Crypto has had a rough year, and with a potential recession on the horizon, it’s easy to feel discouraged as an investor.
However, the right strategy can help make investing in crypto more bearable. While crypto is still speculative and nobody knows for certain how it will perform over time, there are a few things smart investors know that can help maximize your earnings.
1. Crypto is a long-term investment
Cryptocurrency is not a “get rich quick” scheme, and trying to time the market can be incredibly risky. Rather than trying to buy and sell at just the right moment, a safer strategy is to simply hold your investments for the long term.
This isn’t to say that it’s impossible to make a lot of money in a relatively short period of time with crypto. However, a long-term approach is both safer and more realistic, and it will reduce your chances of losing a lot of money if you buy or sell at the wrong moment.
2. Volatility is normal
Part of maintaining a long-term outlook involves bracing yourself for volatility. Even if crypto does thrive over the long run, it will likely experience extreme ups and downs along the way as it finds its footing. While this can be unnerving, it’s also normal for the crypto market.
Bitcoin (BTC 4.92%), for example, has lost more than 80% of its value on multiple occasions. And Ethereum (ETH 5.36%) once saw its price drop by close to 95% over the course of a year. Yet those cryptocurrencies went on to become two of the strongest players in the field.
Volatility isn’t easy to stomach, but try your best to stay focused on the future. Long-term growth is more important than short-term dips, and turbulence is par for the course with crypto.
3. Real-world utility is key
One of the most challenging aspects of investing in crypto is deciding which investments are most likely to thrive over time. All of cryptocurrency is speculative right now, and even the most popular investments aren’t guaranteed to survive.
The ones that have the best chance of succeeding, though, are the ones that have real-world uses. Before you invest anywhere, as yourself whether that cryptocurrency has any utility. If so, how does it stack up to its competitors?
By focusing on utility, it will be easier to determine whether a cryptocurrency is a strong long-term investment or overhyped.
4. Downturns are smart buying opportunities
Market downturns can be intimidating, and it may be tempting to hold off on investing until prices recover. However, market slumps can be one of the best opportunities to buy.
Crypto is often expensive, with investments like Bitcoin and Ethereum costing thousands of dollars per token. During a downturn, though, you have the chance to buy the same cryptocurrencies for a fraction of the price. Many cryptocurrencies are down 50% or more from their peaks, making right now one of the most affordable times to buy.
If you’re investing in strong cryptocurrencies and holding them for the long term, there’s a good chance your investments will rebound eventually. When that happens, you could see substantial returns.
Investing in crypto isn’t always easy, especially during periods of volatility. But the right strategy can protect your money as much as possible, regardless of what the future has in store for cryptocurrency.
Katie Brockman has positions in Bitcoin and Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.