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Over the years, blockchain and cryptocurrencies have attracted an outstanding amount of interest and money. However, the popularity of an asset only automatically indicates that investing in it is easy.
If you need to distinguish between reputable cryptocurrency suggestions and scammers, you’ll need help to make a profit. New traders often have many questions and need help figuring out where to begin when they first enter the market.
Different investors tend to prefer different investment strategies for cryptocurrencies. Today we will look into two prevalent approaches: buy & hold versus portfolio rebalancing.
The Passive Strategy: Buy and Hold
Many cryptocurrency investors buy and retain their holdings until they decide to sell. In some circumstances, these investors may not employ stop-loss orders regarding the technical analysis.
Traders skilled in technical analysis may enter cryptocurrency trades when small or significant price retracements are seen in the price chart. A break of resistance is a favorite entry point for other traders.
Cryptocurrency “Buy and Hold” is one of the most straightforward strategies to practice. It’s as simple as purchasing tokens and keeping your private key safe. Adding a stop-loss or a take-profit to your transaction is not required.
Investing in a successful long-term token eliminates the need to time the market perfectly. However, one of the most nerve-wracking aspects of cryptocurrency trading is figuring out when the market will go up or down. What is the best time to invest in Bitcoin? What about Ether? These questions generate concern and stress.
Additionally, those who trade cryptocurrencies regularly must constantly re-evaluate their entry points to avoid losing money. This method is more time-consuming and stressful. Often, it isn’t easy to get a suitable starting point. It would be best to wait for the market to change to locate a solid buy-in opportunity.
The Active Approach: Rebalancing the Portfolio
Conventional wisdom advises rebalancing your portfolio when the crypto section of your investment portfolio has grown considerably in value.
Some financial experts even advocate selling your portfolio’s most successful assets, such as high-flying tokens. Selling certain investments and acquiring new ones is rebalancing your portfolio to reflect your desired asset allocation.
In addition to increasing the portfolio’s diversity, rebalancing can reduce the portfolio’s dependence on a single token or group of closely linked coins (e.g., memecoins).
While this technique sounds reasonable, it often faces a sad truth: portfolio rebalancing can be highly time-consuming. Since most retail investors typically do not trade for a living and have a primary job keeping them busy during the day, rebalancing investments can sound hard.
Some crypto projects have recently started to offer automatic systems to rebalance a crypto portfolio. Let us mention one of these initiatives in the following section.
This article clarified how different strategies could achieve a good result in the crypto market. While conducting your research on the sector is essential, we are constantly reminded how portfolio balancing can be an interesting approach.
The issue with rebalancing generally depends on the stress and time-consuming operations that come with it. For this reason, investors frequently look for automated solutions.