However, your path does not end there. You need to keep learning to invest with guarantees and, now that you know all of the above, it's time to go up one more step.
In this article you will know the most used investment strategies. These strategies have three levels of risk: low, medium and high.
Personally, I have tried all three and, if I have to choose, I choose the one with the lowest risk.
Why?
Why…
Using the higher risk strategy, I made numerous losses because I had neither the knowledge nor the years of experience required.
Using the moderate risk strategy, I spent a lot of time to put it into practice correctly and, furthermore, I didn't get the expected results either.
With the lowest risk strategy, I have made a profit without spending any time on it for several months.
So why complicate my life unnecessarily?
Below I will show you, from lowest to highest risk, what these strategies are and I will start with the one that has given me the best results:
1. 'Hodl'
This investment strategy is the easiest and most used within the crypto ecosystem because it is considered the safest and one of the most profitable.
The name 'Hold' can be translated as ' Hold ' and that is basically what you do: buy the cryptocurrencies and simply hold them for a long period of time.
Unlike in trading, where you must be constantly aware of prices to act on them, with the 'Hodl' strategy your only premise is to keep your cryptocurrencies, without selling them and without caring about anything else, neither the rises nor the falls Price.
Why 'Hodl'?
You may have realized - or not - that the word 'Hodl' is misspelled. Its correct form in English is 'Hold' but, in the crypto ecosystem 'Hodl' is used.
This is due to a confusion of writing by a user in a Bitcoin forum - he wrote ' I am HODLING ' instead of 'I am HOLDING' - something that ended up becoming a famous 'meme' within the community.
It has now become an acronym in English for "Hold On for Dear Life", which refers to "Keep cryptocurrencies for your life."
In other words, the Hodl strategy is considered rather an investment philosophy in which its followers - the 'hodlers' - keep cryptocurrencies with the aim of using them in the future as a medium of exchange when fiat currencies (euros) no longer exist. , Dollars…)
How to carry out this strategy?
To correctly carry out this strategy, it is essential that you trust that Bitcoin and the rest of cryptocurrencies are not only a good long-term investment, but are an opportunity that occurs only once in a lifetime.
If you still do not trust it 100%, I recommend that you stop your reading right now and go to our article on why invest in cryptocurrencies where we explain the compelling reasons to get involved in this ecosystem. If this is not your case, please continue.
To keep track of your investment and know when you are winning or losing, you will need to take note of the following:
Currency you have bought
Date of purchase
Purchase price
Invested amount
Commissions paid
This can be done by writing down all your operations in a spreadsheet or in applications for your smartphone such as Delta or for a computer, such as Coin.fyi .
Of course, for it to take effect you must be methodical and leave nothing unnoticed.
Another important thing to mention is to avoid one of the most common mistakes when applying this strategy: exchanging some cryptocurrencies for others.
It can be somewhat tempting, but it is not recommended at all. From experience I can tell you that, in most cases, you will end up regretting it if you do it. If you are really interested in a new cryptocurrency, it is better to invest a little more money in it, but do not exchange it for the ones you already have.
As you can see, the 'Hodl' strategy is an investment method:
Simple
Low risk
Affordable for anyone
That does not need dedication time
That brings tranquility
It is the most recommended method, both for new investors who want to invest in cryptocurrencies and for those who have been around for a while and trust in the potential of Bitcoin and Blockchain.
However, there is another investment strategy that is also compatible with the 'Hodl' method. It is true that it requires a little more study and dedication but if you think that 'Hodl' falls short, you can put it into practice.
2. Rebalancing your portfolio
Let's start with the basics first.
A portfolio -of cryptocurrencies- refers to each and every one of the currencies in which you have invested or plan to invest. It is also often called a “cryptocurrency wallet”.
Rebalancing is "re-balancing", that is, returning the values as they were defined at the beginning.
In this area, portfolio rebalancing is the investment strategy that seeks to maintain the same percentages of cryptocurrencies that you had established.
For you to understand it better I will give you an example:
Let's say you have € 1,000 to invest in cryptocurrencies and you want to dedicate 70% to Bitcoin (€ 700) and the remaining 30% to Ethereum (€ 300). There you are already establishing the percentages that you want to maintain.
However, cryptocurrencies are constantly changing in value. For this reason, at the end of a certain period of time (a day, a week, a month ...), the most normal thing is that the percentages have varied.
Let's continue with the example and say that they have varied to 71% Bitcoin (€ 710) and 29% Ethereum (€ 290).
To put the percentages back as you established them at the beginning (70% Bitcoin and 30% Ethereum) you can:
Change 1% of Bitcoin, and pass it to Ethereum
Buy a little more Ethereum
Sell some Bitcoin
By doing that, you will be rebalancing your cryptocurrency portfolio to keep it in the same proportions. With this method you are looking to buy low and sell high.
How to carry out this strategy?
Although it may sound simple, the above example is extremely simple. In practice it is much more complex since there are many questions to take into account:
The number of cryptocurrencies in your portfolio
Whether to rebalance the entire portfolio or just a part
How often to carry out the rebalancing (daily, monthly, yearly ...)
What percentages to choose
The best way to do it in a simple way is by rebalancing only the 'altcoins', and doing it in an automated way with services like Hodlbot or Shrimpy .
These platforms connect to your exchanges and automatically balance according to the orders you give them, maximizing your profits and minimizing losses.
It is true that this strategy, if carried out in an automated way, reduces the impact that volatility has on the cryptocurrency market.
However, it does not enjoy the same simplicity as the 'Hodl' strategy and, therefore, this technique is not the most recommended for people who are new to this world for the first time .
In fact, if one takes into account that the maximum amount of our portfolio should be in Bitcoin (70-90%) and, therefore, without rebalancing, it is more effective to use 'Hodl' than to rebalance the small remaining percentage that may remain in altcoins.
3. And the Trading?
Trading is also an investment strategy, which consists of buying and selling cryptocurrencies in order to obtain profit from these operations. In other words, the idea is to buy low and sell high, in order to make a profit.
In a market as volatile as cryptocurrencies, prices change suddenly and too often.
This market volatility is as dangerous as it is beneficial for trading , because the sharper and more frequent the market movements, the more chances the trader will have to make a profit.
For this reason, this method can be very tempting to new investors who approach the crypto market in search of quick profits. However, they don't take into account that volatility is an indicator of risk, and just as your chances of success increase, so do your chances of loss.
This technique can bring more benefits in the short term than the 'Hodl' technique, but it is much more complex and risky, and the losses could be very considerable if there is no precision in decision making.
In fact, trading is considered within the crypto community as one of the fastest ways to lose money. And this is because the vast majority of people do not have the experience or the necessary knowledge to carry it out with guarantees.
Mastering trading, especially in the realm of cryptocurrencies, can take several years of study and practice. It requires a lot of responsibility, analysis and studies of the market, continuous monitoring and other elements that can contribute to the success of the trader.
For this reason, we do not recommend it as a cryptocurrency investment strategy unless you already have several years of study and experience in this area.
***
Ready!
You already know the most used strategies in the crypto market, with their pros and cons. Now, depending on the level of risk you want to bear, you can choose between:
'Hodl' -Low risk-
Portfolio rebalancing -Medium risk-
Trading -Very high risk-
However, if you are one of those people who, like us, believe in the disruptive power of Bitcoin, Blockchain and the rest of cryptocurrencies, and trust that they will change the way we interact with each other, you do not need to put into practice risky formulas.
This is why 'Hodl' is almost certainly the best strategy you can choose.
Of course, you need to have something else clear: when to buy and when to sell. Otherwise, it is very likely that you buy when you should sell and vice versa, taking your cryptocurrency portfolio to the red.