How to profit from crypto investment in 2024

Cryptocurrencies have emerged as the most traded asset class in today’s world of finance. If you’re new to the cryptocurrency market, you’ll be happy to know it’s still possible to join the bandwagon.

Although trading in cryptocurrencies can be quite risky and challenging, there are various trading strategies to make money with cryptocurrency that you can implement to help you tread the market.

Here are some important cryptocurrency trading strategies you can successfully try out.

1. Long-term HODLing strategy

The term “hodl” was coined in a Bitcoin community forum and has become widely used in place of “hold.” Hodling is a strategy in which investors can buy a crypto asset and hold onto it for an extended period without regard for the short-term price changes in the asset’s value.

For instance, you could buy Dogecoin, expecting that it will increase in price over time, and decide to keep it for the long term.

Advantages:

• Potential for significant gains in the long term: Most cryptocurrencies are rolling out major updates aimed at addressing current challenges inhibiting massive adoption. These crypto assets are mainly looking to improve adoption and liquidity hence setting the stage for potential massive price gains in the future.
• Reduced impact of short-term market volatility: Hodling an asset can be considered a safe bet for investors because of cushioned exposure to short-term price volatility. This also prevents you from buying high or selling low, a phenomenon that can be quite disastrous for your investment.
• Aligns with the belief in the long-term success of a particular cryptocurrency: The majority of cryptocurrency hodlers truly believe in the ability of the asset to conquer and dominate the market in the long run. Should such assets become mass-adopted and replace the fiat currencies, hodlers of that particular crypto benefit greatly.

Disadvantages:

• Requires a high tolerance for market fluctuations: It is one thing to hodl an asset and wait for the price to grow in the future, but it is quite another to patiently ignore short-term price dumps. It indeed requires patience to continue holding onto your crypto even when it’s losing value, but such patience can pay off big time in the long term.
• Missing out on short-term trading opportunities: If you’re a hodler, you’ll have to miss out on the quick profits offered by short-term trading opportunities.
• The strategy could take up to several years to bring profits: In the short term, you might profit from price volatility if you bought the currency at a lower price. However, for hodlers, it takes a lot longer for the assets to surpass their all-time highs (ATH) and lows (ATL), and only then can you truly profit from long-term trading of cryptocurrency.

2. Day trading strategy

The one constant you must have come across is that cryptos are always experiencing price changes every minute. Day trading is a strategy that enables you to take advantage of these short-term price movements through multiple trades within a single day.

In this strategy, you’re constantly entering and exiting trades on the same day. You’ll need to gather a lot of information and deeply understand the market to profit from day trading strategy, as well as use technical analysis tools like chart patterns, volume, and price action.

Advantages:

• Reduces market volatility by spreading investments over time: Since day trading involves making smaller transactions throughout the day, you’ll be able to weather down market volatility by spreading your investment over short time spans.
• Systematic and disciplined approach to investing: Since day trading follows a structured plan, you can make informed investment decisions and adhere to established trading plans thereby minimizing emotional reactions to market fluctuations.

Disadvantages:

• Requires risky, fast decision-making and execution: Since day trading aims to take advantage of short-term price fluctuations, you’ll need to be highly proactive and quick in decision-making. The need for quick reactions and attention to fast-changing market dynamics can be quite stressful and daunting even to the most experienced traders.
• High risk due to market volatility: Cryptocurrencies are highly volatile assets, and even the most established ones are not spared by the uncertainties surrounding the crypto-verse. There’s an equal risk of making a big loss quickly, just as there’s a chance of making a quick buck in the shortest time possible.
• Transaction costs can accumulate: In day trading, you’ll experience a higher frequency of transactions. The cumulative fees attached to these trades can significantly impact your profits.

3. Dollar-Cost Averaging (DCA) strategy

This is a strategic long-term investment approach in which a fixed sum of money is consistently invested at regular intervals, such as weekly or monthly, irrespective of its current market price.

With DCA, you’ll be able to mitigate the effects of market volatility by spreading your investments over time, thereby accumulating assets at an average cost. This method aims to navigate market fluctuations by avoiding the need to time the market. Instead, it focuses on steady and disciplined investment, potentially reducing the impact of short-term price variations on the overall investment performance.

Advantages:

• Reduces market volatility by spreading investments over time: Dollar-cost averaging helps you even out some of the volatility. This is achieved through additional purchases during market lows. Additionally, DCA reduces the cost per unit when you buy a fixed amount of crypto at specified time intervals, and this also means higher capital gains.
• Systematic and disciplined approach to investing: Dollar-cost averaging is an automatic setup, which means you’re spared the stress of decision-making on an everyday basis. This systematic approach allows you to choose how much to invest in your preferred asset irrespective of the price fluctuation.

Disadvantages:

• No profit guarantee or market downturn protection: DCA does not guarantee profits nor act as a shield against market downturns. During periods of market decline, you may still incur losses.
• Commitment to consistent investment over time: If you decide to implement this strategy, you must be ready to commit to adhering to the predetermined schedule of buying fixed amounts at regular intervals. This commitment can be a disadvantage for those who may face financial constraints or changes in circumstances, as deviating from the established plan may impact the effectiveness of DCA.

Time to profit from your crypto investments

As the crypto landscape evolves, investors will have more opportunities to earn from cryptocurrencies going into 2024.

Whether it’s taking advantage of hodling’s long-term gains, day trading to capitalize on short-term volatility, or dollar-cost averaging your crypto asset to take advantage of systematic and disciplined investing, these three are proven strategies to earn you a buck. That said, while implementing these strategies, always look out for other factors that could negatively impact your cryptocurrency investment portfolio.

The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any finance decisions. Appropriate independent advice should be obtained before making any such decision. London Loves Business bears no responsibility for any gains or losses.