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Greetings to all crypto enthusiasts!
Two weeks have passed since our last publication, and bitcoin has already tested new highs of this year. Hype around the cryptocurrency is bringing more and more fresh investments into the crypto industry.
Today, we are going to talk about the best investment strategy when working with crypto assets. We will also see what bitcoin traders are guided by and how experienced players behave.
We have been dealing with crypto industry for quite a long time, but most traders still do not have a clear strategy and understanding of the market.
Let's consider several investment strategies.
The first and most profitable strategy is called HOLD which implies holding the asset for a long time. Even when bitcoin first appeared, it was possible to buy several thousand BTC for just $10. Now the price has surged to more than $11,000 per unit. At the beginning of 2017, it was possible to buy bitcoin for $1,000, and today you could have a profit of more than 1,000%. This is the main point of the HOLD trading strategy.
The HOLD strategy has high prospects for income, but the selected asset should meet the requirements needed for a long-term investment.
One of the key criteria for selecting an asset suitable for the HOLD strategy is the prospects of its future demand. Over the entire period of the crypto industry, tens of thousands of crypto coins have been created. However, only some of them gained popularity among investors. It is important to evaluate the activity of the company which issued this particular crypto asset. You should pay attention to whether the company is actively developing and how it is integrating its coin in the community.
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You should also pay attention to the way in which the crypto community is interacting with the stock exchanges.
The first in space is the first on the Moon. The №1 cryptocurrency bitcoin will always have a special status. This is why bitcoin has a strong foundation for development which is being constantly improved and it is already integrated into the community. All this makes bitcoin a perfect HOLD asset.
Many experienced traders prefer to follow this strategy. For example, quite recently a large business analytics company MicroStrategy, whose shares are listed on the Nasdaq exchange, invested $250 million in bitcoin, having bought about 21,454 BTC.
"Our investment in Bitcoin is part of our new capital allocation strategy that aims to maximize long-term value for our shareholders," said Michael J. Sailor, CEO of MicroStrategy Incorporated.
According to the US Securities and Exchange Commission (SEC), investment company Pantera Capital and its bitcoin-focused Pantera Venture Fund III have raised about $164 million over the past 12 months. And this is the money of huge institutional investors which means that suggests that interest in cryptocurrency is gaining momentum.
The second strategy is of a local nature and is called HYPE. This is a surge in popularity that leads to a sharp change in the value of an asset during a given hype period. Currently, all the hype is going around Decentralized Finance (DeFi) which has logged $6.34 billion in DeFi services in several months.
Let me explain how it works. Community members invest into newly created DeFi projects, and in return they receive new coins. The coins instantly show an income of 100%, 200%, 800%, 1,000% as soon as they are listed on the exchange.
A good example is the DeFi yEarn Finance project, an aggregator platform that collects the best offers from the crypto market on a landing page. The users of this application make a deposit and receive a fixed income on their deposit. In order to deposit funds on the yEarn Finance account, the users need to convert their currency into a local currency, the so-called token (YFI), which will be used inside the service.
Basically, the company itself and its coin have no value. But thanks to the hype around DeFi and the listing of the YFI token on popular cryptocurrency exchanges, the value of one YFI coin has reached unprecedented highs. In just one month after it was issued, YFI surged from $35 to $12,900 (!!!).
HYPE + SPECULATIONS = JACKPOT
This kind of record profitability spurs more interest in cryptocurrency and brings massive inflow of new funds. Notably, the existing crypto projects, as well as just newly created ones, may declare that they are also engaged in DeFi , and the value of their tokens will soar.
With the HYPE strategy, it is difficult to fail. Later on, the coins with record-high profitability turn into more stable assets such as bitcoin.
The HYPE strategy is a local phenomenon, and sooner or later it will lose its steam. This happened to ICO and IEO. It is important to take profit in US dollars or in the most stable crypto instruments BTC.
Bitcoin's current trend and forecasts
After a two-week fluctuation of BTC price within $11,000 and $12,000, market participants managed to hit new local highs. So the value of bitcoin jumped to $12,486 and confirmed that the bullish momentum will continue in the future. The level of $13,868 remains the main target for many investors. This was the high of 2019. When the price tests the level of $13,868, it will be clear where the market will move next. It is possible that within the uptrend bitcoin will break above $13,868 and send the quotes to new highs.
Background for crypto market
Looking at the total market capitalization of the crypto industry, we can observe the long-awaited event. Finally, the total market capitalization exceeded the high of $366 billion in 2019 and rose to $367 billion in 2020. This indicates a strong bullish trend which pushes the value of the first cryptocurrency, as well as of all other altcoins, to record highs.
If we look at the chart showing volumes, we can see that the total market capitalization has been growing since in 2018 in the following way: $472 billion, $571 billion, $834 billion.
Bitcoin Fear and Greed Index is currently showing 75 points, which indicates a high level of interest in crypto assets. On August 11, the index settled at 84 points. However, the peak of 2019 – 90 points – has not yet been surpassed.
Indicator analysis
Now let's have a look at the different sectors of time frames (TF). On H4 time frame we can see that technical indicators give a sell signal after the pullback of the price. Yet, on the daily and weekly time frames we can see a clear buy signal which is confirmed by the general sentiment in the crypto market.
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