7 Best Cryptocurrency Investment Strategies

There are many ways to invest in cryptocurrency, and not all of them are created equal. Not only that, but different investment strategies may be more suitable for you depending on your specific lifestyle.

No matter how much money you have, or your risk tolerance, there is probably an investment strategy out there for you. Keep reading to learn about the various investment strategies for investing in cryptocurrency.

1. Dollar Cost Averaging: Low Risk

Before we begin, it’s important to note that all cryptocurrency investment carries some sort of risk and that there is no way to eliminate it all. That being said, the most risk-averse individuals should begin with dollar-cost averaging.

Dollar cost averaging is a unique investment strategy in which you invest small amounts of money regularly into the same cryptocurrency. While sometimes you may purchase less, and other times more (based on market fluctuations), the thought is that it will eventually balance out, and you will make a profit.

Dollar cost averaging is a long-term investment strategy, though it is generally accessible. Accessible as in you can invest whatever you have available, even if it is just $25 a month.

Because it is so accessible, dollar cost averaging is usually used by beginners in the investment industry. If you are new to cryptocurrency, we recommend dollar cost averaging a very well-known token such as Bitcoin, Ethereum, or Solana.

2. Cryptocurrency Staking: Low to Medium Risk

If you aren’t quite patient enough for dollar cost averaging, the next lower risk option is buying a cryptocurrency that can be staked, such as Ethereum or Solana, and then staking the maximum amount or your entire investment.

Staking is similar to interest earned at a bank—you allow your cryptocurrency to be used by the platform, and in exchange, you receive a small sum. Though cryptocurrency staking rewards aren’t huge, they can net you a nice profit over time, especially if you combine this investment method with dollar cost averaging.

Crypto staking generally carries low risk, but depending on the platform you choose, there is a chance that the platform goes under or ends up being a scam. For this reason, we recommend newcomers stick to only staking Ethereum.

Like dollar cost averaging, staking has a low barrier to entry, as you can typically join a staking pool even if you don’t own a full token.

3. Hodling: Medium Risk

Hodling is the process of purchasing cryptocurrency, then holding onto it for a long period of time until it goes up in value. While there is a risk of loss with hodling, it isn’t nearly as high as the risk of loss with the investment strategies further down this list.

Hodling has a low barrier to entry, as it just requires buying any cryptocurrency and hoping that it will eventually increase in price. Of course, since there is very little to this strategy, there is no way to limit your losses if things do go wrong (such as a platform collapse), which is why it carries medium risk. There is also no way to know when to sell (this is entirely up to the hodler, so keep that in mind).

Generally, hodling only works with the more popular cryptocurrencies, and this method should not be combined with any of the high-risk strategies below. We only recommend Bitcoin investment for hodling.

4. Cryptocurrency ETFs: Medium Risk

The final entry for our medium risk category is cryptocurrency ETFs. Like fiat ETFs, cryptocurrency ETFs combine a number of products into a single grouping, then shares of that grouping are sold as a package deal.

These groupings are usually computer-generated and contain a mix of assets. This can be beneficial to those who are nervous about investing in a single asset, as having a group packaged as one asset can lower the chances of losing everything all at once.

That being said, the benefit and value of cryptocurrency ETFs is closely tied to how the market is doing as a whole, meaning if the cryptocurrency market is doing poorly, the value of your ETF will decline in entirely—making it slightly riskier than an S&P500 ETF for example.

5. Day Trading: High Risk

Day trading is the process of buying and selling various cryptocurrencies on a daily basis, typically in response to perceived market trends. Unlike the other entries on this list, this investment strategy has a huge barrier to entry as it often requires high-level market knowledge, as well as an account on a trading platform like Binance or Coinbase.

Day trading in cryptocurrency is even more risky than day trading fiat, and it is not recommended for everyone. Those who wish to try their hand at day trading should be prepared to take courses and work on increasing their knowledge, while also being prepared to lose everything.

6. ICOs (Initial Coin Offerings): High Risk

ICO stands for initial coin offerings, and they can be compared to IPOs in the fiat realm. IPOs are already extremely risky, as you are often investing in a product that is untested and unproven, and the same goes for ICOs in the cryptocurrency market.

A large number of ICOs fail, and it can be impossible to know which will make it. Therefore, investing in ICOs is extremely risky and should only be approached by experienced investors who are absolutely prepared to lose everything.

7. Futures: Extremely High Risk

Futures trading is extremely risky, whether you utilize this strategy for fiat investments or cryptocurrency. Futures trading is the practice of trading commodities based on the perceived future prices of a particular stock or cryptocurrency. Just as futures trading has gotten many investment firms in trouble, it has also gotten many cryptocurrency investors in trouble.

Futures trading is the riskiest strategy we can think of when investing in cryptocurrency and is often not allowed on most trading platforms. Though some platforms do allow it, there is typically a high barrier to entry, and you’ll need a premium account (and to verify your identity) before you are allowed to do so. So, unless you are confident in your trading abilities, we strongly recommend choosing any strategy other than futures.