Investing in digital assets has become more acceptable than ever before with the approval of spot Bitcoin ETFs allowing traditional investors a way into the sector. Bitcoin isn’t the only crypto asset that you can invest in either, with literally thousands of other options available on various trading platforms.
Apart from deciding what assets you want to invest in, you may be wondering how you can invest in crypto without needing to be too involved in the market on a day to day basis. Thankfully, as with traditional investing, there are ways to invest in crypto without having to do much on your end, and we’re going to discuss them below. We’ll also discuss rebalancing as it’s definitely necessary. Let’s dive in.
Hands Off Investing Approaches for Crypto Assets
The crypto market is extremely volatile, assets can go up in value by 10% over extremely short time frames, making it somewhat difficult to know when to buy in, or the best way to put your money into an asset.
Dollar-Cost Averaging
Dollar-cost averaging, or a DCA strategy, is a way in which to invest in an asset over a period of time rather than in one lump sum. You could buy $5 in BTC everyday, every hour, every month, or whatever other time period you wish. This could also be called a recurring buy.
Other than the initial setup of your DCA, such as funding the account you’re going to use to buy the asset and picking a buying interval, there is nothing you have to do as an investor. You simply allow the platform to execute the transactions for you and don’t have to do anything yourself.
The best part of investing using a DCA strategy is that you smooth out the volatility that is inherent in cryptocurrency markets. Assets can go up and down large percentages in short periods, meaning that sometimes you’ll get a bad deal, but sometimes you’ll also get a really good deal. Overall, this should negate the majority of price volatility that an asset experiences.
HODL/HOLD
Holding on for dear life (HODL) is just a fun way to say HOLD, meaning don’t sell your assets. This is the most hands off way to invest in cryptocurrencies, as you just buy and hold through the ups and downs.
In this sort of situation you likely will have invested in a lump sum (buying $5k in BTC for example), but it’s certainly possible that you DCA’d that same $5k into BTC over a month, year, or another time frame.
Then all you have to do is hold, don’t sell when it drops, or if it goes up (unless it gets up to a price you want to sell at). Over the long-term this tends to be one of the best ways to make gains on your holdings. If you bought BTC at $60k USD in 2021, you could have sold as it dropped all the way down to $15k USD. But if you just held it, you’d now be in profit, as Bitcoin is over $65k USD.
Rebalancing Your Portfolio
Though you may want a hands-off investing experience, you should, at least periodically, rebalance your portfolio. Rebalancing means ensuring that whatever percentages you originally wanted in your portfolio are kept.
So if one asset that you wanted to be 10% of your portfolio becomes worth 50%, it’s likely a good time to take some profits and put them into an asset that you wanted to be at 50% of your portfolio.
For cryptocurrencies, this often means keeping a set percentage of Bitcoin in your portfolio. For some people this may be 50%, for others this may be 80%, and some riskier portfolios may keep it below 50%. If one of your altcoins suddenly doubles in value, this is often a good time to rebalance and put some profits back into Bitcoin.
If you choose not to rebalance, it may not matter, but it’s possible that the altcoin that doubled in value may never be worth as much as it was that day. It’s also possible that it will suddenly be passed in gains by Bitcoin, meaning that you could have profited even more by rebalancing.
Deciding when to rebalance can be tricky, but it’s certainly recommended.
Closing Thoughts
Investing in any industry is always a road that’s difficult to navigate, but it can be especially difficult for those investing in cryptocurrencies because of the inherent volatility.
That’s why using a more hands-off approach to investing in the sector may be attractive to you, as you can still make profits while not having to pay too much attention to the day to day price action. Just remember to only invest what you can afford to lose, especially with digital assets.
