In 2021, many individuals have ventured into the cryptocurrency space, finding comfort from the current effects of the coronavirus pandemic. In fact, 1 in 10 people are currently invested in cryptocurrencies, according to a survey by CNBC. This makes digital currencies ranked fourth, after real estate, stocks, mutual funds, and bonds, as the most invested asset this year.
According to the same survey, 65 percent of those cryptocurrency investors started investing in the asset class last year. During this time, the value of some of the most popular assets has displayed rocking volatility. For example, Bitcoin surged to an all-time high of more than US$63,000 in April, then soon after retraced, followed by a quick rally up again to nearly US$50,000.
Cryptocurrency is indeed on its way to becoming one of the most traded assets, even with its famous volatility. Because of its increasing popularity, many strategies to generate returns are being adopted, such as DeFi staking, high-frequency trading, swing trading, and even the classic buy-and-hold method.
Bombarded with choices plus the volatility of the markets, how can investors and traders, especially beginners, choose the best strategy to grow their crypto portfolio?
Taking advantage of AI trading signals
As technology advances, more opportunities in the form of automated tools are introduced to enable smarter trading and investing. For crypto traders–whether day, swing, or any kind–the use of software, such as AI-based trading strategy, can help lead to informed decisions.
These AI-powered technologies allow traders to use many different signals to simplify their trading approach. For example, AI can continuously monitor historical and live data that strengthens its understanding of the digital asset markets, such as extremely volatile altcoins. One AI prediction signal that can help traders is CryptoHawk AI’s Altcoin Radar. This tool lists the top 100 altcoins available for exchange while being monitored for any attributes that signal any significant value increase.
Signals that utilize AI can help overcome the challenges associated with sharp volatility in the crypto market. These tools aid traders to stay rational and avoid the common pitfalls of emotional trading.
AI signals such as Altcoin Radar are advantageous for traders since they automate deep analysis techniques that can only be done efficiently with self-learning algorithms. Trading tools can only be useful if one knows how to effectively employ them. With the right combination of human judgment and AI analysis, attractive opportunities can be better seized with less effort.
Passive strategies with DeFi fund management
For individuals or institutions with mid to longer-term investment goals, a DeFi fund management strategy offers an alternative approach. This passive strategy reduces the requirements of having to actively keep up with market trends. Think of DeFi indexes, a feature of DeFi fund management platforms, as similar to the S&P 500 or Dow Jones Industrial Average. Instead of investing into a single asset, funds are invested into a basket of digital assets. This index strategy dampens volatility risk while still capturing upside price movements.
DeFi fund managers such as DAOventures allow users to invest their funds in a mixed portfolio by leveraging multiple sets of strategies. The platform handles the majority of the portfolio management aspects to make DeFi investing simple. “DeFi fund management platforms do not manage and touch your money. Instead, they create strategies that are battle-tested and profitable based on smart contracts that help you invest into DeFi, which is far easier than trying to do everything yourself,” explains Victor Lee, Co-Founder of DAOventures.
In addition to indexes, DeFi fund managers like DAOventures typically offer staking and other DeFi strategies to help investors generate returns, all simplified for the end-user. It can also save substantial network fees for the user by optimizing the intricacies of how DeFi portfolios are managed.
“Many people don’t have time to actively trade crypto. As a result, they often opt-in for passive strategies that are unproven or risky. The problem is that these techniques are highly complicated and tricky to keep up with. That’s why DeFi fund management strategies allow you to automatically aggregate yields, so users can earn while they work, sleep and carry on with their daily lives. Making your money work harder than you, is the sure path to financial freedom,” says Victor.
Albeit being transparent algorithms governed by smart contracts, DeFi index strategies are still largely correlated to the macro crypto markets. The key edge is that it can help reduce the risks of volatility while offering simpler user experiences.
The best strategy is to know what you need
Down to the fundamentals, the best strategy is to first understand what you want to achieve from crypto. After clarifying what your goals are, finding which strategy works best is easier to accomplish. Remember, no strategy can guarantee returns. Even if the strategy is meant to weather volatile markets, it still has its pros and cons. Instead of going against volatility, one is better off embracing it with the right tools and the right mindset.
The Human & Machine podcast is dedicated to inform and demystify the crypto, DeFi, GameFi, NFTs and blockchain industries for the average person.
Tlahui is a man in love with words and blockchain. His storytelling and passion to communicate led him to co-host The Human & Machine, a podcast and YouTube channel. Where he rightfully plays the role of an average-minded Human trying to understand and explain in layman terms, the lingo and complexities thrown at him by The Machine, his heartless, yet brilliant co-host.
Hikaru is a blockchain lover with a weakness for cooking. His outstanding understanding and experience in blockchain technologies, plus his unhuman work ethic have earned him the nickname of The Machine. In the show, he plays the role of a hybrid all-knowing robot that goes out of his way to explain blockchain concepts to The Human while trying not to lose faith in humanity.
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