Strategies to Invest in Cryptocurrency. Fundamental Analysis vs. Technical Analysis. Investment or Trading. Nine Crypto Best Game Plans

8 min read

Investment and Trading: What’s the Difference?

Despite some resources telling you otherwise, investing and trading are two different methods of profiting from movements in financial markets. While they have the same goal, these methods approach them differently.

Here is how we can summarize the differences between investing and trading:

  • Period – Investing is a long-term commitment. There are often cases when investors keep their assets for years and even decades. Trading occurs in much shorter periods: daily, monthly, or quarterly. They mostly take advantage of rapid price fluctuations that investors usually ignore.
  • Frequency of transactions – As an extension to the previous distinction, traders are known to place many more orders. Since short-term price changes cannot yield significant profits, traders must make up for this with higher trading volumes, and investors tend to engage in fewer trades.
  • Risks – No method of interacting with the cryptocurrency market is without any risks. However, trading is considered to be a high-risk/high-return approach. Just the fact that traders do more transactions means that they expose themselves to almost daily risks. In investing, profits accumulate very gradually. The risks are still there, but they are not as great.
  • Attitude – Trading requires more technical skills, and investing requires a deeper understanding of the market. In many ways, investors study the psychology of the market, and traders are more about numbers and charts.

Two Foundations of Crypto Investment Strategies: Fundamental Analysis vs. Technical Analysis

Fundamental analysis is based on how the market moves and news within the company impact the asset price. These factors include financial statements from top management, profit margins, cryptocurrency news, political events, and even natural disasters. Based on these underlying forces, analysts can evaluate whether the asset is underpriced or overpriced.

Technical analysis utilizes price charts, resistance and support, indicators, patterns, and trends from the past to predict future price movements. In other words, it gives market participants a comprehensive overview of past performance statistics. It also studies the interaction of demand and supply forces, which are believed to affect the price.

Key differences between the two approaches can be described in the following points:

  • Fundamental analysis considers more extended periods of asset history. In this context, fundamental analysis is more likely to be used for long-term trading. Technical analysis better suits short-term and swing traders.
  • Investors usually apply fundamental analysis, whereas traders prefer technical analysis. The first informs investors on whether they should buy and hold the asset for a particular time, and the second advice about quick profits.
  • Fundamental analysis recognized that the asset is not only affected by the past. The technical analysis normally doesn’t consider current events – instead, it studies how the acquisition behaved in the past.
  • Technical analysis is better at determining the right time to enter and exit the market, whereas fundamental analysis studies the currency’s intrinsic value.

How To Invest in Cryptocurrencies 101: Fundamental Investors Strategies

An exciting analogy regarding investing in cryptocurrency is that they are more like food diets. Different approaches may accommodate one person and become entirely helpful for another. So, as an investor, your goal is not to find the most profitable strategy but the one you can stick to in the long run.

If you see a strategy too good to be true, it is most likely an advertising trick. One by one, we will examine the most common approach without overlooking their drawbacks. The more informed you are about the good and the bad, the better results you will achieve.

Below are the nine best ways to start investing in cryptocurrency.

1. Long-Term Investments (HODL)

HODL is a deliberately incorrect spelling of the word “hold.” The strategy focuses on holding crypto for long periods without cashing out, and beginner investors mainly use it as it is easy to execute and straightforward. The notion behind the strategy is built on an overall hopeful sentiment about the cryptocurrency market.

There is yet to be a definitive answer on whether long-term investments are the right approach for investors. HODL brings investors profits in specific circumstances – when the market is going up. In this context, you can make money by simply holding on to your asset while it appreciates.

Long-term investments are sometimes considered an unprofitable strategy. While it can be successfully used, it leaves no chance of profit when the trend reverses. By sticking to HODL-ing, you may miss out on various profitable opportunities from more complicated strategies.


  • Simple
  • Good during uptrends


  • Not nuanced enough
  • Awful in a downtrend
  • Significant potential losses

2. Average position and then HODL (or Smart Holding)

Creating an average position means purchasing the average price of a cryptocurrency extended over. Because of the crypto market’s volatility, buying the asset in small installments is an excellent choice for building long positions. Investors mainly play it safe – without being too risky but with fewer potential gains.

You can decide the schedule for buying the asset – monthly, weekly, bi-weekly, daily, etc. There are two most common averaging strategies: dollar-cost averaging and value-cost averaging. The first one implies investing equal dollar amounts of the crypto at regular intervals.

With the second one, investors contribute to their portfolio based on the percentage gain or loss made previously. It allows you to choose whether to skip a particular month, aims to buy only on the dips, etc.


  • Affordable
  • Avoids spontaneous decisions
  • Fewer cases of bad timing


  • No regard for changing environment
  • More fees
  • This may result in lower returns

3. Trading: Buying Low and Selling High

The name of the strategy is self-explanatory – buy when you think the price of an asset has dropped low enough, and sell after it appreciates. The decision on what crypto to buy is based on historical values and current market conditions. Even though it may be hard to use this strategy consistently, it has achieved a decent level of popularity.

To safeguard their profits with this strategy, investors often set stop-losses. Some go even further and apply technical analysis and buy/sell based on support levels, moving averages, etc. Also, it is recommended that investors keep an eye on transaction fees and portfolio erosion.

However, it might be hard for investors to determine when the price gets too high or too low. Many investors must find a balance between wanting to wait to increase profits and feeling content with existing ones. Experts recommend supplementing this strategy with other tools, such as moving averages and overall market sentiment.


  • Suits beginners and advanced investors
  • Capitalizes on market panic selling
  • Works for different markets, including sideways


  • Requires research
  • The unpredictability of most assets
  • Psychological roadblocks in terms of when to buy/sell

4. Using a Trading Bot for Day Trading

Automated software carries out the same activity as a human trader but with parameters written in the program. Most traders utilize already-made trading bits, but some choose to put their programming skills to use and create one. While the first one is easier to implement, the second gives you more control over the strategies.

Trading strategies integrated into trading bots are simple and more structured. Since they have to be broken down into a series of activities, they can be simple enough. Otherwise, the bit will be tough to configure, resulting in trading mistakes.

Those who purchase pre-made strategies on trading platforms need to realize the risks. You can make considerable profits since the bot is quick to react to market changes, can trade 24/7, and has no emotions. At the same time, if your strategy is faulty, you can end up with a streak of losses.


  • Minimal maintenance
  • Less psychological pressure
  • Hundreds of markets and assets to monitor


  • Risks of automating consistent losses
  • Requires some programming skills
  • Inability to verify creators

5. Using a Trading Bot to Invest

Automating the investing process is less common than trading. The reason is that trading bots are aimed at quick market analysis and order execution, which is only sometimes the main objective in investing. However, allowing the bot to manage your portfolio with stop-losses and pick low-risk strategies can yield fruitful results.

Different bots come with various features, and investors choose them depending on their strategy. Remember that many features will not apply if, for example, you look to HODL your assets for the long term.

While automated investing has many advantages, there may be better choices for some. Casual investors are not the primary audience for bots and might be better off without them. But if you plan to make consistent investments and maximize risk-adjusted returns, you can reap many benefits from automated platforms.


  • Takes emotions out
  • Keeps investors disciplined
  • Supports multiple accounts


  • Not an entirely hands-off solution
  • Not the best choice for long-term investors
  • Risk of scammers

6. Currency and Exchange Arbitrage

Cryptocurrency exchanges vary in liquidity, trading volume, and prices for certain assets. Market changes affect small and large currencies differently. Typically, more extensive exchanges have lower rates. With an arbitrage strategy, traders purchase and sell assets on smaller exchanges.

Often, there will also be a slot in time after large exchanges experience price changes and before they happen at small exchanges. Since prices do not adjust at the same time, you can capitalize on these price differences. The strategy is straightforward but requires a lot of time and dedication.

To maximize your profit opportunities, you need to increase the trading volume. The price changes are not always significant, so you must make up for them by investing a decent amount of cryptocurrency. Lastly, investors must look for transaction, deposit, and withdrawal fees, which can take a significant portion of their profits.


  • Instantaneous profits
  • Many exchanges and currencies to choose from
  • Takes advantage of volatility


  • Exchange fees
  • Capital requirements

7. ICO Investing (Initial Coin Offerings)

ICOs are a crowdfunding method where tech creators sell tokens that will later be replaced with altcoins after the company is up and running. The benefit is that tokens can be traded on exchanges and may significantly rise in value over time.

There are two main ICO investment strategies, which are opposite approaches. The first one, flipping, implies purchasing the tokens and trading them almost immediately. If there is a good demand for the token and the company is hyped up, you can make good profits. However, the gains may be small if you initially make a small investment.

Alternatively, investors can choose the holding method. The premise behind this tactic is that the investors find the company and its tech very promising and count on their future success. It will require some research. Before investing, you will need to figure out their business model, the development team, total supply, inflation, etc.


  • The high potential return on the initial investment
  • High liquidity
  • Available to everyone


  • Extreme price fluctuations
  • No ownership
  • Risk of Ponzi schemes and scams

8. Managing Investor Funds

Investment portfolio management includes organizing and maintaining investments to hit specific targets. Depending on these goals, investors can choose different strategies, asset allocation, methods of risk management, etc.

One of the approaches is passive management. In this case, investors usually have a fixed asset allocation and don’t try to outperform the market conditions. Since it doesn’t involve active trading, the associated fees are relatively low.

On the other hand, active management implies choosing investments to outperform some market benchmarks. It involves higher fees, and some research suggests it needs to generate consistent profits as advertised.


  • Not too complex
  • Diversified investments
  • Regular source of income


  • Entry and exit fees
  • Limited control of asset selection
  • Tax inefficiency

9. Mining and Combining Any Strategies Above

The debate over which strategy is better is never-ending. Any portfolio manager and analyst would agree that you can achieve your investment goals in many ways. There is no right answer to what will undoubtedly bring you profits, so you must become more adaptive and combine strategies if you feel they will work better.

All strategies described above have unique sets of features, and investors can manipulate strengths and weaknesses to their advantage. For example, you can combine active and passive strategies. The first is likely higher-yielding, and the second should bring more consistent results.

There are difficulties, however. Like there are no perfect strategies, there is no ‘correct’ way to combine strategies. And if you have enough knowledge and resources, you can try your skills at mining or some other crypto activity that fits your style.


  • It takes the best from both worlds
  • Lowered fund expenses
  • Better risk management


  • Requires more market knowledge
  • Risks of incorrect combinations

Things to Consider Before You Create a Strategy to Invest in Cryptocurrency.

Every successful investment has a well-written, measurable, and reproducible strategy. The trouble begins when investors jump from pre-made strategies to creating their own with little deliberation. Some of the main points you need to consider to design a strategy suitable for you are:

  • Your current financial situation – A thorough financial plan should be your first step. There are no guarantees that investments will yield significant profits. So, what is your after-tax income vs. spending ratio, and how much money can you comfortably allocate to investing?
  • Your risk tolerance and desirable return – Your risk management plan and future strategy should consider the inherent risks of specific asset categories. How much risk are you willing to take for a higher potential investment return?
  • The timeline you’re going to work with – A strategy for the long term, i.e., for decades, will be much different from the one designed for several years. Are you saving for retirement, or do you need a shorter and safer strategy?
  • Applicability to different market environments – Investors need to acknowledge that the market will not always be on their side. How would your strategy perform in other conditions, and do you know its strengths/weaknesses?
  • The measure of the effectiveness of your investment strategy – Strategies need to be revisited and adjusted from time to time. Do you know how to evaluate whether the strategy matches your investment goals?



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