Should you hold crypto for a long time or day-trade? While there are many crypto enthusiasts who would recommend day-trading, there are many benefits or advantages of holding cryptocurrency for long-term investment.
In order to understand what a long-term investment is, let’s break it into the parts that will make it easy for everyone to digest.
The word investment is connected with the word invest which means “to put one’s money in an asset, in the hope that it will gain value in the long term”. It can of course be a stock or crypto, but it could be in a house, or in the education of your children. Long-term implies that if you are to engage in such an investment, you don’t expect the returns to happen instantly, but rather it should take time.
All good things are said to take time. There is a time to sow or plant the seeds and a time for harvest. All of these concepts apply to long-term crypto investments.
Is Crypto a Good Long-Term Investment?
Should you invest in crypto for the long term? Is it going to be worth it? The answer would greatly vary on your definition of the long term. If you invest in a 401K at 20, you know you want to get that investment back when you are 60. You know that others have done this way before you were born.
With crypto, however, Bitcoin has been around since 2008 and is definitely young and volatile. This means that, while crypto punks see it as a long-term investment, they are essentially gambling that something that hasn’t been around for long, is here to stay for a long time. This isn’t right or wrong. It is up to you to decide whether a decade of data is enough for you to satisfy your risk appetite.
That being said, there are intrinsic elements in Bitcoin in particular, but also crypto in general, that makes it quite attractive as a long-term investment.
- Crypto is getting stronger. It used to be that the collapse of a single exchange can cause all of the market to crash. Today, however, a China ban on crypto did not even cause price crashes or moon rallies among major coins. The traditional sophisticated investors, has had BITCOIN, and now ETHEREUM futures contracts in CME. This means that these are here to stay. As a reminder, you can’t find lots of pairs on the CME other than mostly commodities, a few majors forex pairs, and the US indexes. No stocks, or ETF’s. In other words, you are in good company.
- Fantastic ROI. A crypto asset has historically broken records in terms of ROI relative to any other asset. The volatility of crypto makes it such a fantastic and appealing long term investment vehicle. The fact that it is not tied to any government is also fascinating.
- Hedge against Inflation. In general, crypto coins have a limited supply. Bitcoin, for example, is limited to 21 million coins that will ever be mined. This means that, whether you want it or not, there will always be a scarce supply, and by the time no more coins can be mined, the supply will no longer exist driving the price up. This is in stark contrast with how the federal reserve can print money without problem, essentially diluting your purchasing power and increasing inflation.
Are there Risks to Investing in Crypto for Long Term?
By far, your biggest risk when investing in crypto is related to how and where you store your crypto. So, if you decide to keep a hard wallet, and then you forget your wallet keys, well, you can say goodbye to your investment.
More so, if the exchange you stored your keys on happens to be hacked, then you also lose your money. Sometimes, the US federal government might decide to take over your exchange wallets. You then find yourself in a legal lawsuit with the US government.
Which Crypto is the Best for Long-Term Investment?
Choosing crypto depends on your risk profile. Bitcoin and Ethereum remain the top safest and most known coins out there. They have survived the test of time, and a massive part of the ecosystem depends on them, especially ETH.
Riskier investments can be made on DeFi itself. Be advised that this would require you to know what you are doing. But with every high risk, there’s always a high reward!
How to Invest for Long Term on Crypto?
If you do not have experience trading, you can create a general basket of coins. The most important aspect of investing is learning to do nothing or almost nothing. And be consistent at doing just that. Remember, it is a long-term investment.
Make sure you understand the fundamentals of the coins you are interested to invest in. Research the team behind it, code, white paper, social media, etc. And try to make sure your investment is diversified across different sectors so as to avoid risk correlated losses.
Choosing the Best Platform for Long-Term Crypto Investments
Once you decide on which coins you want to invest in, you will need to find a platform to purchase them from. Try to find a local exchange that is trusted, or use a regulated global exchange like Coinbase or Kraken.
Crypto has intrinsic risk associated with it, so it’s best to avoid having risks related to the exchange. Once you have money in a crypto account, it’s time for you to purchase the coins you want based on your strategy.
How To Safely Store Your Crypto?
There are a number of good software wallets out there that are pretty easy to set up. The safest way to store crypto though is in a hardware wallet. With both of the options, you own the keys, and no one but you has access to it. This approach does bear the risk of you losing access to your keys though.
If you do not want to take that risk, you can store it on a popular exchange. The custodian business has evolved a lot and most of the exchanges use advanced solutions from 3rd parties to store crypto in cold wallets.
But, at the end of the day, safety in storing crypto is just like having a safe password. If you don’t put in the effort, you expose yourself to the risk of losing your crypto, be it investment coins or trading coins.