The time has come and you decided you better get some bitcoin before the train leaves the station. But what is the best bitcoin strategy to do so? In this article we help you identify the best bitcoin strategy for your particular case in an easy-to-grasp overview.
The year 2023 has seen significant developments in the bitcoin market, with Bitcoin remaining at the forefront of monetary innovation. As its popularity continues to soar, savers are searching for the most effective strategies to capitalize on its potential growth. Let’s get started:
Dollar-cost averaging (DCA) is a tried-and-tested strategy for Bitcoin. With this approach, savers purchase a fixed amount of Bitcoin at regular intervals, regardless of its price. As a result the bitcoin portfolio grows and grows. Depending on how much you are able to buy on a regular basis, you might have soon accumulated one full bitcoin. One full bitcoin is equivalent with 100,000,000 Satoshis because 100 million sats make one Bitcoin. That means if you have less money to save, you can still set a meaningful goal to save 10k, 100k, or 1M sats. Auto DCA takes this strategy one step further by automating the process, ensuring consistency in investments. By spreading purchases over time, investors mitigate the risk of buying at the peak and enjoy the benefit of accumulating more Bitcoin during price dips. This strategy has been well-researched and outperformed the lump-sum strategy.
Buy-and-Hold – The Classic Bitcoin Strategy
Buy-and-hold, also known as “HODLing” in the bitcoin community, is a long-term strategy where savers hold onto their Bitcoin for an extended period, typically years, without trying to time the market. This strategy requires patience and a belief in Bitcoin’s potential to appreciate over time. Despite short-term price volatility, historical data has shown that Bitcoin has consistently shown substantial gains in the long run.
This bitcoin strategy is a classic and if you are new to bitcoin you should research this strategy wholeheartedly.
Lump Sum Investment:
For risk-tolerant investors with a lump sum of capital, making a single significant investment in Bitcoin can be a viable strategy. By entering the market with a substantial sum, investors can potentially benefit from immediate gains if the price continues to rise. However, it’s crucial to conduct thorough research and due diligence before employing this strategy, as it carries higher short-term risk compared to DCA.
Security is a significant concern in the bitcoin space, considering the core idea of Bitcoin is becoming your own bank. Cold storage, or “offline wallets,” is a strategy where savers store their Bitcoin offline in hardware wallets or other cold wallets. By keeping their assets away from internet-connected devices, users significantly reduce the risk of cyber attacks and unauthorized access, providing peace of mind and long-term security for their Bitcoin holdings.
Custodial storage should be avoided at all cost. If you are able to drive a car or bicycle you are also able to learn cold-storage and self-custody. The problem with keeping bitcoin with a custodian or exchange is the risk it involves. Millions of bitcoin have been lost throughout the short history of Bitcoin.
However, for institutional investors or individuals who prefer a more hands-off approach, custodian services can be an option to get started. Custodians are third-party companies that safeguard and manage Bitcoin on behalf of their clients. These services often provide high security measures, insurance coverage, and expert management of digital assets. Although they may charge fees for their services, custodians offer a secure and convenient way to invest in Bitcoin without worrying about storage and management.
But keep in mind there is always a risk that the custodian gets hacked and loses the funds. It can also happen that the custodian mismanages client funds and reinvests the assets into risky projects instead of keeping them safe.
Bitcoin mining is the process by which new Bitcoin is created, and transactions are verified and added to the blockchain. Miners are rewarded with newly minted Bitcoin and transaction fees. While individual miners might face challenges due to the increasing complexity of the mining process and energy costs, investing in mining companies or mining pools can be an alternative way to gain exposure to Bitcoin’s potential appreciation.
One of the best Bitcoin strategies is earning bitcoin for work or professional services. Whether you are a student, baker or software developer, there are many ways to earn bitcoin. You can earn bitcoin for microtasks on platforms such as microlancer.
If you prefer to keep your current job but earn in bitcoin, you can ask your employer if he is able to pay you in bitcoin. Specialized services like Bitwage make the process easy. Surely, in young industries like the tech sector it might be easier than in older and more traditional sectors to earn bitcoin. Many young professionals therefore seek employment in the Bitcoin-industry.
Another strategy often used by self-employed folks, artists and small business owners is to simply offer your services and products in bitcoin, Platforms such as scare.city and plebbin.com and a long range of bitcoin payment processing features make that easy.
Indirect Exposure through ETF or Fund:
Investors who want exposure to Bitcoin without directly owning the asset can consider investing in Exchange-Traded Funds (ETFs) or funds that track the performance of Bitcoin. These investment vehicles enable investors to gain exposure to the price movements of Bitcoin without the need to hold and manage the cryptocurrency themselves. It provides a more regulated and traditional investment approach to the bitcoin market. This strategy is not recommended as it does not actually provide real ownership over Bitcoin. Instead it only provides indirect exposure which is risky.
Technical Analysis and Trading:
Bitcoin trading and technical analysis are often recommended to accumulate more bitcoin. But be cautious, most of the times these recommendations come from people who want to sell a trading course. Comparing the risk and effort with the DCA strategy, bitcoin trading is not recommended for beginners.
For experienced traders who thrive on short-term price movements and market trends, technical analysis and trading strategies can be employed to profit from Bitcoin’s volatility. This approach involves analyzing price charts, trends, and market indicators to make informed trading decisions. However, trading in Bitcoin requires extensive knowledge, risk management skills, and emotional discipline to avoid significant losses.
According to a long-term Bitcoin investor and trader Tone Vays, Bitcoin trading is very similar to gambling with the difference that there is a slightly higher chance of winning if your strategy is good.
As Bitcoin’s popularity and adoption continue to grow, the best strategies for investing in the cryptocurrency will evolve and adapt. Whether you are a risk-averse investor looking for long-term stability or a seasoned trader seeking short-term gains, there are various strategies to suit your preferences and investment goals in 2023. It’s essential to remember that the cryptocurrency market is inherently volatile, and no strategy guarantees profits. Therefore, investors should conduct thorough research, assess their risk tolerance, and seek professional advice before implementing any Bitcoin investment strategy.