What is the top Bitcoin investment strategy?

International transfers

Bitcoin can be used for international transfers, as its open network allows the sending of funds globally without bureaucratic barriers .

Additionally, sending BTC and other cryptocurrencies can be considerably less expensive. International transfers usually incur high transaction fees.

Sovereignty

Through self-custody, the BTC investor can effectively be sovereign over their money. This means that no government or institution can simply confiscate the assets.

This feature is especially important for investors living in dictatorships or countries with a history of confiscating savings assets.

Speculation

Many investors and traders may buy this cryptocurrency to speculate on future price action.

Due to its high liquidity and volatility, it is quite an interesting asset for trading and speculation. Under these circumstances, there is also a possibility of wagering that its price will drop-thanks to short positions.

World liquidity

It is a highly liquid asset on a global level. The degree of liquidity is connected with a volume of transactions of a specific financial instrument. Bitcoin, contrary to the vast majority of assets, is traded on large volumes in almost all countries of the world.

As such, it is a great asset for those seeking liquidity. This asset can be potentially useful for:

• Billionaires;
• People who travel a lot;
• International investors.

Bitcoin Savings

Notably, there can be a difference between savings and investment, depending on the definition used. In this context, many investors use BTC as a savings asset.

Savings should be kept in a liquid, safe, and stable asset. Amongst them, Bitcoin is unstable in terms of price. However, volatility regarding the cryptocurrency has decreased dramatically over the years.

It is likely to stabilize also in terms of purchasing power soon, in the near future, as gold did, once it establishes itself as a store of value.

Other investors will look at Bitcoin as an investment because they think of nominal profit in the government currencies. A few more ways to exploit the asset as an investment are on the platforms or even the DeFi protocols.

What is the best bitcoin investment strategy?

The financial markets offer a wide range of financial instruments and financial strategies for various investor profiles. It’s up to them to find the best option according to their expectations.

Some of the top strategies for Bitcoin trading include:

Day trading

Day trading involves short-term trading. The trader’s goal is to time price movements, whether positive or negative. Bitcoin is a widely traded asset among traders due to its high liquidity.

Day trading is mainly carried out through Graphical Analysis studies. This type of trading is recommended for experienced investors who are capable of handling it.

Swing Trade

Swing trading refers to short- to medium-term trading. This type of trading is also close to day trading because this type of trading applies technical analysis. However, even though in technical analysis, fundamental factors can be applied in this type of analysis.

Hold

Hold simply means buying and holding Bitcoin for a very long period. In fact, this has become a way of savings for investors who are confident of the future regarding the cryptocurrency.

Investors in Bitcoin prefer to take care of their funds for the long term through self-custody. Of course, this is a personal choice for every investor.

Profitability

One can generate BTC by investment into exchange or DeFi-protocols trade platforms. The mechanisms of such generating income include different instruments that can or cannot be economically sustainable in the long term.

For example, this can be done through the Lightning Network , a second-layer protocol capable of carrying out transactions at low cost and high speed. This monetization occurs through the routing of transactions between payment channels.

Bitcoins monetization normally generates returns of 2% per annum. As a result of such adverse results, most investors only hold deposits in custody rather than incur this additional risk.

Mining

The first type of “buy” Bitcoin does is to the miners. However, this “buy” is done by burning electricity and all other computing power. To mine, you just need to have some processing power, some degree of access to electricity, and the Internet.

Mining is currently a highly competitive activity, run by large, publicly traded companies. Mining with home electricity may not be profitable, based on Bitcoin’s market prices.

Additionally, mining can be the most anonymous way to obtain cryptocurrency, which can be attractive to many investors.

Arbitration

Arbitrage involves trading a given asset on different platforms or markets to profit from the price difference. For example, BTC may be trading at a 2% price difference between two national brokers .

Thus, arbitrageurs would take profits on opportunities for theoretical realization in the income generation area; they could act as market makers if they try to close the gap by buying on the platform with the lowest price and selling on the broker with the highest price. International differentiation of prices among different countries might also provide a sizeable room for negotiations.

This strategy is easier to execute as compared to the previous ones. As of now, professional traders and firms, coupled with automated trading bots, dominate this market. Moreover, arbitrage is also risky and expensive, and hence it can only be done by a few individuals who are having special knowledge.

DCA

DCA stands for Dollar Cost Averaging, wherein an investment strategy is made to purchase a fixed dollar amount of security consistently. It is a widespread strategy adopted by BTC savers as well as those who try to tame their portfolio’s volatility over time.

Diversification strategy

Diversification is a very popular strategy in the financial market. Through this strategy, the investor can spread the risk across different positions.

The cryptocurrency market is quite varied. Some investors may choose to invest in stablecoins or companies in the sector.

For example, you can gain exposure to the price of BTC by buying shares in MicroStrategy, the largest corporate holder of the cryptocurrency. In fact, the company’s shares may outperform the price of Bitcoin, since the company is leveraged through borrowing.

Other investors, meanwhile, may prefer to invest in alternative cryptocurrencies such as Ethereum (ETH), Monero (XMR) and Bitcoin Cash (BCH).

Bitcoin ETFs and Funds

BTC ETFs and mutual funds can be a good investment strategy. Most of these funds are non-existent and can only be settled in fiat currency.

Typically, the assets of these funds are stored in specialized custodians, which increases the security of the operation. In addition, these funds usually have annual management fees. In addition, the funds may have their own rules, which must be analyzed by the investor.

The importance of self-custody

Self-custody essentially refers to the creation and secure storage of specific keys, private ones in this case, associated with a Bitcoin address. In such a scenario, only the owners of the keys are allowed to transfer the coins.

Long-term bitcoin holders like long-term storage techniques. Long self-custody, or what one may term a form of cold self-custody, kept off internet-accessible devices, is an excellent option for the investor in case he wants to really put himself through owning his bitcoins.

There are custodians that specifically store BTC, and investors should choose a suitable bitcoin storage strategy as this is a very relevant factor in investing in the cryptocurrency.

Bitcoin Investment Volatility

It is still a volatile asset when compared to the price of gold. For example, in the previous bear market, BTC dropped by around 70%. Due to this fact, investors need to keep a close eye on the market if they are worried about the short-term price.

But the same volatility may prove beneficial for Bitcoin. Price can explode sky high during a bull run. After the official ending of the late 2022 bear market, the BTC price increased about fourfold.

In addition, there are ways to reduce the volatility of investing in BTC: for example, DCA.

Many investors also opt for the strategy of buying during dips. In the event of a market recovery, investors can earn high returns with this strategy.

What to consider when choosing a strategy?

The choice of the investment strategy in BTC should be left to the investor, in view of his/her expectations. Such a strategy may be individually designed or made through a financial advisor.

More active investors with less risk aversion can choose day trading, swing trading, and monetization strategies. More conservative investors can choose holding, combined with diversification into other financial assets.