Bitcoin has become more popular than ever in 2021, and who wouldn’t like to know more about it and strategies they could try out if they want to invest (and gain from it). Whether you are a newbie trader or you’ve been trading for some time, you will find it’s helpful to check these four strategies and see what would suit you the best. The Bitcoin dynamic is great since it’s an asset and the market almost always finds a way to go towards traders’ profitability.
Buying and Holding
This strategy is the most popular and easiest if we are talking about bitcoin. When you buy and then continue to “hold” Bitcoin, you can see progress over time, sometimes even quickly, where the value will rise without you doing much. Essentially, if you don’t have much time and you don’t won’t analyze the market every day, holding is the easiest and most profitable way for you. Naturally, to every strategy, there are pros and cons. If you are willing to wait despite the volatility, imagine how much profit you’d gain in the past two years just because it spiked in December. As you can see, if you want to sell, it’s about time the most. It can be considered a con because it’s risky to wait since prices are constantly moving. While you can lose a lot in a day, you can gain a lot as well. If you are patient and you are familiar with the history of Bitcoin, maybe it won’t be so stressful for you, and you can reap the benefits in a year or two if you buy a fraction now.
Margin Trading has become popular only recently, and it offers quite a profitability. What makes it attractive is that you can triple your initial investment during a single trade because you are using borrowed funds to place a larger trade.
Margin or Leverage trading can be quite risky since you have to have an emergency fund in case something changes (and it’s usually fast). While you can earn more, you can lose a lot as well. It’s a double-edged sword – a huge pro is that you can gain a lot, and on the contrary, you can lose more than you expected. Check with the company you are trading on how large of leverage they offer and do good research before deciding on this risky step. Remember, it’s important to cover any loss here because your position can easily get liquidated if you don’t cover the loss, meaning you lose all the money you could’ve saved.
Bitcoin Futures Trading
This type of Bitcoin trading has also gained popularity recently, and it relies on how accurate your Bitcoin price prediction is. What you’re doing is basically betting on the price if it’s going up after a certain period (going long), or you can predict if it’s going to go short (go down). What’s important to know is that the Futures Trading strategy means you will have to make a contract with a trading platform of your choice. The platform has a set value, and it takes prediction based on speculation of the asset’s price. No matter how direction the market moves, the contract needs to be respected since it sets the crypto’s future price.
This strategy has a couple of advantages since it offers a hedge in case the Bitcoin price falls. If you think the price will go down at any moment, you can hedge against (which means going short). You will be able to sell your crypto at a higher price than you originally bought it. Another advantage is that this is a regulated strategy thanks to Bakkt and CME.
While Day Trading is a popular term like Buying and holding – they are complete opposites. Day Trade Bitcoin can be stressful if you are not ready to keep an eye on the market and observe how much Bitcoin fluctuates daily. The point is to look for a point when the price is low and buy it, and then sell when the price is higher, so you can earn a profit.
While they are many opportunities due to Bitcoin’s high volatility, this can be a stressful strategy. Since the market operates 24/7, if you don’t create a schedule, you can easily fall into a FOMO state and act impulsively. If you want to try Bitcoin Day Trading, you need to understand technical analysis first and many other terms that come with it, especially regarding technical indicators.
Whatever strategy you choose, make sure it corresponds to your knowledge level and how much time you have on your hands. What type of trader are you, and are you willing to put yourself into stressful situations and stay calm, or you’d instead go with the most secure ones? The choice is yours, but remember not to go overboard and consult with your broker before you leap into anything entirely out of your comfort zone. Finding yourself a good crypto broker is a must if you don’t already have one, and be sure to listen to them since a regulated and licensed broker wants you to perform better.