Cryptocurrency Investment Strategies: Long-Term vs. Short-Term

If you want to be a smart investor, fair warning: There will be some math involved. But not in this article – I’m here to warn you about the siren song of numbers. They will send your portfolio to the bottom if you fall for their jingle, the lure of easy money with a few quick calculations. 

Yes, you can make a lot of money using math, even more so when you’re investing in crypto, but all that number crunching won’t amount to a hill of beans without the right strategy. What matters most is how you think about investing, which then leads to your decisions and ultimately your actions. Get those thoughts right before whipping out your abacus; let’s start by considering long-term vs. short-term investing in Bitcoin or any other digital coin. 

What Is Long-Term Investing? 

Some say anything you hold onto for at least a year can be considered a long-term investment. Some say five years; others 10. Again, those numbers don’t matter; how long is a piece of string? The important concept here is time itself, and how it applies to your investment portfolio. 

The Role of Time 

When you invest in Bitcoin or anything else, you’re storing value in that thing, with the intent of retrieving even more value when you cash in at some later date. When do you need that money by? The further into the future you can wait, the more you can take advantage of long-term investment strategies designed to maximize your return. 

Generally speaking, sharp long-term investors focus on lower-risk assets, using time and compound interest to grow their pile instead of shooting for the moon. This would be index funds and GICs and the like, often with money that you’re putting away for retirement; maybe you’ll invest additional funds in a boring company or two with a long history of cranking out widgets. 

Crypto? Not so much. In relative terms, the closest thing we have to a long-term investment would be Bitcoin (BTC). It’s the first and still by far the leading decentralized cryptocurrency on the market; you’ll find BTC on the financial tickers alongside USD and the Dow Jones. 

The thing is, Bitcoin isn’t even 20 years old yet. It remains highly volatile, with the U.S. and other governments still trying to shape their laws around it. What you really need is a sharp short-term approach if you’re going to invest in crypto. 

What Is Short-Term Investing? 

At the other end of the spectrum, we’ve got those investments that you want to cash out more quickly. Perhaps you’re trying to flip multiple real estate properties, or maybe you’re into day trading. As long as you’re not depending on that money for your retirement, you can put it at higher risk in order to claim a higher return. 

Crypto investing definitely falls into this bucket. Some of these coins are more speculative than others; you wouldn’t want to risk your retirement savings on Dogecoin (DOGE) or any of those altcoins. But as we said, there’s a lot of money to be made. Can you hear that song yet? 

Managing Risk 

Even if crypto investing is best thought of as a short-term pursuit, you can use long-term thinking to your advantage by managing your risk, and minimizing the fees you have to pay. Every time you buy or sell an asset, there’s probably some fee attached – and those fees can really add up if you’re constantly flipping. Longer-term investments let you avoid those payouts.  

You might also find you’ll pay less in fees if you invest in Bitcoin ETFs (Exchange-Traded Funds) rather than directly in Bitcoin. That will depend on which investment brokers and which crypto exchanges you’re dealing with; as always, read the fine print, make the right choices, and your time will have been well spent.