Short-Term vs. Long-Term Investment in Cryptocurrency: Build Your Investment Strategy
When Bitcoin was launched, it was worth almost nothing. Just in April 2011, the coin price grew to 1 USD. In 2017, after the famous rally, many Bitcoin holders became millionaires. Because they were sticking to long-term investments.
On the other hand, short-time investments also bring profit. The price of an established coin may vary at around 50% per day, and the price of a new coin might fluctuate to around 5,000% per 24 hours. This means huge profits for those who know the cryptocurrency market and have experience in day trading.
What coins are good for long-term investment and what are the best for day trading? Let us check the main features of both types of coins.
Coins for Long-Term Investment
When Bitcoin was launched, it was almost worthless. Now, its cost fluctuates between 35,000 and 60,000 USD. Despite the recent plunge, it is expected that this coin is going to grow further in price. It was and remains perfect for long-term investment due to its history and particular features.
Bitcoin was created as a peer-to-peer payment system. It was supposed to eliminate middlemen between the transaction parties. However, the project was more than just a payment system. It was also decentralized and was based on crypto hashing. The coin supply was also limited. So, an idea emerged that the Bitcoin value shall be stable even if governments continue printing fiat money, causing hyperinflation (as we see, this idea wasn’t correct).
With time, investors noticed something else behind cryptocurrency: a blockchain. Blockchain technology represents that utility aspect in the cryptocurrency world that makes it valuable indeed. It can serve as a foundation for new systems that are already being built. Blockchain technology is used to enable instant settlement in capital markets, supply chain modifications and improvements, easier peer-to-peer lending, and similar.
From this point of view, some cryptocurrencies are highly valuable in regard to long-term investments. A perfect cryptocurrency that qualifies for the utility aspect has the following features:
It is accepted widely not only among crypto traders but among crypto developers. The acceptance by crypto developers means that the coin is going to move on, new features will be added, and the project is going to comply with the requirements of the modern market.
It is not just a peer-to-peer payment network. The more versatility a cryptocurrency offers, the better it is. It means that it will find applications in one or another field in the real world.
A large team of developers is working on the crypto project constantly to improve and refine it.
For now, just a few coins comply with all three requirements. Those are Bitcoin, Ethereum, Cardano, Polkadot, Chainlink. Such coins have value and are good for long-time investment because, with the growing adoption level, their prices are going to grow. If you check, each of the mentioned coins has something besides the fact that it is just a coin: it either supports a network where companies can create smart contracts and/or dApps, or allows DeFi development, or has potential for other functionalities that will be applied in the future.
Coins for Short-Term Investment
Any coin which price fluctuates is good for short-time investment or even day trading. Yes, even if you take Bitcoin, its price changes constantly, and the variations are huge. So, Bitcoin is also good for trading. The only problem with Bitcoin is that the entry level might be too high because the coin costs a lot.
When speaking about short-time investment, we cannot leave Dogecoin without attention. The reason is simple: everybody has been talking about Dogecoin after Elon Musk announced that this is his favorite coin. Does Dogecoin have actual value though?
No, there is no underlying value in Dogecoin. It doesn`t run Smart Contracts, you cannot build dApps there, or similar. There is nothing surprising in it: the coin was created as a joke. This is one of plenty of cryptocurrencies which status is very fragile and is based just on personal preferences. By the way, Tesla holds 1.5 bln worth of Bitcoin and… nothing of Dogecoin.
Such coins as Dogecoin are good for day trading though. One day, you might earn 500%, and another day, you may lose the same value. To day trade, you need to know the market exceptionally well or to be a really lucky fellow.
When it comes to long-term investment, Dogecoin has already brought some surprises to its developers and investors. However, as a coin with no underlying value, it can hardly be popular for a long time. In the very end, those coins will grow in price that support projects that can be applied in the real world.
Choose the coins to invest in very carefully. They are different, and their chances are different, too. Depending on the coin utility, it might be growing in price or might be fluctuating unpredictably. Depending on it, you can invest either for the long term or trade the coin to get profit.
Whatever you decide to try, don't forget that any investment in cryptocurrency is connected with risk. You might earn but you might lose, too. Never invest funds that you aren`t ready to lose, never lend money for investing or trading, and never spend funds without which the level of your family life is going to drop.
Please keep in mind that the above information is based exclusively on our observations and is provided for informational purposes only. It doesn`t constitute any kind of financial advice nor represents an official forecast. Cryptocurrency is a highly volatile asset, and you are investing in it at your own risk.