The Intelligent Investor’s Practical Guide to Long-Term Crypto Investments for 2022

“Bitcoin is the cash with the wings.”
-Charlie Shrem

Long-term investment requires patience and time. Long-term investing means putting money in the market to generate interest or sell it when the price rises. To expand their assets or prepare for retirement, people might invest in stocks, FX, cryptocurrencies, or precious metals. Nevertheless, long-term financial success is not easy, especially in the bitcoin market.

HODLing

HODLing (long-term crypto investment) refers to investing in cryptocurrency for at least one year. Long-term investing is distinct from short-term speculation, and investors should be aware of their actions. They should invest for a year or longer. So, long-term investing entails taking on more risk (overtime) for a more significant return.

Since many people are still unfamiliar with bitcoin, investing long-term entails inherent risks. But the crypto market is gaining popularity, and institutions are keeping an eye on it. So it’s a terrific investment opportunity for long-term investors looking to diversify. Any investment choice may become outdated without a methodical strategy. Establishing an investing plan with a suitable risk assessment and exit strategy is essential.

Over three years, long-term investing attempts to benefit by retaining an asset. Assume that firm X owns considerable shares of company Y but does not control the majority of voting shares. The acquisition price is a balance sheet item, whereas the short-term investment stocks are profit/loss related. Usually, the sale of long-term investments is classed as other comprehensive revenue, not profit or loss.

Now let’s look at a real-life example of long-term investing…

A Real-Life Example of Long-Term Investing

Let’s start with Bill and Joe. They invested $100 every month for 20 years, earning $24,000 apiece with an annual return of 8%. Bill began investing at 36, whereas Joe waited until 46. Bill will have $131,613, and Joe will have $59,295.

In this case, the return quadrupled since Bill began 10 years before Joe. The example demonstrates the superiority of long-term investment over short-term investment (due to accrued interest).

Long-term cryptocurrency investors are known as “HODLers.” After appearing on the Bitcointalk Forum in December 2013, it became a crypto market meme. (“Hold on for dear life,” say some crypto investors.) Nowadays, “HODL” is used to describe a buy-and-hold investing strategy in the cryptocurrency market.

Long-term investing maximizes the return on a steady asset. Long-term investments benefit from not requiring daily or weekly market research or trading decisions. Many people who do not understand technical analysis and market behavior rely on long-term investments.

The investment in a trading asset is not long-term. But investors might pick it to sell after a few years. As a non-current asset on the balance sheet, its benefit is represented at fair value. However, short-term investment profit/loss directly affects institutional profit/loss. As a result, it is effective for institutions to increase their asset value and add to their income statement. However, long-term investing demands a significant initial commitment, which many people or organizations cannot afford.

Every goal requires a strategy. The factors include investing goals, risk assessment, time horizon, tax implications, and entry and exit strategies. Traders should devise a well-researched trading plan with a track record of success. Investing in bitcoin is unlike investing in FX or stocks. So it necessitates unique investing tactics.

“HODL” Method

One of these tremendous investing methods is “HODL” (hold only). For small investors who cannot afford to invest the required amount all at once, dollar-cost averaging (DCA), an investing method that allocates money regularly, is a “big secret.” Another technique is asset reallocation, which involves evaluating macroeconomic conditions.

The new path to long-term financial success hinges on execution and risk control. Investing strategies should incorporate a time horizon and risk assessment. They must know how long they want to retain the investment and how much risk they can tolerate.

Even though investing is cheaper than trading, investors should consider certain significant fees before investing. Here are some of the long-term crypto costs:

Financial Advisory Fees: These are fees paid to invest, finance, and money specialists. For example, Vanguard’s long-term investment grade is widely used to uncover possible investment opportunities.
Expense Ratio: How much assets consume in administrative and other operational expenditures. Invest in crypto assets with a reduced expenditure ratio.
Long-term investments in the cryptocurrency market that involve money from loans and credit cards are subject to interest charges. Investors should avoid purchasing assets whose return is less than the interest cost.

Buying The Dip

When you buy a crypto asset at a low price and expect it to appreciate in value, it’s known as “buying the dip.” If the long-term price chart shows a quick drop to a low cost, that means there will be a short-term drop.

In 2018, Bitcoin dropped from $19,675 to $5,933. Buying at a lower price would be termed a buy dip. A swing high or low occurs in the financial market. So it’s not always easy to locate the dip. The ideal technique is to discover a market with many lows.

Citing analyst reports is another good way to grasp professional viewpoints regarding the trend. Investors who understand technical analysis are more suited to read market dip news. Finally, a trustworthy cryptocurrency exchange with cheap fees is a great place to purchase a dip.

Overall, purchasing a downturn hinges on the crypto’s future growth potential. Bitcoin, for example, plummeted during the Covid-19 epidemic. People that purchased low and HODLed are now making triple-digit returns. As we can see from the discussion above, long-term investing may be highly profitable provided the investor selects the correct asset. However, this is not always the case.

There is no precise way of stating that a long-term investment is more effective than a short-term investment. Ultimately, it depends on the investor’s thinking and the market’s behavior. However, as part of portfolio diversification, it is strongly advised that you divide your investment into short- and long-term outlays.

Now you at least know another level more about long-term crypto investment, which will help you secure your future investments.

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