The Best Strategies For Investing in the Crypto Market

Despite the stellar year that the crypto market has enjoyed, you'll still be hard-pressed to find a market that is more volatile. The Bitwise 100 Total Market Crypto Index, a fund set up by Bitwise Asset Management to track the 100 largest capped cryptocurrency has gained about 63% year-to-date as of October 7. That index at a point in June had returned over 200%.

That is, if you invested your money in the crypto market and haven't sold any portion of your holding since that time, you'd have lost in the region of 50% of your initial investment. That's a testament to the high volatility in the cryptocurrency market as a whole. Still, that shouldn't mean you can't profit from the growth of this disruptive technology. The growing institutional investor interest is a good reason to not ignore the space. The only thing that you need is an investment strategy.

For this piece, we assume that you understand the basics of cryptocurrencies and blockchain you know why the two matter. Also, this assumes you're a long-term investor looking to be involved for at least a few years.

Invest Through Crypto Funds

The fact that you understand how cryptocurrency and the technology behind it work doesn't necessarily mean that you know how to pick the best cryptocurrencies to invest in. Investing in funds takes the guesswork out of the setup for you. Funds are typically managed by professional money managers, who invest a great deal of time and tools, which may not be at your disposal, in researching the assets they include in their funds.

In addition, investing in crypto through funds also shield you from the volatility of any single asset. In essence, funds provide some sort of cushion against the crash of a single crypto.

Allocate Reasonably

You'll be doing yourself a great disservice by investing your entire life savings in crypto. Investing in a single asset is never even advisable for any kind of investing. Experts generally say to invest between 6% and 20% of your portfolio in cryptoassets — depending on your risk tolerance. By allocating reasonably, you become less likely to trade impulsively, especially when the market swings downward significantly.

Take Note of Fees

One thing to bear in mind is that the crypto space is largely unregulated. This also means that there aren't any industry standards for trading fees or asset management fees (if you're working with a digital asset manager). In addition, prices of individual digital assets (another name crypto assets are called) can vary greatly across crypto exchanges. Therefore, before you decide to invest or buy through an exchange or asset manager, you want to factor in all the fees you'll incur. By the way, this is a bit of standard advice in the traditional investment space.

On a final note, depending on your country of residence, you should check with a tax professional to know the tax implications of investing in cryptoassets.

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Disclaimer: The writer is an experienced financial consultant who writes for Finscreener.org. The observations he makes are his own and are not intended as investment or trading advice.