In the cryptocurrency industry, investors and traders are always looking for ways to make profits from the market in the short-term. The cryptocurrency market moves in a fast way which usually results in quick profits and is also accompanied by some risks and volatility. It takes thorough analysis (fundamental or technical) and as well understanding of market trends, project fundamentals, and general market sentiment to select the best cryptocurrency for short-term investments.
The elements of this content will focus on some strategies to adopt when making short-term investments, the important factors to look into, examples of cryptocurrencies for short-term investments, and what short-term investments are all about.
What Is Short-Term Investment?
Traders profit from the short-term price volatile nature of a coin that gives more profits than just holding an asset on a short-term investment. Putting some factors into consideration such as; funding fees, capital profit tax, etc, long-term investment is less expensive and the effort required is lesser. After the execution of a short-term investment, the investment decision can be changed whereas in long-term investment that is not possible, therefore making long-term investment risky.
Factors To Consider When Making Short-Term Investment
- Market Volatility: Although the volatility of the market might present profitable short-term investment opportunities, high volatility also carries a higher risk. For prudent investors, moderate volatility might favor them.
- Market Liquidity: Liquidity is essential for short-term investors and traders because it allows simple entry and exit from trades or investment from positions without substantially changing prices.
- Effects Of News: Also ensure to be current about possible news in the cryptocurrency industry that could have an effect on the prices. This news includes; favorable policies lay on cryptocurrencies, new technological advancements, and partnership announcements.
- Fundamental Analysis: Analyze the project’s fundamental technology, the use case, the team, and community engagements to fully comprehend its long-term potential.
- Technical Analysis: With technical analysis, you can get to know proper entry and exit points by analyzing the price patterns, charts, and indicators.
Examples Of Cryptocurrencies For Short-Term Investments
1. Bitcoin ($BTC)
Bitcoin uses a technology known as “blockchain”. This technology works in a network based on decentralization to safeguard peer-to-peer transactions. It enables transactions between two parties without the need for a third party to execute a particular transaction. Bitcoin is used as a medium of transactions in exchanges of services and also as a store of value.
2. Ethereum ($ETH)
This is the second crypto project with a large market capitalization. New crypto coins and decentralized applications can be created using Ethereum on its network. Ethereum brought about the idea of smart contracts which plays a vital role in the crypto industry. Ether is the native token of the Ethereum network. It is used for making transaction payments on the Ethereum ecosystem.
3. Binance Coin ($BNB)
Binance is one of the biggest centralized exchanges, performing a multipurpose tasks such as; serving as a trading platform, serving as a wallet platform, a launchpad platform, etc. Binance coin ($BNB) is the native coin of $BNB. $BNB coin can be used participating in token sales on Binance launchpad, it is used to give lower trading commissions, it can be used in a decentralized applications for the purpose of decentralized finance (DEFI) activities in the smart chain network, also enables transactions on cross-chain.
4. Solana ($SOL)
$SOL is the native token of Solana. Solana is created to assist projects that are developed on decentralized applications (DAPPs) and decentralized Finance (DEFI). However, it is a blockchain platform that helps to execute transactions in a fast and less expensive manner. Solana is used for staking, investments, or for performing other transactions on the Solana ecosystem.
5. Cardano ($ADA)
The Cardano network has a native token called ($ADA). It enables the creation of smart contracts and decentralized applications due to the possession of blockchain technology and its flexibility. It distinguishes itself by prioritizing durability, and scalability, and enables sustainability which assists in the rapid adoption of blockchain technology in various institutions. It is used for carrying out transactions, and staking, and functions as a governance token.
6. Polkadot ($DOT)
Polkadot is used as a governance and bonding token and it has a native coin called $DOT. This is a multi-chain platform that makes it feasible for numerous blockchains to communicate with one another. It strives to build a network that is decentralized and accessible that can render the transmission of data between several chains. It is used for governance, staking, and bonding.
Strategies Suitable For Short-Term Investment
- Scalper Trading: In scalp trading, traders buy and sell coins on a short price movement. It’s one of the fastest-paced kinds of trading. A scalper trader capitalizes on an increase in trading volume and the trade can take up to a second, minutes, or an hour.
- Day Trading: Day traders usually hold a trade within a day and they discourage overnight position trading. The durations for each trade range from minutes to hours. Day traders take advantage of daily price movement for profits.
- Technical Analysis-Based Trading: In technical analysis, chart patterns and indicators are used to predict the movement of cryptocurrency in the short term.
- News Trading: Traders take advantage of the news to trade the market and also make short-term investments. Example of such news is collaborations with other projects, technological advancements, etc.
Short-term cryptocurrency investment is very profitable but it is important to note that subsequently, it comes with a high level of risks. As a crypto enthusiast, before you succeed in short-term investment or trading, you must carry out good analysis, research, and proper risk management.
To have a good balanced crypto portfolio, it is essential to carry out both long and short-term methods of investment. For any investment advice, always contact an expert in the cryptocurrency industry to avoid the loss of your investments and funds.