2021 proved to be a landmark year in the crypto industry as major crypto coins hit all-time highs while the market experienced its greatest level of investment. In addition, an increasing number of investors warmed up to cryptocurrencies, with many choosing to diversify their portfolios with a variety of long-term investments.
While crypto investors in the past have traditionally invested for the short term in the hope of making a quick buck, significant milestones in 2021 have inspired investors to commit to long-term investments. El Salvador’s adoption of BTC as an official tender was certainly the highlight, while major banks and global payment operators started to offer crypto services to keep up with the times.
As the first month of 2022 draws to a close, the trend of long-term crypto investment appears to be as strong as ever, with more and more investors choosing to HODL in the midst of a period of violent market swings. With that being said, let’s explore why long-term crypto investments make sense.
Benefits of long-term crypto-investment
Investors who choose to commit to long-term crypto investments are generally optimistic that its value will increase over time, despite volatility in between. These long-term investments are typically maintained for a minimum of 6 months, with a significant number of investors holding onto their crypto for years on end. Let’s touch on some of the benefits of investing in crypto for the long term.
Winning formula historically
Serious investors are those who do thorough research before committing to any crypto investments. A big part of their research is to observe the performance of a crypto coin over a period of time. By looking back at the history of the coin’s performance, investors have a better idea of how much that coin has gained in value.
By merely looking back at the past 5 years, the crypto market has appreciated astronomically, outperforming traditional investment markets in some instances. Dogecoin, for example, started 2021 at a unit price of under $0.01 and started 2022 at $0.16 – validating long-term DOGE investors for committing to the cause.
Lower transaction fees
Investors who trade regularly incur more transaction fees which can become significant when adding them up. By using a long-term investment strategy, however, you are not incurring trading fees as your investment is pretty much left untouched.
Long-term investors do not trade daily, so their profits are not diminished by incurring trading fees. In addition, they are not fazed by market swings and remain confident that their investments will gain in the long run – which more often than not is the case.
Lower risk
Investors who choose to dive in and out of the market hoping to make a quick profit are at a greater risk of running a loss. When you choose to move in and out of the crypto market, you could miss out on profitable opportunities in those window periods when you are outside the market.
On the flip side, those with long-term investments are always in the market and can quickly capitalise for a profit when the opportunity arises.
How to choose a crypto coin for long-term investment
When you are considering a long-term crypto investment, there are some important factors to consider.
Market share
You must consider how much of market share that crypto coin has against other cryptocurrencies. Larger market shares indicate a more dominant position and may provide greater stability in the long term.
Utility value
You must consider if there is a market for users of that cryptocurrency. Look at its underlying purpose and whether it really is a feasible proposition. In general, useful and purposeful projects are usually a good bet for widespread adoption – meaning they are great for long-term investments.
Transaction value
You must consider how often people transact with that cryptocurrency. Observe if that amount has increased or decreased over a period of time. A greater number of users is a good indication that the crypto coin is likely to be adopted easier – making it a fantastic long-term investment prospect.
Technological development
You should look at the projects and goals of that cryptocurrency and see if its technological development aligns with its purpose. If a cryptocurrencies development is in alignment with its purpose, it is more like to gain market share against its competition and be adopted easier – making it a great long-term investment.
What regulation could mean for investors
Due to enormous interest from a growing number of investors, governments and financial institutions around the world are constantly looking at ways to establish laws and guidelines to make cryptocurrencies safer for investors and less appealing for cybercriminals.
However, this is easier said than done, as the decentralized nature of cryptocurrencies has led many of these governments and financial institutions to believe that crypto is an easy way to evade the authorities with unscrupulous financial activity.
Banks like JPMorgan Chase have recently started closing down bank accounts without notice for those individuals who deal with crypto, while countries like China have clamped down hard on crypto users – indicating that favourable crypto regulations are still a long way off.
While that may be the case, many other governments and financial institutions are working hard to regulate the crypto market equitably, having dedicated crypto teams working tirelessly to appease the needs of crypto investors. With the direction that the crypto market is heading in, 2022 could present a watershed moment for crypto regulations – much to the delight of investors and traders the world over.
Final thoughts
While the crypto market is in the midst of a rocky period, this shouldn’t be a reason to shy away from investing in some promising digital assets. If anything, it’s the perfect time for investors to commit to some great long-term investments while the markets are at their most attractive for buyers.
Historically, long-term investors have ridden out storms and come out smiling with their pockets filled to the brim, so there’s no reason to doubt the value of long-term crypto investments. Make sure to use established platforms like Wisly to track and analyse your long-term investments and maximise your performance. Good Luck!
It is important to note that investing in cryptocurrencies is a risky and highly speculative proposition. This article does not provide recommendations, advice or guidance regarding crypto investments but is rather our opinion on such activities. Investors must conduct their own research and engage in the services of qualified professionals before making any financial and/or cryptocurrency investment decisions.
