Crypto Investing Strategies from Professional Investors

Crypto Investing Strategies from Professional Investors

Investing in cryptocurrencies has become a popular investment option for many people who are looking for good and profitable investments. Ever since Bitcoin got the world's attention after its prices skyrocketed in 2017, interest in cryptocurrencies have been rising ever since then. But when new people join this space, they don’t know what to expect and don’t know how to correctly invest their money.

While some of the newcomers can get lucky and make good profits from the random investments, the majority of inexperienced investors usually end up making losses as they fall victim to the volatile crypto market. With the crypto market being so volatile, there is always a big risk of suffering losses, especially if we compare it to stocks or the forex market. But despite this, there are professional investors who have mastered different investment techniques that increase chances of making profits. Let’s take a closer look at these strategies and see how each of them works.

Building strong investment portfolio

The best way to invest in cryptocurrencies is by building a portfolio of cryptocurrencies. When building a portfolio, it is important to carefully consider which cryptocurrencies you are going to invest in and how much will be invested in each of them. This is a good strategy as it brings a certain level of safety to your investment as the price movement of one crypto can offset the price movement of another, making it less likely that you will suffer losses.

When building your crypto portfolio, the best practice is to include 4-7 cryptocurrencies and assign certain roles to each of them. Each portfolio should have 1-2 main cryptocurrencies which will be taking up a big portion of the portfolio. Usually these are cryptocurrencies such as Bitcoin and Ethereum, since these are two of the most trusted and biggest cryptocurrencies on the market. Because of this, they tend to be less volatile and if prices drop, they usually regain them in a short time. Other than this, your portfolio should also consist of mid level cryptocurrencies that are inside top 30 cryptocurrencies by market capitalization. And lastly, you can include 1-2 relatively unknown cryptocurrencies that you believe will succeed. But you should always invest very little into these cryptocurrencies as they have the highest risk, and even if you invest little, profits will still be good. 

Go all in one one coin

Alternatively, there are investors who prefer to invest in one cryptocurrency in particular and don’t deal with multiple at the same time. This is a high risk high reward investment strategy that can generate very good returns, but can also make you suffer big losses. When investing in one cryptocurrency it is crucial to do a very thorough research and analyze the market correctly. This is a good investment strategy when crypto prices in general are down, as in general this is when people start buying and chances of prices going up is high. So for example, when Bitcoin lost the majority of its value at the beginning of 2022, it was a good investment opportunity. 

This is a good short term investment strategy and should not be used as long term investment. Crypto prices are volatile and they tend to go up and down pretty frequently, and there is a good chance that in the long run, your investment will not result in good profits. When investing in one crypto, you should set a target price and once a token hits that price you should cash out. It is true that prices can continue to grow even after this, but it is better to take what you aimed for rather than greed and lose money. 

Invest in ICOs

Another popular investment strategy that many professional investors are using is investing in ICOs. Initial Coin Offerings are similar to IPOs of the stock market, where the project will offer a certain amount of their cryptocurrencies to the public for a certain price. Usually, these projects offer their cryptocurrencies for attractive prices in order to attract investors attention and raise capital for their operations. There have been multiple very successful ICOs that have netted investors pretty good profits. For example, when Ethereum launched their ICO in 2014, they were offering 1 ETH for $0.34. Looking at the current price of Ethereum, people who bought Ethereum during ICO will have a ROI of x5,429, while at all time high, ROI would have been x14,117. 

But when taking this investment approach you should always do a thorough analysis and research into the project you are investing in. There have been many ICOs that failed to deliver on their promises and cryptocurrencies bought during ICO did not gain any significant value and some even lost most of their initial value. There are also projects that are fake and trying to scam people by offering ICOs and then disappearing with the money. On top of researching companies that offer ICOs, you should also do a market research and teremine if the product that company is offering is in demand. There are many projects that sound good, but in reality there is no demand for their product and even if developers try everything to achieve their goal, if there is no demand, failure is guaranteed. 

Invest in newer/small altcoins

Investing in small or new altcoins is another popular investment strategy used by many professional investors. Crypto market is always on the move and changes happen pretty quickly, which means that there are constantly new cryptocurrencies that appear at the top, while some older ones fall. When you plan on investing in these altcoins, you should do market research and also the project these coins are part of. If you believe that there is a future for these tokens, even a small investment can result in very good profits. It is also a good idea to invest in multiple small altcoins at the same time, which will increase profits. For example, if you invest in 5 altcoins and in the future one of them succeeds, two don’t show any significant movements and two fail, you will still walk away with good profits. Since these are small altcoins, they have huge potential for growth, and even with small investments they can generate good profits. While those that fail will not damage your wallet that much, since you have not invested a lot. 

Final Thoughts

Investing in cryptocurrencies is gaining more and more popularity among professional and beginner investors. But since the crypto market suffers from volatility it is important to have a good investment strategy. When it comes to safe investments, building a crypto portfolio or making small investments in small altcoins is the way to go. But if you are more interested in investing in one cryptocurrency, investing in ICOs, or choosing one specific crypto during a down market is the most popular investment. 

It is also important to only invest the amount you can afford to lose. Cryptocurrencies are volatile assets and their prices change pretty frequently, and these changes might come with no prior warning or any good explanation. Because of this, you should not invest the amount of money that might have significant consequences on your financial state and only invest the amount you can afford to lose. 

FAQs on crypto investment strategies

Should I invest in only one cryptocurrency?

Generally it is advised to never invest in just one cryptocurrency and it is best to have a portfolio of cryptocurrencies. When we build a portfolio of cryptocurrencies, if one crypto loses value another one might gain it which will offset the overall value of our portfolio. This is the safe investment strategy that might not show huge profits. If you are interested in investing in just one coin, it is best to do a thorough analysis of the market and invest when the whole crypto market is in downtrend. 

Are ICOs good investment opportunities?

Investing in ICOs can be a good way to make very good profits. Usually, when projects launch Initial Coin Offerings they sell their cryptocurrencies for very low prices in order to attract investors and quickly gain capital. If you invest in one of these ICOs and they succeed it is likely that you will see very big profits. But you should also be careful when investing in ICOs, as projects can easily fail and you might end up suffering losses. There are also scammers who launch ICOs in order to gain capital from investors and then they take that money and disappear.