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Crypto strategies have gone beyond mere buying and holding the asset. The new-age investor has become more conscious. They have started using a smart mix of strategies to maximize returns, deal with volatility, and hedge against risks.
Strategies to manage one's crypto assets can be both short-term and long-term. The former needs constant monetary support and helps get quick gains, while the latter requires patience. So the one that you should stick to varies from one individual to another, and this article will tell you more about both long and short-term crypto strategies.
Note: Crypto investments involve significant risk. Do not take the views mentioned here as financial advice. Please conduct thorough research before making any investment.
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Long-term crypto strategies
Holding
Traders purchase reputable assets like BTC that they hold for the long term (through market cycles).
An example of a holding strategy is: if someone buys 100 Solana (SOL) at $200 each, that’s a $20,000 investment. They simply keep the coins in their wallet without doing anything else, waiting for the price to rise to benefit from it.
Utilizing the cost average effect
Here, traders invest small amounts consistently in an asset. Such an investment strategy reduces the impact of volatility and avoids bad entry timings.
Diversification of crypto assets
Traders diversify to minimize risks and maximize returns by holding multiple assets.
Market players who want adequate exposure but do not wish to incur severe losses often choose diversification as a crypto strategy. They cautiously choose a mix of projects (large ones, medium ones, as well as small ones), along with stablecoins.
Staking in yield-earning protocols
Market players stake their assets with yield-earning protocols to provide liquidity. Since the yield-earning platform gets liquidity to facilitate trade in the larger DeFi ecosystem, it provides rewards to the liquidity provider. Such crypto strategies work well for those who wish to earn a continuous stream of passive income from the market.
Here's an example of earning via yield-earning protocols: a person stakes 100 SOL in a project that pays 6% yearly returns, so they will earn six SOL after one year. However, the 100 SOL they staked will also be protected.
Long-term trade strategies are less stressful and do not require constant market monitoring. However, they do deprive the traders of gaining from event-based opportunities. Hence, people who opt for only long-term trading strategies have a negative opportunity cost associated with their choice.
Short-term crypto strategies
Day trading
As the name suggests, market players open or close positions rapidly, at times multiple times in a day. Such crypto strategies only work for those who are vigilant and keep up with updates every minute.
An example of this type of trading is as follows: A person sees that ETH drops from $103,000 to $102,400 in the first hour and expects a rebound. They buy at $102,400 and sell at $103,600 in the last hour, making a profit within a day.
Swing trading
Here, the asset is held for many days to weeks. The market player in this case wants to benefit from the market highs in the medium term.
An example of this type of trading is as follows: Ethereum is trading at $3,000. A swing trader believes it will rise to $3,500 over the next two weeks due to bullish momentum. They buy at $3,000 and sell at $3,450 after 10 days.
Ultra-short-term trading
In the case of ultra-short-term crypto strategies, the trader carries out multiple, at times even thousands, of trades in a day. The aim of ultra-short-term trading is to benefit from micro price changes.
Event-based trading
A crypto asset that has a favorable event upcoming is more likely to see a price rise. So the trader buys right before an airdrop, exchange listing, or right before a favorable announcement to sell for profit.
Short-term crypto strategies are risky, but they work well for all types of market conditions and offer solid liquidity opportunities.
Choosing a long-term vs short-term crypto strategy or maintaining the right balance between the two can make or break your crypto career. Now, whether one should choose long-term strategies over short-term ones will depend on a host of factors like the individual goals, tolerance for risks, and their understanding of crypto investments.
