Despite its incredible growth, a lot of people remain sceptical about the volatility of the cryptocurrency market.
However, if you adopt the right investment strategy for you – taking into account your wealth and attitude to risk – it’s certainly a viable option when it comes to long-term investment.
Let’s consider the evidence:
- Over the last six years Bitcoin’s price has risen over 10,000%
- With most cryptocurrencies there are only a finite amount of coins – 21 million Bitcoin, for example – so, if a coin sees adoption or popularity, the likelihood is they will grow in value over time rather than diminish
- Traditional investors, such as banks, hedge funds and pension funds are all investing in the crypto market
The Nash personal finance app is powered by blockchain and crypto and makes investing in the crypto market easy.
Things to remember before long-term investing
First of all, work out what you can afford to invest. Decide on an amount per month that works for you and don’t overextend yourself.
Second, carry out proper research on the cryptocurrency you are thinking of investing in. You would do due diligence with any other investment, wouldn’t you? So make sure you do it when investing in crypto.
Carefully consider which coins you think have the power to withstand the test of time and potentially change the crypto landscape. Do not be swayed by over-eager Twitter accounts saying that this coin or that coin is “going to the moon” and to “get on board now or miss out!”.
Lastly, never invest large amounts and expect short-term gains. And never invest your life savings in one crypto alone.
More tips for long-term investing
Diversify your portfolio
First, it is important to diversify one's portfolio across a number of different cryptocurrencies. This helps to mitigate the risk of any one currency going down in value.
Second, it is important to be patient. Cryptocurrencies are a long-term investment, and it can take years for them to reach their full potential.
Third, not just doing the research before investing is important, but also during the invested phase. Keeping track of updates on the projects
Selecting long-term crypto projects
When selecting cryptocurrencies for long-term investing, there are different things to look at. Some investors consider cryptocurrencies with a fixed supply most viable for the long-term because the market can never hold more than the total supply in circulation. This creates a certain “scarcity”, which can be beneficial for price development, particularly if it is a popular coin pushing the demand up. That does not mean, however, that crypto projects without limited supply are not valuable. Ethereum, the second largest coin, doesn’t have a limited supply.
Another thing to look at is to what extent token burn is applied. Token burn is a mechanism used to reduce the circulation supply of a coin and acts as a “deflationary” measure. The whole purpose is to increase the value of the remaining coins in the market. The tokens to be burned are sent to a dead wallet with no one having access to the keys. Many crypto projects, such as BNB, apply token burn practices. To investors this can be an interesting characteristic to take into account.
Thirdly, the market cap of a coin and circulating supply are also factors to take into account. These metrics explain something about the current value in the market for that cryptocurrency, similar to stocks and stock markets. Projects with a high market cap are generally considered more stable and less risky and often therefore considered more suitable for long-term investments.
What is the best long-term crypto portfolio?
You got this far, which means you’re serious about making a long-term investment.
That’s good, as we believe there’s good money to be made.
So let’s try and tackle the big question: What exactly should you invest in?
Here’s some of 2022’s more popular options…
- Bitcoin (BTC)
The original cryptocurrency and the largest in the world by market cap, Bitcoin has maintained 100% uptime since it was released in 2008 and has never been hacked.
It may seem volatile if you monitor it day-to-day and week-to-week, but its short history shows it’s been crypto’s best-performing investment asset for the last ten years.
If sophisticated investors, such as banks and hedge funds, are going to invest in crypto, they usually invest in Bitcoin.
Microsoft, PayPal, Etsy and Amazon all directly and indirectly accept Bitcoin.
All of this suggests that not only is Bitcoin the largest cryptocurrency, it’s also the most reliable and should be considered as a buy-and-hold asset in an investment portfolio.
Bitcoin is available on the Nash app.
2. Ethereum (ETH)
Ethereum is both a blockchain platform and a cryptocurrency and is currently the second largest cryptocurrency by market cap.
Some experts are predicting that 2022 will be a big year for Ethereum, thanks to its recently improved scalability, security and sustainability and because of its support for smart contracts and dApps.
Goldman Sachs – a leading global investment banking firm – has taken note and is planning to offer Ethereum options trading, like it does for Bitcoin.
All of this means that Ethereum may soon start to rival Bitcoin as a long-term investment option.
3. Avalanche (AVAX)
Avalanche is a relatively new crypto, launched in September 2020. But it’s seen significant growth since then. Avalanche can run all popular dapps from the Ethereum blockchain, but uses its own consensus mechanism, which is more environmentally friendly than Bitcoin and Ethereum’s proof-of-work. Read more here.
What are the main benefits of long-term cryptocurrency investments?
- Holding crypto can help you beat inflation over time.
- Crypto adoption is rising, and if it continues to do so, then so will the value of the coins.
- Investing in crypto incurs lower fees and gives you better access to your investment than traditional vehicles like stocks.
We believe that a smart, diversified investment in crypto can lead to an impressive growth in personal wealth over time.
DISCLAIMER: This article is for informational purposes only and does not offer professional financial advice. For a full appreciation of investment strategies and risks in your particular situation, please consult a professional.