Can cryptocurrency be treated as long-term investment?

With the prevalent volatility in the crypto market, never has it been more important to distinguish between methodologies of buying into this sector. On the one hand, you have traders, on the other you have investors. While many assume the two are interchangeable, there are key differences in each player’s goal. Traders hold assets until they reach short-term success while investing is based on the buy-and-hold principle. Investors invest their money for some years, decades, or even longer.

In the Bitcoin (BTC) market – HODL has become a mantra! HODL, an acronym for ‘hold on for dear life’, is the core philosophy that most BTC maximalists live by. To a hodler, (i.e, an investor) short term-price fluctuations are insignificant, while traders have defined levels of risk. To a trader, the ideal advice would be – if you’re losing money then end the trade at your defined stop-loss range, while for an investor the ideal advice would be to buy every dip and HODL.


Choosing the right cryptos for long-time investment

The last thing you should do when it comes to all things money is to go in blind and unprepared. Do the work, research, read everything you can about the sector, the coins, the projects, the tech. Don’t believe everything you read on social media; we’ve all heard of someone who invested in a cryptocurrency and benefitted a large return on investment.

Don’t do anything with your money that you don’t understand. Take some time to learn the underlying mechanics – not only about the project, but also figure out the kind of investor you are.

This would be key to figuring out the investments that would fit you best.

Crypto market’s volatility has been widely covered in recent times. So understanding your goal with digital asset investments that complement your risk appetite is one of the most important steps you should chalk out before making the leap. Investing in the right digital asset can be tricky. What needs to be taken into account is the project’s reliability. When it comes to digital assets, one needs to look at the collective trust in a coin’s community places in the project. Other features that contribute to a project’s USP include its supply conditions and its Raison d’etre.

Allocation

As Bitcoin and ETH, the native currency of the Ethereum blockchain, together comprise 60% of the cryptocurrency market, these two assets will play an important part of your portfolio. These two cryptos ensure that your portfolio tracks the broad cryptocurrency market.

The rest of the portfolio can be divided into separate investments, which focus on projects you are bullish on. This is where “figuring out the kind of investor you are” comes back into the picture. Your risk appetite will likely define how you allocate your portfolio to altcoins.


HODL strategy

There is no perfect portfolio. A diversified portfolio managed by a nervous investor will likely fail, regardless of how well the assets were chosen.

In 2021, Bitcoin holders were up 47.35%, while ETH hodlers were up over 300%. For the HODL strategy the required asset doesn’t involve chart-reading or market analysis, the skill that’s most important is patience. Quality investments are bound to surge. While most traders look at timing the market, the investor’s best bet is time! The longer the period of hodling, the higher the gains.

There are short-term swings that come and go. Since crypto-assets are volatile, historically the best way to succeed with crypto is to hold onto what you already have.