How to Invest in Cryptocurrency? Selecting a Crypto Investment Strategy
How to invest in cryptocurrency in Australia? When should you invest in crypto? How much should you buy? A crypto investment strategy helps you answer these questions, giving you a plan to enter the crypto market and grow your portfolio. As they say, if you fail to plan; you plan to fail.
Selecting the right crypto investment strategy can grow your portfolio and wealth, while helping you manage your risk (and your emotions). A strong investment strategy is the foundation of many successful crypto investors, so let’s find the right one for you.
The six most-used crypto investment strategies in Australia
Which crypto investment strategy is right for you? The best thing about these investment strategies is that you can choose the one that matches your risk tolerance and time horizon. Whether you’re looking for quick gains or to build a large investment portfolio into retirement, you can select the crypto investment strategy that fits your needs.
1. Dollar-cost averaging (DCA) investment strategy
Known as ‘stacking sats’ amongst bitcoiners, this strategy involves making small and regular investments into crypto, rather than one big purchase. It’s an especially popular technique within volatile markets, as it can help you avoid trading with emotion and follow a solid investment strategy.
Tools to help you stack sats and accumulate crypto by dollar-cost averaging:
Micro-investing is a way to invest small amounts of money and grow your portfolio over time. With as little as AU$20 per week, you can buy bitcoin, Ethereum and other cryptocurrencies. The best thing about micro-investing is that you can automate your purchases, similar to a DCA strategy. Simply set up your micro-investing strategy and watch your wealth grow.
Tools to get you started micro-investing in crypto:
3. Value investing
Made infamous in traditional financial markets by Warren Buffett, value investors analyse the fundamental value of a cryptocurrency and purchase coins that are undervalued. They determine whether a specific cryptocurrency is undervalued by looking at the actual fees or income that a protocol is earning and compare it to the price.
Is value investing possible in crypto? Absolutely, although it’s much easier to evaluate some coins rather than others. For example, you can see the fees that Uniswap (a decentralised exchange on Ethereum) generates and compare them to the price of the UNI token. You can then use traditional metrics like the price-to-earnings ratio (P/E ratio).
Tools to help you spot value in the crypto markets:
- Price-to-earnings (P/E) ratio
- Fundamental analysis in crypto
- Check the current crypto fees being generated
4. Growth investing
While value investing focuses on the current earnings of a crypto asset, growth investing looks to the future. Growth investors focus on projects and industries with strong upside potential and are prepared to invest over the long term. As the crypto economy is still very much in the growth phase, many crypto investors use this approach.
Tools that can help growth investors in crypto:
5. Technical Analysis
Technical traders check the charts and make trading decisions based on chart patterns, support and resistance levels, and moving averages. With these tools, they aim to predict whether a cryptocurrency is more likely to increase in price, decrease, or trade sideways. Moving in and out of positions quickly, they aim to take advantage of the volatility within crypto and earn impressive returns.
Tools to help technical traders identify money-making opportunities:
- How to Use the Moving Average Convergence Divergence (MACD)
- What are Moving Averages?
- Using the Relative Strength Index (RSI)
- Crypto fear and greed index
While technical traders move in and out of the market, ‘HODLers’ stay invested. ‘HODL’ is the crypto investment strategy to buy your coins and hold them for a long time as they increase in value. While it has become an incredibly popular term in crypto, it reflects another popular idea from traditional finance; time in the market prevents timing the market. Notably, it has created many incredible bitcoin success stories.
Tools for crypto HODLers:
How to invest in cryptocurrency in Australia
It’s important to note that you don’t only have to rely on a single crypto investing strategy. You can take any of these strategies and apply them to your unique financial situation. For example, you could select a crypto to invest in using the value investing approach, use the dollar-cost averaging strategy to invest your Australian dollars, and then HODL them for a decade.
Ready to invest? Once you’ve determined your crypto investment strategy, it’s time to choose your crypto exchange. A crypto exchange is much like a stock market, except that instead of buying stocks, you can buy cryptocurrencies like bitcoin, Ethereum, and Avalanche.
Tens of thousands of Australians have chosen to invest with Cointree since we were founded in 2013. We’re an easy-to-use crypto exchange in Australia that’s AUSTRAC registered, highly secure, and with hundreds of cryptocurrencies available to trade on the platform. Sign up now to get started.
Disclaimer: Information provided is for educational purposes and does not constitute financial product advice. You should obtain independent advice from an Australian financial services licensee before making any financial decisions.