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Popular Crypto Strategies: How They Stack up in 2022

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By , Updated On August 26, 2022

Looking for the best way to make money from cryptocurrencies? There are plenty of ways to do it. After all, crypto’s infamous volatility can create some impressive profitable opportunities, at least for those who know how to balance the market’s inherent risks.

But what is the right strategy for you? And, more importantly, how well will it work considering the market conditions in 2022? Read on to find out.

Crypto Strategies

  • Risk Warning

Before getting into the nitty-gritty of crypto profit-making strategies, we have to discuss risk. It is an inherent part of the financial markets, a danger that lurks around every corner but is not talked about enough.

Most crypto exchanges and brokers are quick to dazzle their customers with promises of huge profits, seemingly overnight. In reality, that’s usually not the case. You need both skill and patience to be successful and avoid the most common pitfalls of the crypto industry. Investment and trading “can be highly lucrative, but due to the volatility of the markets, that can also be extremely risky,” as this website reminds us

That’s why we advise you to plan your deals very carefully. Regardless of your choice of strategy, you always need an exit plan. Understand the risks and what you can afford to lose before you commit too much of your budget.

Now that that’s out of the way, we can delve deeper into strategies you can try when playing around with crypto.

  • HODL

Named after a hilarious but rather apt misspelling of the word ‘hold,’ HODL has emerged as one of the top strategies among crypto investors.

In fact, it comes from traditional forms of investment, such as buying stocks. The basic principle behind holding is that once you own an asset, you keep it in your portfolio for as long as possible, watching its value increase over time.

Sounds simple, doesn’t it? Well, a challenge presents itself when the asset you own starts going down in price. That’s usually when the more feeble-minded investors panic and decide to exit their positions at a loss.

However, the trick is to know when it is even worth holding. If you’ve invested in an asset that’s doomed, exiting before your loss becomes too great is the right decision. Do you see now why so many people struggle with this strategy?

Simply put, it is pretty difficult to estimate the reliability of an asset, especially when talking about cryptocurrencies. They are still a relatively new asset class with lots of challenges ahead and no guarantee for mass adoption in the near future. 

Even so, some examples exist to tempt investors. For instance, people who bought Bitcoin dirt cheap early on when it was worthless and bravely hodled until 2021 essentially became millionaires. But in reality, those sorts of opportunities don’t present themselves every day, and not every cryptocurrency has the solid foundation and scalability to succeed in the long term.

Hodling in 2022: Yay or Nay?

If you have already invested in cryptocurrency, then it might be worth holding. Right now, the world is going through several crises, contributing to sky-high inflation rates. Central banks around the globe are at their wits’ end as to how to stabilize their respective economies.

Naturally, this grim picture has affected the crypto market too. Though cryptocurrencies are unregulated, they react to high inflation by dropping in value. Thus, as a long-term strategy, you may succeed in holding — if you do not expect profit in the next couple of years or however long it takes for inflation to go down and risky assets like crypto coins to go up again.

In case you haven’t bought cryptocurrency yet, check our section on buying the dip below.

Buying the Dip

This strategy refers to one of the most basic ideas in finance and economics: buying something when it’s cheap, with the mind to sell it when it becomes expensive. 

The underlying assumption with this strategy is that the asset you’re buying is undervalued when you get your hands on it. In other words, investors believe that said asset is inherently worth more than its present market value.

As a result, they can ‘outwit’ market participants by purchasing the asset at its lower price, knowing full well they snatched a bargain. Then, they can sit and comfortably wait as everyone else catches on and realizes how good that asset is. The market will consequently rush to buy more of it, and this demand will drive prices up. 

Investors can then prepare to sell the asset at a higher price. But to maximize this strategy, they need to evaluate the correct price for the asset. Essentially, they need to know how much the asset’s value can grow before it dips again.

Does it sound like, in this case, investors are holding? They are — but only for a little bit. In general, buying the dip is a bit more short-term than HODL. It still may take some time, though. 

In addition, hodlers are not always looking to sell their assets. Some of them hope to keep them forever and live off of dividends. That’s how buying the dip and hodling differ. 

Buying the Dip in 2022: Yay or Nay?

In this case, we say yay. While no one can guarantee you a positive outcome for any investment, many cryptocurrencies are at multi-year lows at the moment. Considering everything happening in the world right now, you could say some of them are undervalued. 

If you identify specific reasons why some tokens might kick off again — for example, due to the utility they bring or their excellent tokenomics — you might have some good candidates to buy. Just remember not to invest blindly and always get to know the risks involved.

Day Trading

Unlike HODLing and buying the dip, day trading is a very fast-paced strategy. It refers to transactions that traders execute within the same day, sometimes within minutes or even seconds. 

The same concept of “buy low, sell high” applies. But in this case, traders are looking at short-term price fluctuations. For example, a sudden market rush might boost prices for a few minutes before they settle back down. These are the types of fluctuations day traders watch out for.

As you might have guessed, this is a highly-technical and difficult strategy. Day traders swear by technical analysis tools and indicators. In addition, many of them also use trading robots to help detect price changes faster. Stop-loss and take-profit orders are a must.

Given all this, day trading is both time-consuming and not very beginner-friendly.

Day Trading in 2022: Yay or Nay?

Because day trading uses short periods anyway, it is always appropriate. We say yay — as long as you have the technical skills required. With a strategy this fast, the risks are often much higher, so you need to be extra careful.