regularly buy small amounts of cryptocurrency to slowly build up your portfolio. Buying smaller amounts decreases the transaction and processing fees you need to pay and gives you some breathing room to watch the market and make decisions based on long-term movement.
Traditional stock traders utilise this strategy, but it can be adopted as a Bitcoin trading strategy as well. Rather than dropping $1,000 in one go, you can put in a more realistic amount that fits your budget regularly, such as $50 to $200. Likewise, you need to incorporate other cryptocurrency trading strategies to make this staggered purchase behaviour work.
HODL your coins. Rather than being driven by emotion and selling off your investments as soon as the market shows minor signs of a downward trend, think long-term. Most cryptocurrencies, including Bitcoin, Ripple, and Ethereum, are meant to be left alone to grow in value over the years.
Stay on top of trends. The latest news and enthusiast-driven forums are some of your most reliable sources. If an extremely influential institutional investor starts having doubts about Bitcoin, you can expect prices to drop very soon. And if they start investing in BTC, you can expect prices to increase. Apart from watching trends, it’s important to act fast and make quick but informed decisions, so you don’t miss out on opportunities.
Hedge your funds. Don’t rely on a single risky investment–spread your wealth across low-risk options as well. That may mean investing in Bitcoin Futures or more traditional options.
As with all cryptocurrency trading strategies, there isn’t a single foolproof way to get ahead of the market and guarantee gains forever. You’ll still have to calculate transaction fees. You’ll still have to watch the market regularly.
But these Bitcoin trading strategies are much friendlier to small-scale investors, as you aren’t going for extremely high-risk bets while also not being too conservative to a point where results are almost nonexistent.
If you decide to buy cryptocurrency, you can track all major coins using our in-built crypto tracker, which will give you hourly price updates. It will help you catch the Bitcoin price at its lowest!