Short term gains are exciting, especially in the fast-evolving crypto spaces but the simpler and more habitual your investing, the more likely you are to stick to it and let the market work its magic.
Luckily, modern tech advances have brought several easy automation tools to the table so you can leverage the long-term power of the market to your advantage.
Why Should I Invest In Crypto For The Long Term?
While some may love the high-stakes volatility of shorter-term investments, especially in the already volatile crypto spaces, there are a few reasons you may want to consider a long-term investment strategy:
- Long-term investment allows you to benefit from the cumulative nature of your crypto investment, including the power of dollar cost averaging (DCA) bots, which we go into more detail on below.
- The crypto space is very vulnerable to short-term fluctuations and volatility. When you take a long-term perspective, you ward off impulsive, emotional decisions based on short-term movements. Instead, you stay focused on your strategy and goals- the best way to generate more consistent returns over time. It also lets you ride out adverse economic cycles, or ‘crypto winters’, and acts as risk mitigation.
- Additionally, frequent buying and selling of investments can lead to higher transaction costs, adversely impacting the returns generated by small wallets.
While long-term crypto investment offers numerous benefits, it’s essential to remember that it still requires patience, discipline, and a well-thought-out strategy that matches your risk tolerance.
Common Long-Term Crypto Investment Strategies (And How To Automate Them)
With long-term crypto investment strategies the easier you can make the investment habit, the better.
While all longer-term strategies boil down to some form of ‘buy and hold,’ amusingly known as ‘hold on for dear life’ or HOD in crypto communities, there’s a wealth of refinements.
As modern tech has made automated trading platforms, trading bots, and other tools easier to use and more accessible, there are some great ways to ensure investing in crypto is as easy as clockwork.
Most revolve around using automated trade platforms (‘bots’), where you can set entry and exit rules as simple or complex as you desire. These automatically engage in transactions that match those rules for you.
1. HOD: Buy And Hold
This is exactly what it says on the tin. Buy trusted coins with a reliable track record and hold them regardless of short-term fluctuations.
It’s unexciting but the results speak for themselves, and the sheer simplicity is its true value.
We’ve all heard of that person who had some coins on a flash drive and years later they were worth a small fortune- that’s basically the opportunity a refined buy and hold strategy seeks to create.
While buy-and-hold doesn’t need much automation, you can leverage algorithmic trades to buy/sell in specific conditions or markets that interest you without needing to do so manually.
It is essential to choose fundamentally strong projects with promising long-term prospects.
2. Using DCA Trading Bots
A refinement of buy and hold, investors contribute a regular sum to their portfolio no matter what the coin price is. This means they can buy more when prices are low and less as they climb.
Over time, this will lower your overall cost of investment rather than taking the ‘hit’ from a one-time purchase’s position.
You can schedule regular buys of a specific cryptocurrency, following the dollar-cost averaging strategy
DCA bots are particularly well suited to cryptocurrency investment. This strategy helps mitigate the impact of short-term price volatility and potentially allows you to accumulate more assets during market dips.
A DCA trading bot allows you to pre-set the parameters of how low/high you’re willing to trade and have the bot automatically handle the allocation of your regular funds where your money will have the most impact. .
DCA bots are favored by long-term investors seeking a disciplined and hands-off strategy to build their positions gradually.
They help remove emotions from the investment process and can lead to a more balanced and (potentially) profitable portfolio over time.
Many more advanced bots allow for sophisticated features like easy matching to signal providers and so on, too, making crypto investment as easy as possible.
3. Crypto Index Investments
Did you know ETF-type index trackers are now available for cryptocurrency?
For investors who are a little jittery about the volatility in some cryptocurrencies, or who simply don’t want to have to open a crypto wallet and monitor another investment platform, this can be a solid alternative.
Especially effective where investment amounts are small, indexes track several trusted coins, allowing for fractional shares in different cryptocurrencies.
Rather than hoping one or two will outperform the market, you benefit from the index’s overall growth in increments. Typically, it’s low-cost, and diversification is built in.
4. Diversification In Crypto
Diversifying your crypto holdings across multiple cryptocurrencies will reduce risk and improve the potential for overall returns.
Different coins will perform better under various market conditions. It’s smart not to put all your cash into only one currency, and instead ‘hedge your bets’ with a portfolio balanced by several options.
Be sure to include both altcoins and stablecoins for added diversification.
‘Staking’ is the closest thing to dividends for crypto there is. By pledging to the network and leaving your coins in their wallet, you earn interest or additional coins.
This allows a passive increase in the holding over time. Staking is only available on cryptocurrencies with proof-of-stake models.
If you’re interested in staking, some crypto exchanges and platforms enable you to stake your coins with just a few clicks.
6. Growth vs. Value Investing
Growth investors choose coins they believe have future growth potential. Value investors look for coins they believe are undervalued, which the market will recognize in time.
Similar to traditional financial markets, this strategy involves researching and investing in undervalued cryptocurrencies with strong fundamentals and growth potential.
For value investing strategies you can employ trading bots that execute trades based on your predefined criteria and indicators.
7. Trend Following Through Copy Trading Bots
Experienced investors have the time, knowledge, and willingness to choose their own assets, time their trades, and more.
This involves analyzing price trends and market sentiment to identify long-term trends. Investors seek to buy when the trend is bullish and sell when it turns bearish.
Most crypto investors, however, lack both the time and experience to make these decisions well.
Copy trading can help. You set your automatic trading tool/bot to make the same decisions (within your budget) as a ‘master trader’ or ‘signal provider’ and benefit from their expertise and knowledge.
This way you can leverage an expert’s knowledge for smart cryptocurrency choices, entry/exit positions and more.
It’s also a social style of trading with tips traded back and forth and online communities to help- and that’s always encouraging.
When you buy a cryptocurrency and are using a crypto trading bot, you can set limit orders to automatically sell it at a predetermined price target, ensuring you don’t miss out on potential gains.
Additionally, you can use stop-loss orders to protect yourself from significant losses by selling a cryptocurrency if its price drops to a specific level.
8. Tradingview Bots
Tradingview is one of the best-known social trading platforms, bringing together historical data across markets and allowing you to access a range of analytical tools as well as trade.
Integrated into the Tradingview platform, a Tradingview bot utilizes technical indicators, price patterns, and custom algorithms to analyze market data in real-time.
Your bot will work with the Tradingview language (PineScript) to enact your chosen trading conditions- from simple indicators like specific entry/exit conditions, risk management parameters, and position sizes right through to immensely sophisticated strategies.
Once deployed, the bot constantly monitors your selected financial markets and executes trades according to the strategy’s signals without human intervention.
The bot will also send alerts when these conditions are met, allowing you to both execute orders and improve your future results.
Tradingview bots are highly customizable, allowing you to tailor your strategies to your preferences and risk tolerance.
Automating your long-term investments makes trading simpler, encouraging you to stay the course of your investment.