Choosing a cryptocurrency investment strategy could be the key to increasing your crypto earnings. Any investment comes with risk, but you can often minimize your potential losses by sticking with an effective strategy and closely monitoring the Canadian Bitcoin price. Here are eight common cryptocurrency strategies that you can adopt today.
Use a Crypto Price Tracker That Displays Multiple Currencies
Investing in crypto requires you to monitor the current price of your investments. Some crypto price trackers only display prices in USD, which could lead to some confusion if you are investing in CAD.
The Canadian Bitcoin price is the value of Bitcoin in CAD (Canadian dollars) instead of USD (US dollars). For example, if one BTC equals $20,230 USD, it is worth about $27,700 CAD.
Look for a crypto price tracker that includes CAD prices. Many of the leading tracking sites allow you to switch currency. Along with comparing the price of Bitcoin to CAD, you can compare it to other cryptocurrencies as well.
Diversify Your Cryptocurrency Investments
Instead of putting everything into Bitcoin, diversify your crypto assets by investing in several cryptocurrencies. Consider spreading your investments across some of the top cryptocurrencies.
The prices of many cryptocurrencies correlate heavily with Bitcoin (BTC) and Ether (ETH). However, maintaining a diverse crypto portfolio can slightly decrease the volatility of individual cryptocurrencies. The best crypto platforms in Canada will offer a variety of popular cryptocurrencies to diversify your portfolio.
Use Dollar-Cost Averaging to Invest Regularly
As with any investment, you should only invest what you can reasonably afford to lose. Your investments are not protected against financial losses.
One way to avoid investing too much is to invest a set amount at regular intervals. This is called dollar-cost averaging (DCA).
For example, you may decide that you can afford to invest $100 per month in your cryptocurrency assets. No matter the state of the crypto market, you continue investing $100 each month. Across the long-term, dollar-cost averaging often results in a better value compared to investing a lump sum of your money.
Set Clear Entry and Exit Points for Each Trade
Instead of dollar cost averaging, many investors try to wait for the ideal time to complete a crypto trade. The goal is to buy when the value of a cryptocurrency is down and sell when the price rises, resulting in a profit.
When trying to profit from crypto trades, it is important to set clear entry and exit points. Decide at what point you want to buy and sell before you start the trade to avoid making decisions based on emotion or the latest news cycle.
Consider Using a Mixture of Crypto Storage Options
You can store your cryptocurrency online or offline. Online digital wallets are referred to as hot wallets. A hot wallet is convenient as you can access your crypto instantly on your chosen platform.
Offline storage includes physical devices called cold wallets. A cold wallet is the most secure way to store crypto but may require you to transfer crypto to a hot wallet before selling. You need to pay a small fee for each transfer.
A common strategy is to store short-term investments in a hot wallet and most of your long-term holdings in a cold wallet.
Look for Staking Opportunities to Earn Free Crypto
Several cryptocurrencies have recently initiated programs to allow crypto holders to earn rewards. You can earn rewards by staking your crypto, which means holding it in a specific crypto asset without selling or transferring the crypto for a set time.
Depending on the cryptocurrency, you may earn an annual return of about 4%, which is significantly higher than the APR for the typical savings account or savings bond. Yet, staking crypto still includes risk, as the value of the cryptocurrency may decrease over time, which lowers the value of your rewards.
Look for a Platform with Low Fees for Crypto Trades
Investing in cryptocurrency involves fees. You need to pay a fee for each transfer or trade. Depending on the platform that you choose, the fees may gradually eat into your potential profits.
Compare trading platforms to avoid overpaying fees for your trades. For safety reasons, you should only compare large Canadian trading platforms that is at minimum FINTRAC registered such as Coinberry. You should also avoid overtrading. Overtrading occurs when you complete multiple smaller trades instead of one large trade. If you get charged for each trade, overtrading can drastically reduce your gains.
Take the Time to Research the Cryptocurrency Industry
No matter the strategy that you use, you should take the time to research the cryptocurrency industry. You should know what you are investing in. Learn more about how blockchains work, the origins of Bitcoin, and the differences between the major cryptocurrencies.
Cryptocurrency has rapidly grown in popularity in the past few years, making it an attractive investment opportunity for many. However, investing requires caution. Take the time to consider some of the strategies discussed, such as using dollar-cost averaging to stick to an investment goal.