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A Guide For Long-Term Crypto Investing [2024]
If you clicked on this article, the odds are that you've had a tough time with crypto day trading, have recently learned about crypto's future potential; and are now more bullish about the industry's long-term prospects. Maybe you are none of these and are just interested in learning more about this approach. Either way, long-term crypto investing has established benefits that will appeal to everyone. These include compounding growth potential, reducing the impact of volatility, reducing transaction costs, and freeing up more time.
However, it is important to note that long-term crypto investing isn't without risks either, and requires a deep understanding of the crypto space, and best practices in order to enjoy all the benefits on offer. The good news is that our guide will provide you with everything that you need in order to maximise your chances of being a good long-term crypto investor.
You’ll read about:
- Choosing the Right Crypto for Your Portfolio
- Long-Term Strategies for Crypto Enthusiasts
- Regulatory Considerations and Risk Management
- ICONOMI's Crypto Strategies — A Managed Portfolio Approach
Let's dive right in!
1) Choosing the Right Crypto for Your Portfolio
The first place to start is having the ability to identify the most optimal cryptocurrencies for long-term investing. The reason why is simple — no matter how good your management skills are, there's only so much you can do if the cryptocurrencies you have chosen have weak fundamentals.
Below is some guidance on what to look for in crypto when investing long-term, and some examples of cryptocurrencies that have performed well long-term.
What to look for in a long-term crypto investment
When assessing whether a cryptocurrency is ideal for long-term investment, it's crucial to consider factors beyond short-term price fluctuations, or social media marketing hype.
1) Strong fundamentals
The first thing you should be looking for is strong fundamentals. What this means is you want to see a crypto project with a solid technological foundation, a clear use case (solving a problem or enhancing something), and an experienced team at the helm. You also want to identify solid and incentivising tokenomics (which can normally be found on a project's whitepaper), and a coherent and realistic roadmap.
2) Unique and compelling technology
The next thing you want to see is strong blockchain tech offerings that should be robust and innovative and demonstrate a "clear" advantage over existing solutions. The use case should be practical and address a real-world problem, with the potential for widespread adoption. Examples of compelling technological offerings could include allowing faster transaction processing times (TPS), facilitating lower fees, or providing interoperability solutions.
3) Numerous/reputable partnerships
Alongside solid fundamentals and a unique technology offering, you also want to see that a cryptocurrency has numerous or "reputable" partnerships. This is important to see as it demonstrates early adoption that has huge growth potential, and also shows that a project's token is actually being used. However, it's important to be aware that some crypto projects that sadly fake their partnerships (or at the very least, inflate them), so you should always double check to see whether these partnerships are real or not.
4) A loyal and active community
Because crypto heavily revolves around the concept of decentralisation, community engagement and a thriving ecosystem are vital indicators of a project's potential. A strong community fosters innovation, provides support, and contributes to the project's overall success. But don't assume. Many communities are made up of low-level community members who are either inactive, obsessed with short-term profit (Wen Lambo), or trying to sell marketing services,
5) A large market cap
Typically, a larger market cap means a cryptocurrency will be more established, and due to large amounts of buying and selling, these types of tokens tend to be less susceptible to extreme volatility and market manipulation (compared to smaller cap coins). So when selecting a cryptocurrency for long-term investment, consider those with significant market caps, as they are usually viewed as "safer" investments due to their widespread acceptance, higher liquidity, and the ability to sustain operations through various market cycles. Two prime examples are Bitcoin and Ethereum.
6) Historical performance
Last but not least, you should 100% examine the historical performance of a cryptocurrency to identify growth potential and market resilience. This includes looking for cryptocurrencies that have not only survived, but thrived through bull and bear phases. A cryptocurrency that meets either criterion demonstrates it has strong fundamentals, effective management, and a robust community. Moreover, it helps gauge the long-term viability of the project, indicating its ability to deliver consistent returns over time, which is crucial for long-term investments.
2) Long-Term Strategies for Crypto Enthusiasts
Once you have identified the cryptocurrencies that you believe have the most long-term investing potential, the next step is to find a long-term strategy that suits your needs.
Below are the 4 most common long-term investing strategies for crypto:
The buy and hold strategy — pros and cons
The 'buy and hold' strategy (often referred to as hodling) involves purchasing cryptocurrencies, and holding onto them for an extended period of time; regardless of market fluctuations. This approach is based on the belief that despite short-term volatility, the value of a high-quality cryptocurrency will increase over the long term.
The primary advantage here is simplicity, as it doesn't require frequent trading or constant monitoring of the market, which minimises transaction fees and the emotional stress associated with trading. However, this strategy also means you have to weather potentially severe fluctuations in value, which can be nerve-wracking and financially damaging if not planned properly.
So it's essential for investors to first research cryptocurrencies with strong fundamentals, and that have genuine long-term growth and utility potential.
Diversifying your portfolio with multiple cryptocurrencies
Perhaps the most useful approach for long-term crypto investors is to invest in multiple high-quality crypto projects, and ones with different value-propositions.
The logic behind this is that rather than putting all your eggs in one basket, holding a variety of tokens from different sectors—such as finance, technology, and utilities— will allow you to mitigate against losses if multiple assets experience downturns. This approach can also increase the chances of huge gains, especially if more than one asset in your portfolio experiences exponential growth.
The downside with diversification (a sole investor) is that managing multiple assets requires more time and knowledge, as different cryptocurrencies respond differently to market stimuli. Diversification can dilute the impact of high performers on your portfolio, potentially reducing overall gains compared to a more focused investment strategy.
Dollar-cost averaging — minimising risks and maximising gains
For those who are looking for a more regimental approach to investing, then dollar-cost averaging (DCA) may be for you.
DCA involves investing a fixed amount into a particular cryptocurrency at regular intervals, regardless of the asset's price at the time. This strategy can be particularly effective in highly volatile markets like crypto, as it reduces the impact of buying at a high price point by averaging out the purchase cost over time. It's a disciplined strategy that can help investors build a position in a cryptocurrency without the pressure of trying to time the market.
However, while DCA will in theory reduce risk by spreading out your investments, it does mean that you could also miss out on lower prices if you invest right before a market dip. It also requires consistency and commitment, which might be challenging for those who need liquidity.
Staking — making yield on your crypto
Staking is a strategy used with cryptocurrencies that use a proof-of-stake (PoS) model. By holding and locking up certain cryptocurrencies, you can participate in network operations, such as transaction validation, and earn rewards in the form of additional coins. This not only helps secure the network but also generates a steady return on your holdings, somewhat akin to earning interest in a traditional bank.
The benefits of staking include earning passive income on assets you’re already planning to hold long-term. However, staking has its drawbacks: it often requires a minimum investment period during which your tokens are locked and cannot be sold. This can be risky if the market drops and you can’t exit your position. Plus, not all cryptocurrencies offer staking options, which limits your choices if you prefer this strategy.
3) Regulatory Considerations and Risk Management
By this stage, you may have identified the ideal cryptocurrency (s) for long-term investing, and also the most optimal long-term investing strategy. But it's important to note that you still need to take regulatory considerations into account, and be able to identify and mitigate risks.
The importance of regulatory considerations
Given how the crypto industry is still relatively nascent compared to other markets, regulatory changes can significantly impact the overall health of your crypto holdings. For this reason, investors must stay informed about global regulatory trends, and understand how they affect their investments. So by monitoring developments in legislation, and staying compliant with local regulations, you can anticipate potential market shifts, and avoid any unnecessary fines.
Identifying and mitigating risks in crypto markets
It's also in your interest to identify and mitigate risks that could adversely affect your portfolio. Key risks include market volatility, liquidity issues and cybersecurity threats.
To manage these risks, you should diversify your investments across various crypto assets to avoid overexposure, use secure and reputable exchanges to minimise the risk of fraud, and maintain recommended cybersecurity measures. Additionally you should also use hardware wallets for storing cryptocurrencies, and in the event that you use online wallets, you should always enable two-factor authentication.
Another thing you should be doing is regularly reviewing and adjusting your portfolio based on performance (and changing market conditions). This is a non-negotiable, as the crypto market is highly volatile and conditions can change rapidly. So by staying informed on the performance of your investments, you can better manage your portfolio and strategy.But what if we told you that there is a hands-off avenue where you can gain the benefits of long-term crypto investing, but with minimal involvement?Enter ICONOMI!
ICONOMI's Crypto Strategies — A Managed Portfolio Approach
For individuals and businesses who are interested in being exposed to the long-term benefits of crypto investing, ICONOMI offers a compelling solution through 200+ crypto strategies.
What are ICONOMI's crypto strategies?
ICONOMI's crypto strategies act as a sophisticated investment vehicle for investors who want exposure to various cryptocurrencies, but lack the time and expertise to do so efficiently.
So rather than having to purchase and hold cryptocurrencies yourself, ICONOMI allows you to invest in an array of different Crypto Strategies, which are essentially dynamic portfolios. Each strategy offers a unique blend of assets, risk tolerances and market objectives, and allows investors to engage with the crypto market through a more strategic and hands-off manner.
Benefits of choosing managed crypto portfolios
Opting for ICONOMI's managed crypto portfolios presents multiple advantages:
1) Expert Management
Each crypto strategy is curated by seasoned experts, who have a monetary incentive to provide the best returns possible for those who invest in their strategies. Therefore, most investment decisions are based on thorough market analysis, an understanding of tokenomics, and a solid grasp of crypto investing best practices.
2) Diversification
Managed portfolios typically hold a variety of cryptocurrencies, spreading risk and potentially increasing the likelihood of stable returns. So it is common to see crypto strategies that have sizable investments in crypto with large market caps such as Bitcoin and Ethereum, mixed in with more experimental DeFi assets.
3) Accessibility
Due to its incredibly user-friendly user interface (UI), ICONOMI makes it very easy to invest in crypto strategies with just a few clicks. So in the event you see a crypto strategy (s) you like, you can be an official crypto investor within a few minutes.
4) Transparency
Investors have access to real-time data on portfolio performance and asset distribution, which significantly enhances decision-making capabilities. So before you choose a crypto strategy, you can easily see the historical performance of each crypto strategy, and whether it has consistently brought about a return on investment for investors.
5) Saving time
Last but not least, as a result of investments being managed by the owners of each crypto strategy, you will be able to save much more time compared to investing on your own. So although you still have the ability to adjust and exit your positions yourself, in the event you want to completely offload responsibility, then the owners of each crypto strategy can take care of this for you; but in a way that is down to their own discretion.
How ICONOMI's strategies cater to long-term investors
ICONOMI’s platform is particularly well-suited for long-term investors. Strategies are not only designed to capitalise on immediate market movements, but are also aligned with longer-term outlooks. Investors can choose strategies based on historical performance and projected future trends, with the ability to adjust their holdings as their goals or market conditions change.
Moreover, the ease of transitioning between different strategies on the ICONOMI platform allows investors to remain agile, adapting to market shifts while maintaining a long-term investment stance.
Conclusion
As can be seen, it's clear that informed decision-making, strategic diversification, and adapting to evolving market conditions are crucial for long-term investing success. What's more, taking fundamentals, innovative technology, and a responsive community into account are also important factors for determining the long-term value of a cryptocurrency.
While direct investment methods such as hodling, diversification, and dollar-cost averaging are respectable crypto investing approaches, the downside is that they also require you to be proactive, and have an above-average level of knowledge to invest effectively. The good news is that ICONOMI's crypto strategies eliminates these requisites by delegating the investing process to an expert portfolio manager. By leveraging the different Strategies, newcomers who are eager to invest in crypto can do so without the burden of continuous market monitoring and complex decision-making.
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