Developing Your Crypto Investment Strategy

Your crypto strategy will be one of the easiest things to write and one of the hardest to implement.  90% of us invest emotionally. We FOMO (Fear Of Missing Out) into a trade and we exit a trade because of FUD (Fear Uncertainty and Doubt).  Your Investment strategy will help you avoid these mistakes – but trust me, investment decisions based on FOMO and FUD are very hard to avoid! 

Investment Strategy – Types of Investment

This is the eighth section of the Cryptocurrency and Blockchain awareness programme,
How to Crypto.

Before I start, I’m seriously not a financial expert and cannot tell you what your strategy should be.  I believe that your investment strategy will be unique to you and one that is only going to be useful only to you.  You will have a different risk tolerance than I do, you are less or more wealthy than I, and you will probably believe in different investments than the ones I believe in.

There are, however, some useful tips that may help you in the development of your investment strategy and take some of the guesswork out of it.  These are a good place to start and make the whole process of developing a strategy less daunting.

You will make money in cryptocurrency by buying when the price is low and selling when the price is high. But, perhaps you would like to get involved in short term buy-low-sell-high Swing or Day trades or even the exciting sounding Scalp Trades which are undertaken minute by minute?  Or, will you make large single investments that you will hold long term.  There are lots of ways to invest in crypto:

Crypto Investment Strategy – Short Term Investments 

Day and Swing trading. This is the buying and selling of cryptocurrencies in the short term.  Day trading, as the name suggests, is when you get in and out of a trade within a day or so. Swing trading is when you buy a crypto currency and wait for the price to go up over a period of a few days or weeks before selling (hopefully at a profit). As mentioned above, Scalp Trades are those that are entered and exited within a few minutes. 

Crypto Investment Strategy

Crypto Investment Strategy – Long Term Investments

Your Cryptocurrency PortfolioThis is where you would hold and not sell your investment, perhaps for years!  The term HODL has become popular after an on-line early Bitcoin trader was explaining that he would HODL on for dear life no matter what happened to the price!  In his excitement he mistyped the word HOLD. Hodlers do not make investments for a quick profit.

Your crypto currency portfolio may contain a range of crypto currencies which you would trade on a regular basis and some currencies that you would hold long term.  You need a cash reserve that you use to buy cryptocurrencies (enter your trade) when the time is right.  It will be replenished with the money you earn when you exit your trade. 

Your investment strategy may have a range of crypto currencies which you would hold long term (usually the ones with the least risk).  You may also have riskier, short term  investments in the hope that they would realise a profit more quickly by closing the trade early yet still able to make some money.  Such a strategy would help you grow your portfolio more quickly but at a higher risk.

Crypto Investment Strategy – Three Parts to Your Portfolio

Your portfolio will only contain money that you are prepared to lose – you will not have gone into debt to buy crypto and you would not suffer any significant hardship if all your crypto investments were to crash to zero.  Sure, you would be upset but you would not be in a position to lose your house/flat or suffer financial hardship.

I would therefore suggest that the three elements in your portfolio should be: Long Term investments, Short Term Investments and Cash Reserves.

Cryptocurrency Portfolio

Your Portfolio Management

First of all, you need to work out how much your portfolio will be worth when you begin investing.  For simplicity’s sake, we will look at portfolio investment values of 1000 dollars/euros/pounds representing a small portfolio and 10,000 and 100,000 representing medium and large portfolios respectively.  Of course these figures are relative, some might consider 10,000 to be a small portfolio.  The determination of classifying small, medium and large portfolios is therefore based on risk tolerance rather than monetary amount.

For instance, if you have a portfolio value of over 100,000, you will most likely want to secure a larger portion in longer term, less risky investments (let’s say Bitcoin or Ethereum).  If you only have 1,000, you are more likely to want to invest it in higher risk investments which would hopefully yield higher returns.  When you take profits from these returns, you will put them in your cash reserves or use them to purchase currencies for the long term holding pot.  This sort of activity is what we mean by portfolio management.

You will regularly manage your portfolio to ensure the same percentage values are regularly maintained.  You would, of course, determine the percentage values based on your own objectives and risk tolerance. The guide below is for indicative purposes only.

Cryptocurrency Portfolio Segments

In section nine we will take a look at options for deciding on which cryptocurrencies to invest and also include facts and stories of the some of the more unscrupulous crypto projects: Choosing Your Cryptocurrency Investments.

This article is copyright 2022 by Tony Fawl, CryptoNET.

This page is part of the How to Crypto Web Series, an awareness course for beginners interested in blockchain projects and cryptocurrency investment. Please checkout the Bibliography and Glossary of Terms pages for other useful resources and links. To find out what we do, take a look at the About Us page.

Disclaimer: is not a registered investment, legal or tax advisor or a broker or dealer.  All investment/financial opinions expressed by are from the personal experiences of the owner of the website and are intended as educational and entertainment material. Best efforts are made to ensure that all information is accurate and up to date but we would still recommend that you do your own research before making investment decisions. 


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