In this article, we’ll explore three crypto trading strategies that are common to experienced crypto traders. None of them are a magic formula or bulletproof cryptocurrency investment strategy for all coins. There’s no such thing. These “strategies” are simply sound practices that you may consider adding to your own forecasting knowledge and trading behavior. And the last one looks at a long-term strategy for big investors buying and selling large amounts.
The crypto market is by far the wildest of the asset classes. Not even trading bots can predict crypto assets these days. Bear that in mind while we consider these common approaches.
Is BTC a “buy” opportunity?
Nobody knows who is holding Bitcoin right now, but it’s likely a lot of retail traders who bought at the 40K+ mark and didn’t sell at the all-time-highs. There must be thousands of crypto traders hoping for a new and epic rally so they can break even, but there’s no guarantee that cryptocurrencies will ever hype again. More about that later.
When Bitcoin settled into the 20K range, position traders started “gently” buying at the low prices and got comfortable, patiently awaiting the next rally. And then, just when we thought the crypto climate couldn’t get colder, a 4K Bitcoin crash shocked everyone.
It’s probably a good time to remind you that cryptocurrencies don’t have an underlying asset, so anything can happen. No matter how detailed your crypto trading strategies are, there’s always room for a surprise or two. So, how to trade crypto in today’s crypto climate?
Crypto trading strategies
Bitcoin and the alt-coins are being pushed by many internal and external factors, so avoid going “all in” on any forecasts, no matter how obvious the indicator assumption seems to be. Also, the strategies have different risk/reward ratios. Some are long-term “buy and hold” strategies, some are a little more risky with short-term returns.
Risk/reward ratios are especially important if you have a modest equity level in your trading budget. Higher leverage, higher risk crypto trading strategies can stop out low-equity accounts in a single day. Make sure your account settings are optimized to your trading budget and crypto trading strategy.
Buy & Hold
Buy and hold, also known as position trading, is a long-term cryptocurrency investment strategy. Traders go long on a coin and hold for anywhere from one to six months. A position trader watches trends and waits for reversals. In some ways, the position trader is following the most basic cryptocurrency investment strategy, which follows the “buy low, sell high” principle.
Given that the order stays open for a longer period, the trading account is put at high risk when position trading, as there are highly volatile crypto prices when a trend is starting and ending.
Buy & hold is one of the most common crypto trading strategies because it doesn’t require much trading experience. The “buy” part of the process is easy, but most traders get stuck when a rally actually occurs and prices rise. When should you close the order? How much profit is enough? For example, when Bitcoin hit 10K in July 2020, lots of traders thought it was overbought and waited for a fall. But when Bitcoin moved toward the 40K in January 2021, the world got Bitcoin fever. Those who sold at 40K were crying not long after. Nobody knew it would pass 60K+ just weeks later. Indicators gave no clue as to what would follow.
Bitcoin has been in decline for over a year now, and we haven’t seen such low prices since November 2020. While some believe this is just the bowstring being pulled back before the arrow is fired, others believe that crypto might be in its natural range. If you’re looking at the current 16K price and thinking a Buy & Hold seems like a good strategy, finish this article first. There’s more to know, and it could make all the difference.
Crypto scalping strategy
Scalping is also one of the go-to crypto trading strategies. An exciting and risky way to trade crypto. Scalpers prefer quick trades. A scalper can open and close multiple orders within minutes, as the highly unpredictable fluctuations occur within both trends and sideways cryptocurrency market levels. Scalpers don’t really care about trends, or what the media says. They open long orders followed by short orders, aiming for modest profits from micro-changes in hourly prices. While technical analysis is a big part of most crypto trading strategies, for scalping it’s at the core. For sure there are scalpers who have traded Bitcoin successfully, but they are taking risks not all traders are ready for.
Remember, there is no underlying asset behind Bitcoin. The market prices are only influenced by the traders. Price history cannot indicate future investor behavior – not consistently.
Technical analysis traders will use the common big-name indicators to identify patterns, so retail trading volume can be forecast based on cause and effect. Unfortunately, retail volume is only a fraction of the total volume of crypto being traded. Retail traders can only move markets when they are united.
Trade like the billionaires
This crypto trading strategy will never be explored by mainstream sites. It’s not really a strategy, more like a mindset. There are plenty of theories about what influences Bitcoin price movements. Cryptocurrency trading is totally anonymous and decentralized, so there’s no way to really prove one hypothesis over another. But one version stands out, fits the recurring price actions we see, and it simply makes sense. To make this explanation easier to read, let’s group all the billionaire investors and hedge fund organizations into one entity. Let’s call them P&D – the Pump & Dump crowd.
P&D is patient when it comes to crypto. After a crash, they slowly consume the sell-off volumes, making sure not to elevate the price. Bitcoin gets stuck in a low range. Once the sell-off volumes are exhausted, rock bottom is established. Now they need a rally.
When the world starts talking about Bitcoin positively, P&D get ready to seed Bitcoin with strategic buy intervals. But they are waiting for something significant to happen. As an example, let’s say major local banks around the world adopt crypto, create wallets for customers, and link debit cards. That’s next-level adoption, positive news for crypto. Within a day, Elon Musk and Warren Buffett are on CNBC saying Bitcoin is the future, and admitting that now is the time to get into crypto.
The big investors already have coins from the stagnant period. All this positive sentiment inspires investors to buy the current low, which prompts a price rise. At this point, P&D make their 1st seed and a trend forms. Retail investors jump in, and Bitcoin rockets. The news, of course, features the rally that everyone is talking about. Media dig up any content they can find showing a famous person who is positive about crypto. And the prices keep rising. This is when P&D make a 2nd seed and the crypto space goes crazy. Retail investors are buying like there’s no tomorrow, hoping to ride the money-making wave. The price gets high. P&D is ready to sell the 1st seed volume. Profit was significant, matching or exceeding the 2nd seed investment amount. The sell-off creates the first drawback.
It’s exciting times. Bitcoin traders buy more during the dip. Those traders afraid of missing out take advantage of the temporary price fall and join the crypto buzz. Volume increases again, the price goes up, and champagne corks pop.
P&D still have money in the game. Buying volume is slowing, and prices are on the roof. Time for the second dump to get returns on the 2nd seed money. Another drawback follows. Some traders buy, some just watch and hold. As the trend is fading. Traders sell, but only a few diehard traders are still buying. The price line crowns, the rally is over – and almost everyone hits the sell button. P&D made a killing in the market. As did the early retail traders. The FOMO crowd broke even or lost a little. The latecomers get stuck with the bill. And balance is restored.
Is now the time to buy BTC?
First, “they” know that we know what they are doing. So they might plan to change their cryptocurrency investment strategy. Perhaps they will only create one drawback. They might make three drawbacks. Nobody knows, not even them. So expecting this cycle to happen again for the 4th time is a stretch. Second, recession fears may also play a part in BTC’s winter prices. People expecting an economic downturn might think twice about investing in cryptocurrencies. That goes for P&D too. In tough economic times, the rich park their money in haven assets. Bitcoin is the opposite of a haven asset.
Last, there’s that 4K sell-off that took BTC from 20K to 16K. The stable low price was established and holding at 20K. The 4K fall surprised everyone. A massive, perfectly timed selloff within 24 hours. Definitely not something that would occur from standard retail volatility. It seems P&D are not willing to make a 1st seed, not just yet.
It could be that they want their equity in something a little more stable before the economy implodes. If that’s true, then expect more rapid dumps on the BTC chart. Even knowing what we know, it’s still hard to forecast Bitcoin, so trade crypto with caution this winter. Watch multiple crypto news sights daily, and don’t expect BTC to rise without a big reason.
