Cryptocurrency, precedently seen as a volatile asset, is now compelling investors to consider it as a powerful, legitimate, and alternative investment tool for traditional assets. While traditional assets like stocks, bonds, or real estate tend to be more stable, they are still subject to risks, but significant day-to-day price swings of 10% to 20% in crypto have outpaced traditional investments.
Apart from the liquidity and accessibility of Cryptocurrencies, digital currencies like Bitcoin (BTC), Ethereum (ETH), and others have played a huge role in approaching highs and paving the way for Decentralized Finance (DeFi), revolutionizing investors’ thoughts about crypto. Holding back to the higher risk opportunities and volatility, crypto has the ability to generate returns that have outperformed traditional assets.
Exceptional returns from crypto are not only attracting experienced investors but also grabbing the attention of newbies. Here in this guide, we’re gonna walk you through crypto investment strategies, advanced exchange market techniques, and risk management to protection techniques to make your portfolio balanced. Let’s get started!
Crypto Advantages Over Traditional Assets
Rising crypto trends in the market are impelling investors to compare crypto with traditional assets, because understanding these key insights will help them make their portfolio balanced by taking the right decisions. So, let us break these advantages down:
Key Benefits Over Traditional Assets
- Higher Potential for Return
Cryptocurrencies like Bitcoin and Ethereum have clearly outperformed traditional assets, with a potential growth lead of 200% over the last decade, while traditional assets like the S&P 500 average only 10% per year.
- Decentralized and Control
Cryptocurrencies work on Blockchain Technology, a decentralized technology, offering a borderless form of investment to investors to participate in the market via the internet globally. While traditional assets are generally managed by governments or banks, making them inaccessible.
- Liquidity and Accessibility
Liquidity means how easily you can sell or buy your assets without affecting their prices too much. Thus, Crypto has high liquidity and accessibility as compared to traditional assets. For example, you can buy or sell Bitcoin or Ethereum globally, 24/7, whereas assets like bonds and real estate require specific hours for trading and often need bank or brokerage access to proceed.
Crypto vs Traditional Assets Performance – Table Comparison
| Assets | Average Annual Return | Notable Performance Events |
| Bitcoin | 200% | 2017 Bull Run, 2021 ATH (All-Time High) |
| Ethereum | 100% | 2017, 2021 Surge, DeFi Boom |
| S&P 500 | 7 to 10% | Steady, traditional growth |
| Gold | 2 to 4% | Slow, steady inflation hedge |
| Government Bonds | 2 to 3% | Low-risk, low-return |
Crypto Investment Strategies for Outperforming Traditional Assets
Implementation of strategic techniques in the Crypto market for better growth is significant for both experienced and inexperienced investors, because extreme volatility, uncertainty, and technical complexity can easily overwhelm them. By applying the following beneficial techniques, such as Dollar-Cost Averaging, Asset or Portfolio Allocation, Market Timing Consideration, and News Updates, you can leverage the crypto market easily.
Dollar-Cost Averaging Approach
Dollar-Cost Averaging (DCA) refers to an investing strategy in which you invest a fixed amount on a selected schedule by making small purchases. Since you’re investing a fixed amount, preventing you from making impulsive decisions based on market hype or fear. The two most prominent benefits of DCA are long-term potential growth and the power of compound growth.
Portfolio Allocation Principles
For better growth in the Cryptocurrency market, you must have a well-balanced portfolio, because it not only helps in risk management but also assists in generating maximum return.
Follow these principles for portfolio allocation:
- Diversification:
Apart from Bitcoin, you must invest in other currencies like Ethereum to keep your portfolio balanced and to get exposure in various sectors of the Crypto ecosystem.
- Risk Tolerance:
If you’re unable to tolerate high risks around 40 to 50% of your portfolio, we recommend you invest around 10 to 15% of your portfolio to keep it balanced.
- Balanced Mix:
A suggested diversification of your portfolio from our experts is given below:
- 20-30% Cryptocurrencies
- 20-30% Cash or Gold for stability and liquidity
Long-Term VS Short-Term Strategies
A long-term strategy based on the popular term in the crypto market, HODLing (Hold On for Dear Life), refers to holding assets for an extended period. The potential of this long-term strategy can be seen in the price of Bitcoin, which was $1 in 2010 and rose to $60,000 by 2021, changing the lives of long-term investors.
While a short-term strategy involves buying or selling by seeing short term market trends or benefits. Short-term strategy requires a deep knowledge of the crypto market, but long-term doesn’t. So, it totally depends on your choice whether you go with a short or long-term strategy.
Market Timing Considerations
As the Crypto market swings to its fullest within a very short span of time, it’s very important to keep a keen eye on the market. These kinds of price swings are more dramatic in crypto as compared to traditional markets. To leverage the market, you must pay attention to regulatory news like developments in blockchain and others.
Advanced Techniques to Consider
Apart from the mentioned techniques, yield farming, staking, and DeFi Platforms are also the most profitable and used techniques among the crypto market investors. Let’s learn how we can leverage the given technique more efficiently:
Yield Farming and Staking Opportunities
Yield Farming, typically known as liquidity mining, involves lending your crypto assets like Bitcoin, Ethereum, and others to DeFi platforms to get high returns in the form of tokens or interests. Actually, you provide your assets to these lending protocols, earning interests, rewards, or transition fees as returns.
Staking is also the most renowned technique used in the crypto market, where crypto investors usually lock their coins in the Staking wallet to support blockchain networks, and in return, they get their returns as a reward. Stable passive income, lower risks, and network participation are the common benefits of staking.
Leveraging DeFi platforms
Financial intermediaries like banks or governments manage traditional assets, while crypto assets are managed digitally by blockchain protocols, making it a more accessible, transparent, and open system for financial platforms.
DeFi platforms offer lending, borrowing, decentralized exchange, and other relevant facilities to crypto investors to enhance their returns. Aave, Compound, and MakerDAO are common DeFi platforms used by cryptocurrency investors.
Risk Management and Protection
Although crypto investments are more volatile than traditional assets, they still rank highly among investors due to their high returns and increasing trend. We’ve also shared some advanced techniques to mitigate losses or enhance returns, so here are some additional risk management and protection techniques that you must follow.
Common Pitfalls to Avoid
Avoid these common pitfalls in crypto trading:
- Chasing Short-Term Grain
Crypto prices are extremely volatile, fluctuating after every short period of time compels some investors to invest, but they face losses due to price fluctuation. Using DCA is the best technique for short-term investors.
- Falling for FOMO (Fear of Missing Out)
FOMO means when some investors see the hike in the crypto market, feeling the fear of missing out on the high returns, so they invest, and in return, they face loss. To avoid these feelings and emotions, traders must remain certain, undoubtful, and disciplined in the crypto market.
- Overexposure to a Single Asset
Most traders invest a huge portion of their portfolio in a single trending cryptocurrency for the sake of high returns, but the crypto market is highly volatile, resulting in a great loss. Investing in various currencies is a great technique to keep your portfolio balanced.
- Underestimating Regulatory Risk
As the market of cryptocurrency is still evolving, some countries are developing new rules and regulations while some are restricting crypto in their countries. So, stay updated on crypto markets in your country and globally, because unavailability of some platforms may lead to high losses.
Diversification for a Balanced Portfolio
Balancing portfolios for traders is essential to grow in the cryptocurrency market, so the technique that stands at the top is diversification. It means that you must diversify your investment percentage across the crypto ecosystem.
Here are some diversifications to keep your portfolio balanced:
- Large-Cap Cryptocurrencies like ETH and BTC and Small-Cap Cryptocurrencies like Solana and Polkadot.
- DeFi tokens and Stablecoins must be considered.
- Blockchain platforms and NFTs can also help you.
- Portfolio mixes can also work well, it means investing 20-30% in Cryptocurrencies and 20-30% in Cash or Gold for stability and liquidity.
Conclusion
Cryptocurrency emerges as a high return investment along with more volatility in the market as compared to traditional assets. It means the more risk you take, the more return you get, it’s like a law. So, for those traders who really aspire to diversify their portfolio, cryptocurrency works as a legitimate investment. By adding this to their portfolio, traders may leverage facilities like high returns, market accessibility, and liquidity that can’t be offered by traditional assets.
Some mentioned techniques like yield farming, DeFi, and staking, will surely help investors to unlock the power of crypto and to outperform traditional assets. Along with adapting these techniques, investors must remain updated by the latest news globally, because knowledge is a power, so this will help them unlock the full potential of crypto.
Note: This is not financial advice.
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