If you’re considering investing in cryptocurrencies, experts offer tips to make the process easier. Holding crypto helps investors beat inflation and create a clear path toward financial freedom. As crypto heads towards widespread adoption, the coin’s value will increase, invariably growing the investment.
Investing in crypto for the long term lets investors control their portfolios directly. They have more access to their investments, which keeps trading fees low. Investors only need to HODL, and they’ll save money in fees and potentially make more in profits.
Building Long-Term Crypto Portfolios
There are a few things to keep in mind before starting this journey. They include:
Market Sentiment and News
The first and most crucial consideration is market sentiment. According to research by smart betting guide, market sentiment influences the price of tokens. This is true for smaller cap coins.
Some projects get positive media attention due to excellent marketing, which helps keep their price afloat. A great example is Tron, which has a larger marketing budget.
For other coins, investors must follow the news and updates related to the project. It will make it easier to track market sentiment for the token.
Utility of The Crypto
Another crucial thing to consider is the utility that crypto offers. Not all cryptocurrencies have great use cases. However, all require a use case to remain relevant in the industry.
Investors check the coin’s utility by researching what it offers aside from being a store of value. For example, Ethereum allows developers to build DApps on its blockchain, while Filecoin acts as a storage network.
On the other hand, Solana helps users create NFT apps for minting and trading digital art. BNB is also a utility token used for payments and more.
Market Cap
After considering the use case, the next factor should be the coin’s market capitalization. It is a way to gauge a cryptocurrency’s value and popularity. When a coin has a large market share, it implies dominance.
For instance, BTC has over 40% of the market share. Automatically, this makes it an excellent long-term investment. Traders use it as an indicator for other cryptocurrencies as well. So, investors can look out for coins with over a billion in market cap.
Those with smaller market caps are much easier to manipulate. However, this may not always be the case. The potential to grow is always there. At least, there have been some tokens with such potentials, like Shiba Inu.
Transactions and Trade Volume
Determining the trade volume is essential for investors. It helps them see if the cryptocurrency is used daily. If it has daily trade volume, there’s a chance that it has value and will continue to appreciate. While monitoring the transactions, investors must distinguish between spam and real transactions.
Using Ethereum as an example, the coin averages 800,000 transactions daily. Since the network processes ERC-20 tokens, it has a sizeable daily trade volume. It is proof that the network is active and has value.
Ongoing development
Another critical consideration is the development of the crypto project. If there is no ongoing development, there is a chance that the crypto will lose value in the long term. This includes updates like hard forks, soft forks, and network upgrades.
Solana is a great example of how this works. The platform aims to improve its network upgrades for better stability. In the same vein, Ethereum updated its network to Ethereum 2.0.
For Solana and Ethereum, this positive development means a higher chance of widespread adoption. Hence, they are great long-term investments.
Risk Tolerance
After considering the technical aspects, some less trivial factors should come to mind. Firstly, what is your risk tolerance? Investors must understand that a high-risk tolerance is essential for long-term investments. This is mainly because of the volatility of the cryptocurrency market.
The value of tokens often fluctuates, and there is no guarantee that it will not crash completely. Therefore, investors must consider what may happen if they lose their long-term investment.
Where to Buy Crypto
The method of purchase also matters when choosing long-term crypto investments. As simple as it seems, buying crypto is not as easy as walking into a bank and depositing money. While investors can use crypto exchanges or peer-to-peer platforms, the funds have little protection.
Regulation is also scarce in these instances, so investors must assess and evaluate different platforms to choose a secure one. They must do their due diligence to find a suitable option for their needs.
For instance, there are cold and regular wallets. Cold wallets are offline wallets and often the best for long-term HODLing. Other third-party wallets work fine but are impervious to theft. Exchanges are also susceptible to hacking. So the investor needs to weigh the pros and cons of each method before choosing the most suitable one.
Tips for Long-Term Crypto Investment
Before investing for the long term, here are some general tips to guide investors.
Diversify The Portfolio
As mentioned earlier, crypto is volatile, and investors can lose all their money. Diversifying by investing in a few tokens with great potential is wise. It could include solid coins with a track record and new coins with high potential. This way, the investor will have others to fall back on even if one loses all its value.
Always Have a Strategy
Investors must have a strategy that works for their long-term plans. This means researching to find the right strategy for the trade. A proper strategy mitigates losses and increases potential profits.
Risk Management is Essential
A risk management strategy such as a limit on investment is essential. It ensures that the investor prevents unavoidable losses when they can. Options like stop loss can manage the risk in volatile market conditions. Also, experts always say, “never invest all your money unless it is spare funds.” Only use what you can lose.
Long Term Should be the Goal
The crypto market is volatile, and prices will always fall and rise. So, investors do not need to panic when prices fall dramatically. Rather, it helps to HODL for as long as possible to reap great profits.
