A lot of people that start investing in crypto want to get rich quickly. However, is short-term investing the right approach to investing in crypto? Is it better to hold cryptocurrencies for the long-term, or should you go for short-term investments to get rich quickly?
This blog post explains to you what the benefits and the downsides are from long and short-term investing so that you as a beginner can decide how long to hold your cryptocurrencies in the crypto market.
Holding Cryptocurrencies in the Long-term
- Long-term investing is less risky because you are investing from the macro perspective (whole market) of the market. This has the benefit of you focusing on markets that have an upward tendency or that you are aware of the overall market situation.
- Long-term investing is simple, and you are always in the market, which enables you to learn consistently. This knowledge can later be useful to adjust your crypto portfolio in a more sophisticated way.
- It is less risky. This is the case because you have a long-term investing plan and stick to this plan. You are aware of the risks that you are willing to take. This makes you less prone to emotional investing, which could cost you a lot of money.
- It takes a long time. Investing for the long-term is not getting rich quickly. It is essential in long-term investing to wait at least 4 years or more before taking profits. This long-term investing method also applies to the crypto market. Especially when you take the bitcoin halving into consideration, that shortens the number of bitcoins that can be mined per block.
- You have to shift your mindset from short-term rewards to long time rewards. This means that you have to look out for investments that are going to be around in the next 10 years and longer. This means that you can’t just jump on an immediate crypto hype. You can of course still enjoy the crypto hype and invest in it, but you should not invest a lot of money into it.
Holding Cryptocurrencies in the Short-term
- You can earn a lot of money in a short time. This is especially possible if you invest in the crypto market because the market is volatile.
- You learn a lot in a short time in order to not lose money
- You tend to not have a macro perspective on the market. You mostly have a micro perspective on the crypto market. This means that you are only interested in the immediate day or month of the market. This has the risk of not realizing if the whole market is in a bull or a bear market.
- You can lose a lot of money. If you don’t invest, extremely cautious. Since you are mainly focused on the micro perspective of the market, you have the risk of having more downward potential. Additionally, you can have 5 great investments, and then you have 1 investment that could cost you a lot of gains.
- The risks are really high. Investing into the crypto market is overall speculation, but if you invest in the short-term then you have even higher risks because the market is unpredictable.
- You get emotional very fast. If you lose money or when you gain money, you either start to be more greedy or you want to make your money back. Investing under such circumstances is very risky and can cause you to lose the money you can’t lose.
- Another problem with short-term investing is that beginners usually do not have sufficient knowledge to succeed as a day trader.
This video below shows you why 80% of day traders lose money. He only talks about stock trading, but you can also apply this principle to cryptocurrency because you also speculate with stocks that the prices are going up in the future. The only difference from a trading standpoint from stocks to cryptocurrencies is that you can yield dividends with stocks, and that the crypto market is even more volatile than the stocks market.
To sum it all up, it can be definitely said that it is better for beginners to invest in the long-term to be successful in the crypto market. Investing in the long-term allows you to plan properly, and you don’t get so emotional if the market goes up or down in value. Cryptocurrencies are also mostly limited in the number of coins that can be mined. This means that the crypto market is resistant to inflation and that crypto adoption is in your favor in the long-term
Holding your crypto for a long time is also aligned with the stoic principle of persistence and resistance. Since holding your crypto for the long term is less risky, you have time to adjust and learn more about the market. This allows you to get better over time to make better adjustments to your portfolio in the long run.
Another stoic principle that supports long-term investing is that you are less likely to invest with emotions. You are under the control of your emotions because you see the big picture of your investment.