Currently, investing cryptocurrencies over the long-term has been proven profitable, but it is important that you know about the market before investing. Luckily, investing for the long-term can be one of the most simple ways to invest, at least in theory. New investors may find it hard to hold onto their investments after 50%+ moves in either direction.
A great benefit of cryptocurrencies is that their issuance and operating rules do not depend on a central bank or other financial institutions; instead, they’re managed by programmed algorithms that no single entity controls. Instead, the network decides the cryptocurrency's future through a decentralized voting process.
Many established cryptocurrencies are currently on the market, and over the long term many of these assets have appreciated in value radically. Many of these assets have a market capitalization in the billions of dollars, and we will focus on the largest cryptocurrencies by market capitalization, as many of these investments have the best long-term potential.
Long-Term Investment in Cryptocurrencies
This type of investment in crypto is when you expect its price to increase over time — usually an investment that must be maintained for a minimum of 6 months to 1 year. In some cases, long-term crypto investors plan on holding their investments for decades. Investments can be made in parts, and dollar cost averaging is a great strategy for many investors.
Many long-term investors also earn interest on their digital assets while holding them. If you're holding Bitcoin, Ethereum, or other cryptocurrencies, you might as well earn interest on them to accumulate more coins over the long-term. Platforms like Hodlnaut make this possible, and you can earn up to 12% interest on your digital assets.
Best Cryptocurrency Investments for the Long Term
1. Bitcoin (BTC): is the largest cryptocurrency in the world, the 1st and the most popular in the market. It was created in 2009 by Satoshi Nakamoto, whose identity is still anonymous. Bitcoin can be referred to as "private money" as opposed to fiat currency which governments control. There are no institutions or governments that control Bitcoin's supply; instead, the parameters of Bitcoin's code control its monetary supply. Bitcoin has a supply of 21 million maximum coins and more than 18 million have already been mined. This finite supply makes Bitcoin the best store of value cryptocurrency on the market.
2. Ethereum (ETH): This is the 2nd-largest cryptocurrency by market capitalization, created by Vitalik Buterin and 7 others in 2014. It's one of the largest platforms for decentralized applications also known as DApps. Ethereum is the platform and Ether is the currency used by the Ethereum platform. This currency works thanks to smart contracts, which is a set of conditions and actions that were created by its developers and are executed by the network with a series of defined rules.
3. Chainlink (LINK): Among the best cryptocurrencies to invest in last year was Chainlink. Even today the project is valid and arouses the interest of retail and institutional investors alike. Why was Chainlink successful? Mainly thanks to a system of "nodes'' defined as Chainlink nodes (CN), which are configured to monitor the progress of an event in order to provide said data to smart contracts. A revolutionary tracking method that sparked the LINK Token boom.
4. Polkadot (DOT): Polkadot is referred to as a layer-zero blockchain. It will support 100 parachains on its platform, allowing distinct blockchains to be able to communicate with each other. It's a proof of stake blockchain which seeks to be a scalable solution for smart contract blockchains.
5. Uniswap (UNI): Is a leading token on Ethereum's blockchain. It's the governance token for the largest decentralized exchange (DEX) on Ethereum's network. Uniswap is essentially the Coinbase of blockchain projects. Users can trade crypto using Uniswap without needing to sign up for a cryptocurrency exchange account. Instead, simply connect your wallet to Uniswap's website and you can begin trading crypto directly from your Ethereum wallet.
Where to Buy Cryptocurrency
Many platforms offer cryptocurrency trading. So, search for the best option that is safe, legal, convenient and has low costs. Here are four of the best cryptocurrency trading platforms:
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The Benefits of Long-Term Investing In Cryptocurrencies
There are 3 key benefits of long-term investment in cryptocurrencies:
Historically it works. Over 5 years, some indices show similar rates of return. The S&P 500 generally has a rate of return of 60% over a 5-year period, while the FTSE 100 has a return of 25% over the same period. This happens almost every 5 years throughout history as markets tend to rise. Over the same timespan, the cryptocurrency market has appreciated over 10,000%. Although seeing these returns again is unlikely, crypto could still outperform traditional investment markets in the near future.
The fees are lower. Active trading increases transaction fees. By using the long-term strategy and taking the long-term view — and leaving your investments alone after the purchase — you are not incurring any trading fees. A long-term investor does not trade on a daily basis and therefore does not reduce their profits through trading fees.
The risk is less. When you constantly move in and out of the market, you run the risk of missing out on a profitable opportunity while you are outside the market. With the long-term investment strategy, you are always in the market.
Long-Term Investment Strategy
We must be clear about the investment objectives before investing any amount:
- Will you sell when the crypto grabs a certain price or after a certain time?
- Will you sell in parts at different times or all at once?
- Are you willing to trade your long-term vision for a short-term investment? For example, if gambling strategies change or new laws are applied that could affect the economic conditions and long-term prices of your investment, it is likely that you should reconsider selling beforehand.
- It is convenient that you should do a little research to decide which cryptocurrencies are the most convenient or the best to invest in for the long term.
Another strategy many crypto investors use over the long-term is to earn interest on their digital assets. Instead of simply holding your Bitcoin, Ethereum, or altcoin, you can stake them through a crypto wallet to earn anywhere from 2% to over 10% annually on your cryptocurrency. What's great about this is the interest is paid in the crypto you stake, so you'll be able to accumulate more cryptocurrency passively. Exodus wallet lets users stake their crypto for interest, as well as trade and store crypto securely. Exodus is available on iOS, Android, and desktop, and it's free to use. Domain Money offers managed portfolios that include a curated basket of crypto assets for your long-term investment strategies.
How to Choose a Crypto Asset for the Long-Term
Market share, utility value, transaction volume, technology development and market news are some ways that cryptocurrencies can be assessed for long-term value. Here are some questions to ask about the cryptocurrency you are considering to determine if it can have long-term value.
Market share: How much market share does this cryptocurrency have against other currencies? A large market share indicates a dominant position. Be sure to compare the crypto project with similar competitors, as not all cryptocurrencies compete with each other.
Utility value: Does it have a use? Is there a market for users? What is the underlying purpose it aims to resolve and is it feasible for that purpose? Being a purposeful and useful product means that it is likely to be widely adopted and, therefore, a good long-term investment.
Transaction value: How often do people transact the cryptocurrency? Has this amount been increasing over time? An increasing number of users indicates that a crypto is in the process of being adopted and, therefore, a good long-term investment.
Technology development: Does it have positive technology development that makes sense for its purpose? Adapting the technology to the purpose means that it is more likely to be adopted and thus gain market share against its competitors.
Market news: What does the market news say? Is there a problem that could affect your long-term profitability? Read the market news and stay up to date on developments to make informed and healthy investment choices.
Cryptocurrency Network Effects
The digital currencies presented in the top 10 of the Coinmarketcap rating are the most trusted among traders and crypto investors. This is due to various factors, and the most important among them are:
- High liquidity
- Stable growth of the exchange rate
- Prospects for further development of the ecosystem
- The reputation of developers and team members
Cryptocurrency Investing Tips
Start by investing little. If this is your first time, you are most likely eager to invest in cryptocurrencies, but we advise you not to anticipate, be patient, and take your time to develop basic cryptocurrency trading strategies.
Prepare yourself as much as you can. If you don’t know about blockchain technology and Bitcoin, circulating supply versus total supply, inflationary vs deflationary supply, wallets vs exchanges, private and public keys, you may encounter problems while investing.
Prepare and read more about cryptocurrency investments — it’s essential.
There are investors who lose money for simply not knowing how to start. Preparing yourself will give you experience and will help you in making decisions; experience is also acquired through the mistakes you make.
The path is risky, but if you do it well and calmly, you will be better off and most likely see high returns on your investments.
Cryptocurrency Market vs. Stock Market
If you’re a cryptocurrency enthusiast and know the basics of how the stock market works, you may have noticed that there are many things in common between these 2 universes.
In both cases, it’s possible to buy and resell the movable property, to make a profit and invest in varied projects. Each time, it will be necessary to carefully read the specialized press and to be informed as much as possible on the markets.
But there are also fundamental differences between these 2 areas.
The stock exchange, for example, has already been established for centuries, and its functioning is institutionalized, surrounded by laws and well-defined organizations. A very large part of the economy works thanks to it.
Cryptocurrencies are still very recent. Bitcoin emerged in 2009, and the development of the sector is still in its infancy. Governments around the world have not fully examined it, and so it is still a universe where pyramid schemes and insider trading are common.
Some predict that the crypto-asset universe represents the future of the stock market as we know it today. Others are more cautious and speak of a parallel market. But many crypto investors agree that the share of cryptocurrencies in the real economy will increase at the expense of the stock market.
How to Store Your Crypto Safely
If you want to make a long-term investment in cryptocurrencies, you should keep your digital assets away from trading platforms because they are vulnerable to hacking at any moment. The best option for preserving digital assets is by acquiring a hardware wallet. Hardware wallets are offline wallets that provide cold storage for your cryptocurrencies, making them impossible to hack. Ledger Nano S is one of the best hardware wallets in the world that allows you to store a large number of cryptocurrencies, as it is secure and the wallet can be retrieved easily.
Another option for storing your cryptocurrency is Exodus Wallet. This software wallet has tons of features to let you earn interest on your digital assets, which many long-term investors do for larger returns. Exodus is free to use, and it's available on the mobile app store as well as desktop.
Is Cryptocurrency a Good Long-Term Investment?
Historically speaking, yes. For example, Bitcoin has outperformed many major indices including the Nasdaq and gold over the last year alone. Looking back even further, if an investor bought Bitcoin two years ago and held it until today they would have outperformed the S&P 500 over the entire last decade.
Though Bitcoin’s importance continues to drive crypto markets, it’s also key to familiarize yourself with the new blockchain projects and protocols that go beyond Bitcoin’s store and transfer of value. Regularly following the news to gauge where the blockchain space is headed is critical to becoming a successful long-term investor in crypto.
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