Should you invest in cryptocurrency for the long or short term? That is an understandable question that has plagued folks all throughout the global crypto community. Long-term investments in cryptos have historically yielded amazing profits, essentially the stuff of legends. While a closer examination of the price activity during that time period reveals that multiple crypto bear markets nearly wiped out the investment capital several times. That is not for everyone.
Both are effective for different types of investors — different strokes for different folks! In this blog, we will explore both of these methods of investing in the crypto market, which should help you realize which strategy is best for you.
WHAT EXACTLY IS LONG-TERM CRYPTO INVESTING?
This is an investment strategy, or rather a school of thought, that suggests investing is a long-term game. The main principle behind long-term investing is to put money into the market to generate interest or to sell when the price of the asset rises above the price you paid for it.
In long-term crypto investment, an investor often purchases a crypto asset with the intention of holding it for at least a year or longer. In the crypto industry, this is known as HODLing, which is a misspelling of ‘Hold on For Dear Life.’ With a longer investment horizon, an investor should know what they are doing and what they are investing in.
Because this includes a longer time horizon, investors in the context of cryptos must be aware of what their crypto assets are intended to perform, how trustworthy the development team is, and how large their vision is. If all three of these conditions are met, the investment will almost certainly provide multi-bagger profits.
However, it should be noted that those multi-bagger gains will not come without setbacks. There may be days, weeks, or even months when the investor must see notional losses on their books before entering a profitable zone.
HOW TO DECIDE IF I SHOULD INVEST IN A CRYPTO FOR THE LONG TERM?
Choosing which cryptocurrency to invest in is a challenging task for every investor keeping in mind the tax on crypto in India. One of the key reasons is because there are so many different cryptos to select from. There are around 20,000 separate cryptos in active circulation as of this year. And picking just a few to invest in from such a large pool is quite challenging.
The methods used would likewise range from one investment to the next. One must try to find their own investment ‘mantra’ to follow and make decisions based on it. However, it would all come down to a few key elements.
Take a look at these few questions to comprehend them, and if you can answer these questions regarding the cryptocurrency you wish to invest in, it is a fantastic place to start.
- What real-world problem is that particular cryptocurrency attempting to solve?
- More importantly, how serious is the situation in the real world? Is it attempting to deliver a slight convenience, or will it revolutionize lives, or maybe a whole industry?
- How trustworthy does the crypto’s development team appear to be?
- What is the whitepaper of the crypto project attempting to achieve?
- Do enough people agree with you on the issue that the particular crypto project is dealing with?
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