Like other investments, Bitcoin is also subject to various market forces and factors that could drive or hinder its value. For instance, volatility is one of Bitcoin’s key characteristics that could induce huge losses when prices take a downturn. That is why investors require enlightenment on maximizing the potential returns and reducing risks as much as possible. Here are pointers to help you maximize your Bitcoin investment.
Diversification
Diversifying your Bitcoin portfolio is one of the best ways to cut risks and improve the expected returns on investment. The idea is to spread the investments to average out losses if the market hits. Various ways to diversify Bitcoin investments include time diversification, geographical diversification, or industry diversification. Consider the sectors with high growth prospects and global competitiveness if you intend to diversify by industry. Geographical diversification entails spreading your investments across different countries or regions. Time diversification involves buying Bitcoin when the prices are low and selling the assets when prices are higher for significant profits.
Copy Trading
Copy trading is an investment that mainly entails copying the trades of professional investors. A handful of crypto trading platforms listed on TrustPedia allow investors to do that. It is usually a straightforward process whereby you select a trader to follow based on their previous performance, the number of followers, and overall risk. The second step is to link your account to their trades so that wherever they buy or sell Bitcoin, your portfolio will also do the same automatically. Copy trading is a hands-free strategy to trade crypto without studying or tracking assets’ price movements and market developments. You can decide the portfolio share to allocate to each trader once you have settled on a few options. You could always change traders, reduce or add more funds depending on the performance. While professional investors are highly likely to get things right, it is impossible to predict a trader’s success or Bitcoin’s future movements with utmost accuracy. Thus, setting up a loss limit to automatically halt your trades is advisable if you lose a predetermined amount or Bitcoin’s value drops below a particular level.
Hedging
Several crypto investors primarily focus on buying low and selling high, which is not bad. However, doing so also makes them lose out on many lucrative opportunities. The ability to short trade and bet against assets is a precious strategy in the highly volatile crypto market, enabling investors to reduce potential risks incurred during adverse price movements. Hedging mainly involves placing a direct trade in the direction you expect the market to go and a second one in the opposite direction. That would enable you to still make profits and even offset the incurred losses if the first trade fails to go your way. Most investors hedge their trades through short-term or long-term futures contracts, with two parties agreeing to trade a specific asset at a predetermined price and date. However, it is a risky move reserved for seasoned investors. Overall, the crypto space constantly adapts and expands, providing ample opportunities to maximize your Bitcoin investments. The above strategies are just a handful of ways to stretch your funds and increase the potential for higher returns on investment with fewer risks.
