The idea of diversifying his crypto investments comes from the observation that digital currencies are taking an increasingly important part in the global economy.
Thus, as with fiat currencies, the diversification of his portfolio becomes an important issue for any investor concerned with making his capital grow in a good and reliable way.
With this in mind, here are 4 solutions to diversify its entrants in terms of crypto-currencies.
Crypto investment: mining
the cryptocurrency mining is one of the first ways to diversify your crypto investments.
The concept is to use powerful computers to validating blocks of transactions on a blockchain. As a reward for this validation and security work, miners receive tokens native to the blockchain in question.
Specific to networks of Proof of Work (PoW)the Bitcoin blockchain is one of the most well-known that allows generating 6.25 bitcoins per block so far.
This amount is divided in half every 4 years.
So this is a pretty interesting profit, especially since the price of BTC continues to rise over time.
However, unlike other solutions, mining is not accessible to everyone, for two major reasons.
To begin with, he asked a significant initial investment in the field of material.
In fact, as mentioned above, mining requires the use of powerful computer equipment. The more powerful the computer, the better it does at solving the ciphers and the more likely it is to get rewards.
Finally, this computer power uses large amounts of electricity.
Scattered all over the world, mining fields » emerged and included many computers. It operates continuously and independently mines cryptocurrencies.
Thus, mining is an excellent source of crypto income but it requires a significant return investment and returns can be limited.
Additionally, the current energy crisis coupled with the progressive abandonment of PoW networks has left mining more and more on the sidelines.
Staking: low risk and moderate return
Staking is a very popular method for crypto investors.
Unlike mining, which is reserved for Proof of Work blockchains, staking is specific to blockchain networks. Proof of Stake (PoS).
Here, no hardware is required, just staking a method of incentive which allows validators to pledge their tokens to claim to work on the blockchain.
In return for completing their tasks, validators receive rewards in tokens native to the network.
The enthusiasm around staking is due to one major advantage it provides: ease of access.
Indeed, the stake is accessible to all investors who own tokens. The number of blockchains that offer staking continues to grow and we can mention, among others, Tezos (XTZ), Solana (SOL) or even Fantom (FTM).
In addition to its accessibility, staking offers relatively low risk to lose. Certainly the risk of hack is there but the overall loss of capital remains very moderate.
However, these advantages have a negative side: low yield.
Investing in Crypto through staking generally shows a relatively modest return from 1 to 5% on average depending on the platforms and staked tokens.
Of course, some platforms and some assets offer higher returns, but the risk increases proportionally.
The DCA Strategy for Long Term Crypto Investing
The DCA method, acronym for Dollar Cost Averagerecognized as one of the most effective strategies in terms of investment and trading.
Invented decades ago, it applies to classic assets and cryptocurrencies.
The method is based on a simple principle: the price of all assets has increased an upward trend. Despite the fall and bear markets, the market always admits to an increase in value.
The DCA strategy takes advantage of this observation to invest the same amount or similar amounts in a given asset on a regular basis.
For example, a trader can define a DCA strategy in Bitcoin and choose to invest €100 every 1st of the month. Therefore, every month, whether the market is bullish or bearish, the trader will make the purchase of BTC up to €100.
This method is effective because it allows the BTC price to average down.
Accessible to all, DCA has a major problem: discipline.
In fact, it is important that investors establish an operating discipline. They should be ready to buy their asset even if it shows a decrease in value or the market does not lend to it.
This is why, despite the simplicity of its mechanics, it remains very difficult to set up.
The trading algorithm: automatic crypto investment
Using a trading algorithm is ultimately our ultimate solution to diversifying your trading investments.
The trading algorithm is often called ” trading bots in an abusive manner. It is a computer program backed by a platform that allows its users to generate passive income in an automated or semi-automated way.
Trading algorithms suffer from a poor image due to the large number of fraudulent offers. This is also the reason why it is necessary to know how to choose the best among them.
The best algorithmic services work in a structured way. They always analyze the market in search of interesting opportunities.
Take the example of Stradoji’s algorithm service. The latter offers 3 different strategies:
- A “Portfolio” strategy, focused on long-term investments;
- The second is based on a Swing Trading strategy for the medium term;
- Finally, a short term Day Trading strategy.
By choosing one of the strategies, the algorithm uses a personal analysis and looks for suitable patterns.
Semi-personalized and fully automated, a trading algorithm offers possible diversification of the crypto portfolio with advantages for all types of profiles from beginner to advanced.
Trading algorithms thus represent an interesting opportunity when combining a safe and effective program.