Why keeping a number of different cryptos in your wallet is a good idea if you are planning to hold on to your cryptos? Well there are “various” reasons. Please read on for why I believe keeping a variety is better. And with dollar cost averaging, we will be able to get further with our investments.
HODL – Holding On to Dear Life. Basically means you are keeping your cryptos for the long term (like for years) and not selling them even when the market moves for the short term. In my opinion, this is actually a pretty good strategy. If you are going in for the long haul, HODL will usually yield you better results rather than keep buying and selling. This is because inevitably the market will turn bull. And whatever “crypto winter” will end. I would like to add that in addition to HODL, you can also dollar cost average your investments. This means you simply divide up your investment funds into smaller chunks and deposit at regular intervals. This strategy is very good in such a volatile market like the Crypto market. A good time to enter is when there is a dip. But honestly it is nearly impossible to predict the low or the high.
However do note that if the crypto you are planning to HODL is not sustainable, the price might go to zero. So only HODL those with at least some potential to be good. Not those meme coins (like our beloved DOGECOIN) or rug pull coins which might disappear the next month or year. For those tokens, I would suggest you not to keep for the long term. They are mainly for speculative trading only.
However there is one more often forgotten trading strategy – getting into a variety of different types of cryptos. No, I am not saying buying up all the top 20 cap cryptos you see on the exchange, but choose a few different types of cryptos – like defi, smart contracts, store of value and even stablecoins. But why you might ask? Well….because they simply spread the risks. Just imagine you are holding only BTC and one fine day some very strange celebrity claims that Bitcoin is one of the world’s most inefficient currencies out there and he wants to destroy it. We don’t want to name names here but we all know what the impact will do when someone does it. Same for Ripple and their XRP tokens right? Such things do happen in the Crypto sphere and the project might take a huge hammering in the short term. So yes spreading your risks around is a good idea.
The reverse can be true as well. Again imagine if you are holding those SWAP tokens and one fine day, the biggest centralized exchanges got hacked or went down or got shut down by the government. What would that mean for Decentralized Exchanges or DEXs? It means that traders will have no choice but to use DEXs now. Of course the entire Crypto market will take a slight dip as traders and investors will be extremely concerned but they still need to do trading right? And to do trading in those exchanges, you will need the underlying tokens. So demand for these SWAP tokens will increase and thus the price will rise as well. And if you are holding these tokens, you might want to offload them to cut your losses from your other crypt holdings. You can of course use the profits to go buy cheap cryptos as well. Win- win situation.
Stablecoins is yet another category of tokens which a lot of traders do not carry in their portfolio. But is it often underrated. Who can blame them? Their main purpose is for traders to exchange other cryptos with. It just makes trading easier as we get a stable “currency” to trade with. However keeping them in your wallet and able to use them at a moment’s notice can be mean huge profits. And if those “HOLDers”, the stablecoin interest rates are pretty high if you are thinking of lending them out to others. Sure they don’t increase in value but they are always in demand. I will usually keep a small portion of my portfolio in stablecoins, especially if the markets are down. I think of stablecoins as convenient “cash” sometimes. It is always good to have some cash on hand am I not correct?
Even keeping some store of value tokens can be a viable trading strategy as well. These are easy to understand tokens and you don’t need to too much technical knowledge to use the token. And these are usually what big institutions and whales usually aim for. So when they pump it is usually big money. Of course when it dips, the reverse might be true as well.
So investors should diversify their portfolio. If you have been targeting only one or two coins, I think it might be better to start changing tactics. And of course you will learn more about the different types of cryptos out there as well. And with more knowledge, there will be less FUD and FOMO around. And with less FUD and FOMO, the crypto market can finally mature. Hopefully. And please ensure that you have sufficient funds to meet your daily needs in case of a sudden downturn or unexpected need.
By the way, I am no financial advisor. Please do your own research and all investments come with a certain level of risk. You can check out my portfolio and see which tokens I am currently holding.
One reply on “HODL, crypto variety & dollar cost averaging strategy”
[…] So if you have always wanted to enter the cryptosphere, I believe now is the time. Don’t go all in but spread the risk out by dividing your funds over a longer period. Not just during a bear market, this strategy works even during a bull market. But not only should you spread out your funds for a longer period, you should also get into a variety of cryptos as well. Don’t just stick with one crypto. You should read my post about HODL and spreading risks. […]