7 Foolproof Crypto Investment Strategies for Beginners

Not sure how to get started investing in cryptocurrency? In this guide, we’ll walk through seven strategies that can help you earn a profit in the volatile crypto market, whether you’re a beginner or an experienced investor.

Strategy #1: Crypto Value Investing (Fundamental Analysis)

Value investing involves identifying cryptocurrencies that are undervalued by the market. 

To determine a project’s potential, you can look at metrics like transactions per second, market capitalization, tokenomics, and Total Value Locked (TVL). This can help you spot potential high-value projects that have not yet picked up popularity. 

Why value investing works 

Value investing allows investors to spot projects before they rise in value.

For example, some investors decided to buy SOL because of the blockchain’s fast speeds, low fees, and strong community. At the time of writing, SOL is up more than 400% in the past year. 

Key Metrics for Value Investing

• Transactions per second (TPS): If you’re investing in a Layer 1 or Layer 2 blockchain, you can take a look at metrics like TPS to understand the speeds being offered. For example, Solana’s fast speeds make the blockchain a great option for specific use cases — like crypto gaming. 
• Market Cap: A snapshot of the asset's total value, giving insight into how the project is currently valued by the market. Cryptocurrencies with low market caps may present a better value investing opportunity. 
• TVL: Measures the total amount of crypto staked on a blockchain or locked in a DeFi protocol. This can be a great proxy to measure a project’s trust and usage. 
• Tokenomics: Tokenomics looks at how cryptocurrency projects measure supply. Typically, cryptocurrencies with low inflation rates are more likely to increase in value. 
• Community engagement: The size, activity, and quality of a project’s community. Indicators include community activity on GitHub, active wallet addresses, and active users on Discord and Telegram (be wary of bots!) 

Experience level 

Value investing is recommended for investors of all experience levels. Taking time to understand the fundamentals behind a project is a great way to ensure that you’ll be a successful investor for the long-term. 

Strategy #2: Regular Dollar-Cost Averaging (DCA)

Dollar-cost averaging (DCA) refers to investing a fixed dollar amount into a cryptocurrency at regular intervals. 

For example, investing $100 in Bitcoin every month is considered DCA. 

Why DCA Works

Let’s walk through some of the advantages of DCA. 

Smoothing costs: Because cryptocurrency is so volatile, it can be difficult to find the optimal time to buy in. DCA allows you to ‘smooth out’ volatility and acquire cryptocurrency through market highs and lows. 

Avoid emotional investing: By automating your purchases, you resist the temptation to panic-sell during downturns and go "all in" when prices soar. 

Accumulate crypto over time: Investing a set amount in crypto on a regular basis can help you accumulate a large amount of holdings across both bull and bear markets. 

Platforms for DCA

Let’s walk through some popular platforms for dollar-cost averaging. 

• Coinbase: Coinbase offers recurring purchases starting from just $1, making it accessible for small investors.
• Kraken: Kraken allows you to dollar-cost average cryptocurrencies with industry-leading fees. 
• River Financial: River Financial offers zero fees and low spreads for recurring Bitcoin purchases. However, the platform only supports BTC and is only available in the United States. 

Potential Drawbacks

Potential underperformance: While DCA is effective in volatile markets, it can underperform a lump-sum investment acquired at a low cost basis. 

Transaction fees: Frequent purchases can accumulate transaction fees, impacting your returns over time.

Experience level 

DCA is a great strategy regardless of experience level. It’s especially useful for beginners who may have trouble with emotional decision making. 

Strategy #3: Copy trading 

‘Copy trading’ is a feature offered by select cryptocurrency exchanges that allows you to mimic the platform’s successful traders. Copy trading is a helpful shortcut for investors who don’t have time to research the market and make trades on their own. 

Copy trading platforms 

eToro: eToro is one of the most well-known copy trading platforms on the market. While it has higher fees than other platforms, it supports stocks and cryptocurrencies and is easy to use for beginners! 

OKX: OKX offers low fees, a wide range of cryptocurrencies, and copy trading features! However, the platform is not available in the United States. 

Drawbacks of copy trading 

Over reliance on others: Copy trading means that you may not build the skills and expertise necessary to understand the crypto market and become a better investor in the long-run. 

Extra fees: Copy trading platforms often charge additional fees for transactions. 

Experience level 

Copy trading is a beginner strategy. It’s easy to get started with if you’re using a copy trading platform. 

Strategy #4: HODLing (Buy and Hold)

Buying and holding — also known as HODLing in crypto circles — refers to simply buying cryptocurrency and holding it for years through multiple market cycles. 

Early Bitcoin investors are some of the most successful HODLers — seeing huge returns after simply buying Bitcoin and holding through market volatility. 

Why does HODLing work? 

Simply buying cryptocurrency and holding for the long-term allows you to take the emotions out of your investment decisions. Many investors panic sell at the first sign of trouble and miss out on potential gains. 

How to Make HODLing Work

Let’s walk through a few tips on how to HODL for years and decades to come. 

• Set Clear Timelines: Establish specific goals and timelines for investing, so you're less likely to make impulsive decisions. If your time horizon is years or even decades in the future, you should be willing to ride out temporary market volatility. 
• Cold storage: To make sure that your cryptocurrency is safe from hacks, you should consider holding your crypto in cold storage. 
• Use Crypto IRAs: Crypto IRAs are designed to help you minimize the tax impact of long-term investments. In addition, there are early withdrawal penalties (which helps reduce the urge to panic sell!) 
• Balance with Stablecoins: Converting a portion of profits into stablecoins during bull markets can help you manage volatility without abandoning your position entirely. 

Experience level 

HODLing is practiced by investors of all experience levels. 

Strategy #5: Momentum trading 

Momentum strategies rely on following upward market trends using technical analysis — in other words, studying chart patterns to determine whether cryptocurrencies will move up or down in the short-term. 

Momentum traders often transact in memecoins — which tend to have large price swings in short spans of time. Examples of memecoins include Dogecoin, Shiba Inu, and Pepecoin. 

How to get started with momentum trading 

1. Learn the basics of technical analysis: Understand the basics of technical analysis — such as golden/death crosses and how to read candlestick charts. 
2. Find a crypto charting tool: Use a charting tool like TradingView to study cryptocurrency price patterns and make better trading decisions. 
3. Keep a trade journal: It’s recommended that you keep a trade journal that has the details of all of your trades — including net gain/profit and your reason for making the trade. This can help you understand the reasons for your unsuccessful trades and improve your strategy for the future. 

Downsides of momentum trading 

Limits of technical analysis: Many critics have said that technical analysis fails to take into account the fundamentals of cryptocurrencies and external events and can be subjective. 

Losses are inevitable: Even successful momentum traders occasionally lose money on trades. If you have trouble having peace of mind through market highs and lows, momentum trading may not be for you. 

Experience level 

Momentum trading is considered an intermediate/advanced strategy. Understanding technical analysis takes time, so momentum trading is not recommended for beginners. 

Strategy #6: Crypto arbitrage 

Arbitrage involves exploiting price differences for the same cryptocurrency across different exchanges. 

For example, Bitcoin might be priced slightly lower on one platform than another, creating an opportunity to profit from the discrepancy.

Tools for Arbitrage

Let’s walk through a couple of tools that you can use for arbitrage trading. 

• CoinMarketCap:  CoinMarketCap allows you to track crypto prices across different exchanges. 
• CryptoHopper: CryptoHopper offers trading bots that can find arbitrage opportunities for you for $24 a month. 

Drawbacks of arbitrage trading 

Because of the large numbers of traders who are looking for arbitrage opportunities, competition is very high. It’s often difficult for solo traders to compete with firms with high-tech arbitrage bots. 

Experience level 

Because of its difficulty, crypto arbitrage is considered an advanced strategy. 

Strategy #7: Market cycle investing 

Cryptocurrency markets move in cycles — with cryptocurrencies often having a ‘cyclical high’ and a ‘cyclical low’.

Investors who have the ability to ‘time the market’ — in other words, buy low and sell high — can potentially make large profits. 

Investors use historical data and tools like the Bitcoin Rainbow Chart to time their entries and exits strategically. 

Example: Halving Events

Historically, Bitcoin’s price has increased after halving events, which reduce the amount of new BTC that enters the market. 

 Many investors try to time the market and buy BTC before the halving, with the intention of selling at a profit shortly afterwards. 

Drawbacks of market cycle investing 

‘Timing the market’ is considered difficult, and it’s important to note that historical trends are not always indicative of the future. 

For example, the price of BTC fell in the hundred days after the 2024 halving despite historical trends. 

Experience level 

Because of the difficulty of timing the market, market cycle investing is considered an advanced strategy. 

How do I deal with emotional bias in crypto investing? 

Avoiding emotional bias is essential in crypto investing because emotions like fear and greed can cloud your judgment and cause you to make impulsive decisions. 

Let’s walk through some strategies for avoiding emotional bias while investing in cryptocurrency.

Set clear goals and limits ‍

Define your entry, exit points, and risk limits before trading to avoid decisions driven by fear or greed.

Use stop-limits and take-profits ‍

Automating trades with stop-loss and take-profit orders can prevent emotional reactions to sudden market shifts.

Stick to a risk management strategy ‍

Allocate only a small percentage of your portfolio to each trade (e.g., 1-5%) to minimize risk and your attachment to individual positions.

Accept losses as part of the process

Experienced crypto investors understand that in a diversified portfolio, losses are inevitable due to market conditions and the impossibility of picking winning cryptocurrencies with every trade. Accepting that losses will happen can help you maintain level-headedness. 

How is crypto investing taxed? 

It’s important to remember that disposing of cryptocurrency is subject to capital gains tax. That’s why crypto investors should keep careful records of their transactions. 

These records can make it easy to report your capital gains and losses in the future. 

Crypto tax software like CoinLedger can make it easy to track your crypto taxes. Just connect your wallets and exchanges and let the platform track your portfolio and generate a comprehensive tax report in minutes!