Cryptocurrencies have transformed the way we think about finance and investments. Users are attracted not only by the speed and transparency of transactions but most importantly by the potential for financial autonomy. However, before you start investing in cryptocurrencies, it is worthwhile to understand a few issues, which we will discuss in the following article.
Cryptocurrencies have become a popular way to diversify an investment portfolio, and their global and decentralized nature attracts not only large financial institutions but also individual investors, for whom the entry threshold often starts from just a few hundred zlotys.
High volatility and potential profits tempt novice investors, but every investment carries the possibility of loss. Initially, it is worth considering whether we are interested in long-term investments (hodling) or short-term (speculation).
Novice investors, who do not fully understand the cryptocurrency market and feel lost in the vast world of crypto-economy, after setting up their own wallet (our guide will help: How to choose and set up a cryptocurrency wallet on a smartphone?) can take advantage of easier options such as cash trading at physical exchange offices, e.g., the oldest network in Poland, Quark. Exchanges such as Quark offer the possibility of direct trading, which is much less complicated than using online platforms.
Long-term or short-term investments?
Choosing the right investment strategy depends on financial goals, possible risks, and the level of commitment we are willing to invest in learning and tracking the market.
Long-term investments require less involvement and rely on buying and holding crypto assets for a long time, with the assumption of their value increasing. This can be treated like a retirement policy, with profits realized in several years to a decade. This method of investing is called HODLing—a term originating from a typo in the word “hold” and has become a term for long-term investments.
When investing long-term, it is not necessary to track exchange rates and short-term market fluctuations can be ignored. This method is suitable for those who believe in the potential of blockchain technology and do not have the time or inclination to follow market movements daily.
Short-term investments can be called speculation or trading. They involve buying and selling cryptocurrencies to profit from price changes. Traders can use various techniques:
- Day trading – where many transactions are executed in a single day.
- Swing trading – a technique where positions are taken over several days or weeks.
- Scalping – a strategy where many positions are opened and closed with small profits.
- Bot trading – a strategy that involves using bots that independently make transactions.
These strategies can provide large profits in a short time; however, inexperienced investors often lose their savings when choosing such strategies.
These forms of investment require a lot of engagement, constant market analysis, and often access to analytical tools. They are suitable for people with experience in finance and willing to spend a lot of time monitoring the market.
Cryptocurrency trading
Long-term investors prefer stability and lower risk, so they often choose trading in physical cryptocurrency exchange offices instead of exchanges. Such trading takes place physically in cash, often anonymously without verifying the customer’s identity.
Short-term investors often start their journey by choosing the right trading platform, which offers the currency pairs they are interested in and tools for market analysis. After setting up and verifying an account, trading is done by posting buy or sell offers for cryptocurrencies at the right moments, which requires the ability to quickly react to changing market conditions.
Technical and fundamental analysis are the foundations of effective speculation. Technical analysis uses charts and mathematical indicators to predict future price movements based on historical data. Tools such as moving averages, RSI indicators, or MACD are commonly used to predict trends and turning points in markets.
Fundamental analysis focuses on evaluating the value of cryptocurrencies based on external economic and financial factors, such as news regarding regulations, technological innovations, changes in project teams, and project development. This information can significantly impact the valuation of cryptocurrencies.
For novice investors who may feel overwhelmed by too many conditions and variables of online trading, physical cryptocurrency exchange offices like Quark offer a simpler and more direct solution. In such places, transactions can be made directly in cash, eliminating the need to navigate complicated online trading interfaces. Such exchange offices often also offer staff support, which helps in understanding the processes related to buying and selling cryptocurrencies.
Risk Management
It’s important to remember that all investments carry risk. Therefore, continuous updating of knowledge, educating oneself, participating in courses, reading market analyses, and learning from the experiences of other traders is key. It is also worth following our blog, where we publish many educational contents.
Several types of risks can be defined in investing in cryptocurrencies:
- Market risk – the volatility in the market means that the value of cryptocurrencies can rise and fall significantly in a short period. This risk can lead to significant losses.
- Regulatory risk – regulations regarding cryptocurrencies are being created at both the European Union and Polish levels. Legal changes can affect the value of cryptocurrencies and the development of projects.
- Technological risk – errors in exchange software, hacking attacks on cryptocurrency exchanges, and other technological issues such as losing wallet keys can result in the loss of savings.
To reduce these risks, investors can apply several risk management strategies, such as:
- Portfolio diversification – investing in various cryptocurrencies or other assets such as tokens, and using several different platforms, can help minimize risk.
- Using stop-loss functions – these are automatic sell orders that activate when a specified loss is reached. This allows for limiting potential losses.
- Regular market analysis – monitoring market trends and responding to changes.
- Securing accounts and wallets – using strong, unique passwords and two-factor verification on exchanges, as well as making and securing backup copies of wallets can help protect against the theft of savings.
- Direct transactions – cash transactions in physical exchange offices can avoid some technological risks associated with online platforms.
Summary
Both long-term HODLing and short-term trading can be profitable, but they require an appropriate level of knowledge, caution, and responsibility. Choosing the right strategy depends on individual financial goals, risk tolerance, and the time the investor is willing to invest.
For beginners who are looking for simpler and more direct ways to start their journey with cryptocurrencies, physical exchange offices like Quark are the most appropriate choice. Quark exchange offices offer the possibility of physical trade in cash and also allow for maintaining anonymity.
Education is a key element to achieving success in the world of cryptocurrencies. Participating in courses, reading specialized publications, and following our blog can contribute to a better understanding of the market.
