Long-Term Success with Crypto Investing Strategies

We are continuing our series of educational materials about cryptocurrency and how to handle it. Today, we have long-term investment, otherwise known as position trading, on the table. This type of handling, or HODLing the assets, is preferable if you wish to be free of the fussiness typical for short-term deals when you can’t help but stare at the screen and control. Control and pray that the next candle turns out green at the end. Do you see how the intro is written with tears?

HODL!

Nearly all crypto traders have encountered this acronym. Hold on for Dear Life is an investing strategy in which you hold a cryptocurrency even if the price dynamics don’t promise you immediate profit. Investors who use crypto as their long-term investment instrument believe that crypto will inevitably cost more than it costs now, and they base this belief on the technical and other peculiarities of the cryptocurrency market.

Pros and cons of holding crypto

First, let’s define long-term. Of course, it depends on your personal feelings because some people consider one year long. But what is genuinely long-term and falls under the «HODL» way starts at three years and more. So, there are pros and cons to holding crypto for that long.

We will describe the advantages and disadvantages of holding crypto using the example of the two most popular cryptocurrencies: Bitcoin and Ethereum. However, this does not mean that other cryptos are irrelevant to HODLing.

Bitcoin (BTC)

Pros:

1. Market leader: Bitcoin is the first and, to this day, most prominent cryptocurrency. There is a great chance things will stay this way. Bitcoin has the most market capitalization and worldwide recognition.
2. Store of value: Thanks to Bitcoin’s limit of 21M coins, it is protected against inflation and depreciation in the same way it is with gold. Yes, Bitcoin is finite, and no authority can «print» an extra Bitcoin infusion.
3. Widespread adoption: Nowadays, people, companies, and even governments have vast investments stored in Bitcoin.

Cons:

1. High volatility: Bitcoin’s price can be astonishingly volatile, with tremendous fluctuations within short periods. However, since we are investing long-term, it is not such a significant disadvantage, is it?
2. Regulatory risks: Limitations and potential control imposed by governments might affect Bitcoin’s price and availability for investment.
3. Environmental aspects: Bitcoin uses the Proof-of-Work consensus mechanism, which is rather energy-intensive. The system’s energy consumption has been criticized and might impact the long-term viability of Bitcoin.

Ethereum (ETH)

Pros:

1. Smart contract function: Ethereum is the major platform for smart-contract-based services like dApps, NFTs, and decentralized finance (DeFi) as a whole. This extended area of application guarantees that Ether will remain appreciated and grow along with the decentralized economy.
2. Upgraded consensus mechanism: In 2022, Ethereum completed the transition to the Proof-of-Stake consensus mechanism, which made the platform and cryptocurrency more energy-efficient than Bitcoin and other PoW blockchains.
3. Large developer community: Thanks to the mentioned area of application, Ethereum has an active innovation-driving developer community. Many more tokens than Ether itself are created based on the Ethereum platform.

Cons:

1. Competition: There are other blockchains with similar smart contract functions, such as Solana, Cardano, and Polkadot. This can potentially impact Ethereum's value.
2. Regulatory risks: Like Bitcoin, regulatory organs can limit Ethereum’s use.

Protect your crypto with risk management

The cryptocurrency market is highly volatile and still not fully established. It is natural for cryptocurrencies to undergo significant turmoil, market speculation, and crypto winters. To be protected, consider using some elements of risk management in your strategy. For example, don’t invest in only one cryptocurrency. While investing in Bitcoin and Ethereum, put some money into other cryptocurrencies just in case. Yes, altcoins, in general, tend to fall sharper than Bitcoin. But they also grow in value and capitalization with the crypto market.

Another aspect of risk management is being prepared for market volatility. While the mentioned «Hold on for Dear Life» strategy neglects the coming and going volatility periods, your mind doesn’t neglect them. Rather than purely risk-management advice, consider it a psychological trick: when making an investment decision, imagine what the price of Bitcoin will be in 10 years if the current trend continues. After you have already invested, there might be significant swings and even a crisis. Instead of panicking and selling with a significant loss, remember your long-term goal and don’t give up. We at KvaPay believe that cryptocurrency is the future of finance, and we welcome anyone who wishes to store their digital assets. We have a secure, convenient multi-currency wallet with a convenient deposit and withdrawal system. Come to KvaPay and HODL with us!