8 Best Crypto Investing Strategies for Beginners (2024)

Despite its potential for high returns, the crypto world can be daunting, especially for beginners.

In this guide, I will share eight practical and beginner-friendly crypto-investing strategies to navigate these turbulent waters.

But first,

Let's dive in!

What is Cryptocurrency Investing?

Cryptocurrency investing is the act of allocating funds into digital currencies, such as Bitcoin and Ethereum, with the aim of generating financial returns as their market value fluctuates.

But to fully understand crypto investing, we first need to understand what a cryptocurrency is.

Cryptocurrency, at its core, is a digital currency - a new form of money that exists solely in the digital realm.

It's a medium of exchange, similar to the familiar dollars or euros, but with a twist: it operates independently of any central authority or government.

This independence is not just a feature; it's the very essence of cryptocurrency.

Picture a universal ledger, recording every transaction and the value of each digital coin or token. This ledger is safeguarded by cryptography, ensuring every transaction is secure and immutable.

Unlike traditional currencies, where central banks hold sway, cryptocurrencies offer you greater freedoms.

You can send them across the globe with minimal fees, a stark contrast to the hefty charges imposed by conventional financial institutions.

But here's where it gets intriguing: cryptocurrencies are like the wild horses of the financial world - untamed and unpredictable.

Their values can soar to dizzying heights or plummet to worrying lows, making investing in them an exhilarating yet risky endeavor.

With over 26,000 cryptocurrencies traded publicly, each offering unique features and potentials, the cryptocurrency market presents massive opportunities for the astute investor.

Let's dive deeper!

Best Cryptocurrency Investing Strategies

Ready to venture into the crypto world?

Here are eight strategies that can serve as your compass, guiding you through the dynamic seas of crypto investing.

1. Buy-and-Hold Investing

Picture this - you buy a crypto asset and tuck it away, like a treasure chest in the depths of the ocean, waiting for its value to grow over time. Think of Bitcoin's ascent from mere dollars to staggering heights.

Talking of Bitcoin, did you know that Bitcoin was worth $0.003 in January 2010?

While you may not have been able to catch the wave that early, Bitcoin’s price has increased 1049.28% between January 2019 ($3,843) and January 2024 (44,167).

This strategy is about patience, watching your investment grow over the years. The strategy is commonly known as HODL (hold on for dear life) in the crypto space.

Whether you buy a whole coin or just a fraction, this approach is about playing the long game, watching and waiting as the market ebbs and flows.

2. Day Trading

Now, imagine yourself as a sailor, navigating the choppy waters of the crypto market daily.

Day trading is fast-paced; you're buying and selling within the same day, capitalizing on short-term market movements.

It requires a vigilant eye on market trends, a solid understanding of analytical tools, and staying in tune with the latest crypto news.

It’s a hands-on-deck approach, needing both time and dedication to master the art of market timing.

As such, you have to master technical analysis and fundamental analysis, which could be challenging for beginners.

Moving on to the next strategy,

3. Arbitrage

Think of arbitrage as being a trader who buys spices in one port where they're cheap and sells them at another where they're expensive.

In the crypto world, this means buying a cryptocurrency on one exchange where it's cheaper and selling it on another where it’s priced higher.

This strategy requires quick action and a keen eye for spotting price differences across exchanges.

4. Staking

Imagine your cryptocurrency as a working asset, like lending your ship to a trading company.

By holding and locking your assets in a wallet, you support the operations of a blockchain network.

In return for this support, you earn rewards, similar to earning interest.

It’s a less active, but potentially rewarding strategy, especially if you believe in the long-term potential of your chosen cryptocurrency.

5. Lending

In the world of crypto lending, you're the banker.

You lend your crypto assets to others through a platform and earn interest in return.

It’s crucial to tread carefully, selecting reputable platforms to avoid the risks of fraud and security breaches.

Think of it as vetting sailors before you lend them your ship for their voyages.

6. Dollar Cost Averaging (DCA)

This strategy is like planting seeds at regular intervals, regardless of the season.

You invest a fixed amount into cryptocurrency at set periods, which smoothens out the impact of market volatility.

It's a way of building your investment steadily, without the stress of timing the market to perfection.

7. Mining

This is for the tech enthusiasts, akin to setting up a mining operation during a gold rush.

It involves setting up specialized hardware to solve complex problems, earning new cryptocurrency as a reward.

It’s a more hands-on approach, requiring both technical know-how and significant investment in equipment.

8. Taking Advantage of Airdrops

Airdrops are when free tokens are distributed to create awareness of a new cryptocurrency. These free tokens can be used for investment, trading, or converting into cash.

It’s like finding a small treasure that could potentially grow in value.

Overall, each of these strategies carries its own set of waves and winds. As a beginner, you should navigate carefully, understanding the intricacies of each approach and aligning them with your investment goals.

Things to Consider in Crypto Investing

Investing in cryptocurrencies can be akin to navigating a labyrinth in the dark – exciting but filled with unseen twists and turns.

To help light your way, let's consider some crucial aspects:

i. Understand the Risks and Rewards

Cryptocurrency is a unique beast in the investment world.

Unlike traditional currencies, it operates outside the standard monetary systems, meaning your journey here is one of high risk but also high reward.

It's essential to understand this fundamental difference before diving in.

ii. Do Your Homework

Before buying cryptocurrency, embark on thorough research. Look up online reports, reviews, and background checks on the company behind the cryptocurrency.

It's crucial to understand the company's foundation – its team members, location, registration details, and financial backing.

This due diligence helps you avoid schemes like Ponzi scams.

iii. Be Skeptical of Guarantees and Licenses

Having a regulatory license or trade body membership is not a foolproof sign of investment security.

Always approach such credentials with a critical eye and conduct additional research to verify their legitimacy.

iv. Beware of Irreversible Transactions

Unlike traditional banking, where transactions can sometimes be recalled, crypto transactions are usually irreversible.

If you accidentally send your crypto to a scammer, it's likely gone for good.

v. Avoid High-Pressure Marketing Tactics

Be wary of unrealistic marketing, like aggressive selling, promises of large returns, or deadlines to buy.

Your investment decisions should be self-driven, not influenced by external pressures or celebrity endorsem*nts.

vi. Invest What You Can Afford to Lose

A cardinal rule in crypto investing is to only invest what you can afford to lose.

The world of cryptocurrency is volatile and unpredictable; ensuring you're not overextending is key to maintaining your financial health.

vii. Keep Your Crypto Holdings Private

Sharing your crypto investments on social media can attract scammers.

Social engineering is a common tactic used to defraud investors, often with promises of high returns.

viii. If It Sounds Too Good to Be True, It Probably Is

This old adage holds particularly true in crypto investing. Always approach overly optimistic promises with skepticism.

ix. Be Cautious of Leverage Trading

Leverage trading in crypto can amplify gains, but it also magnifies losses. A small drop in asset value can result in significant losses, especially with high leverage levels.

This kind of trading requires a deep understanding of market movements and risks.

In a nutshell, as you step into the world of cryptocurrency investing, these considerations are your guiding stars.

They will help you navigate the complexities and potential pitfalls, ensuring a more informed and secure investment journey.

Pros of Cryptocurrency Investing

Navigating the crypto seas offers various advantages, making it a voyage worth considering for many investors.

Let's dive into the bright spots of cryptocurrency investing:

1. Independence

Imagine a world where financial transactions are free from the heavy hand of central authorities.

Cryptocurrencies operate independently, without intermediaries, allowing you to bypass traditional banking systems.

This freedom is particularly significant for countries where institutional corruption is rampant, offering a means of financial transactions that circumvent compromised systems.

2. Accessibility

Cryptocurrencies bring the world to your fingertips, offering 24/7 accessibility.

Unlike traditional markets with set trading hours, the crypto market never sleeps.

This round-the-clock availability means you can trade, invest, or simply check your portfolio whenever you want, offering unparalleled accessibility to your financial assets.

3. Lower Fees and Faster Times

Picture this: sending money across the globe in minutes, not days, and at a fraction of the cost of traditional banking.

Cryptocurrencies make this possible.

The absence of intermediaries like banks typically results in lower transaction fees, making it an economically smart choice for global transactions.

4. Transparency

Every transaction in the crypto world is recorded on a blockchain ledger, visible to anyone.

This transparency ensures that all dealings are out in the open, reducing the chances of fraudulent activities and increasing trust in the system.

5. High Return Potential

The story of cryptocurrencies is filled with tales of astronomical returns.

For example, Bitcoin has seen its value skyrocket to heights of around $65,000, showcasing the high return potential of these digital assets.

However, it's crucial to remember that this high reward comes with high risk, as these markets are known for their volatility.

6. Mainstream Support

Initially viewed with skepticism, cryptocurrencies are now gaining mainstream acceptance.

More and more businesses are starting to accept crypto as a form of payment, and institutional investors are increasingly incorporating digital currencies into their portfolios.

For instance, the US Securities and Exchange Commission (SEC) approved 11 different spot Bitcoin ETFs in January 2024.

This growing support adds credibility and stability to the crypto market.

Cons of Crypto Investing

Cryptocurrency investing can be best defined as “high risk, high rewards” investment. While it brims with opportunities, it's not without its undercurrents and whirlpools.

Let's explore some cons associated with crypto investing:

1. Volatility

If you're seeking a tranquil sea with steady returns, cryptocurrency might resemble more of a storm.

The prices of popular digital currencies, like Bitcoin, have shown dramatic fluctuations. For instance, in 2021, Bitcoin's value swung between $30,000 and $60,000 in just a few months.

This volatility is part and parcel of the crypto world, where long-term predictions are as uncertain as the direction of the wind.

2. Unregulated Markets

The charm of cryptocurrencies - their decentralization - is also a double-edged sword.

With no central authority regulating these digital currencies, the crypto market is like the Wild West.

It's a haven for those seeking freedom from traditional financial constraints but also a playground for illicit activities.

Unlike traditional investments insured by entities like the FDIC in the U.S., cryptocurrencies have no such safety net.

Once your digital coins vanish, they're like sunken treasure—irrecoverable.

3. Hacking and Cybercrime

Navigating the crypto waters means being vigilant against pirates—hackers and cybercriminals.

From phishing attacks to the theft of private keys, the risks are as real as they are daunting.

And with billions at stake in the crypto trade, a significant hacking event could send shockwaves across the global economy.

4. Human Errors

Even the most seasoned sailors can err, and in the crypto world, such errors can be costly.

Losing access to a cold wallet or mistyping a private key can mean saying goodbye to your digital assets.

The story of a man losing access to a $300 million Bitcoin fortune due to a forgotten password is a cautionary tale of how human error can turn fortunes into fables.

5. Forks

In the crypto realm, forks aren't for dining; they're significant changes in blockchain protocol, leading to the birth of new currencies.

For example, a disagreement in the Bitcoin community led to the creation of Bitcoin Cash.

Forks can substantially impact the value of cryptocurrencies and are a risk inherent to this investment class.

As news of an impending fork spreads, investors might rush to alter their strategies, causing significant price fluctuations.

In a nutshell, the world of crypto investing is filled with high risks and potential high rewards.

It's a landscape where fortunes can be made or lost in the blink of an eye, requiring a combination of knowledge, caution, and sometimes, a bit of luck.

Cryptocurrency Investing Plan

Now that you understand all you need to start your cryptocurrency investing journey, let's chart the course with a well-thought-out plan, ensuring a smooth sail through the crypto seas.

Here is your ideal plan:

i. Education

Knowledge is your anchor in the volatile waters of cryptocurrency.

Begin by understanding the basics: what cryptocurrencies are, how they work, and the market dynamics. This may require you to take a course (like mine), or you can rely on free online sources like YouTube.

Remember, the more you know, the better equipped you are to make informed decisions.

ii. Set Up an Exchange Account

Think of an exchange account as your digital harbor, where you dock your crypto investments. This account will be your hub for buying, storing, and selling cryptocurrencies.

Remember, the rates on these exchanges depend on the activities of buyers and sellers, not the exchanges themselves.

If trading is more your style, consider a crypto brokerage account for quicker transactions.

iii. Decide on Cryptocurrencies to Invest In

Navigating through the myriad of cryptocurrencies can be daunting.

Start by researching the top currencies and understanding their market share.

For example, Bitcoin's rise from $500 to $30,000 in five years showcases the potential of well-chosen digital currencies.

Your choice should align with your risk tolerance and investment goals.

At this point, you may consider subscribing to my weekly newsletter for up-to-date crypto investing insights.

iv. Determine Your Investing and Trading Strategy

Your strategy is your compass.

Will you be day trading, catching the short-term waves of the market? Or are you more of a long-term investor, riding out the storms for potential greater gains?

Other options include lending your coins for interest or staking in proof-of-stake networks.

Choose the strategy that aligns with your time commitment, expertise, and risk appetite.

v. Initiate Transactions Using Your Strategy

With your strategy set, it's time to hoist the sails.

Begin purchasing cryptocurrencies as per your plan.

Stick to well-known exchanges and currencies initially, and always be on the lookout for scams and unstable arrangements.

vi. Store and Secure Your Cryptocurrencies

After purchasing cryptocurrencies, safeguarding your digital treasure is paramount. You have several options for securely storing your crypto.

Here are the most common crypto wallets in the market:

Hot Wallets: These are online wallets, convenient for quick access but vulnerable to security breaches.

Cold Wallets: Offline physical devices like USB drives, offering enhanced security.

Paper Wallets: Literally a piece of paper with your keys printed on it, offering an offline storage option.

Exchange Wallets: Wallets on the exchange platforms themselves. Useful for trading but less secure for long-term storage.

Remember, the security of your crypto assets largely depends on how you store them. The phrase “not your keys, not your coins” is a vital mantra in the world of crypto storage.

With this plan in place, you're ready to set sail in the vast ocean of cryptocurrency investing.

Remember, the crypto seas are ever-changing, so continual learning and adaptation are key to navigating these waters successfully.

Conclusion

As we anchor at the end of our journey through the exhilarating world of cryptocurrency investing, remember, this odyssey is about blending knowledge with strategy.

Whether you're drawn to the patient art of Buy-and-Hold or the rapid currents of Day Trading, the key is education and a solid plan.

Embrace the volatility as a seasoned sailor embraces the sea - with respect and preparedness.

Set sail with confidence, and may your crypto journey be as rewarding as it is exciting!

Crypto Investing FAQs

Is cryptocurrency a good investment?

Cryptocurrency can be a good investment if approached with a well-informed strategy, understanding its high volatility and potential for significant returns.

Is crypto a good way to invest?

Crypto offers a unique, potentially lucrative investment avenue but requires a careful approach due to its inherent risks and market fluctuations.

How do I start investing in crypto?

Begin investing in crypto by educating yourself about the market, setting up an exchange account, choosing a suitable strategy, and deciding on which cryptocurrencies to invest in.

Which cryptocurrency is best to invest?

The best cryptocurrency to invest in depends on individual risk tolerance, investment goals, and thorough research of the currency's market performance and potential.