Crypto funds are perfect for those who don’t want to waste their time at the exchanges. You may invest in cryptocurrency without buying coins from traders if you consider such option as crypto funds. There are projects like Token-as-a-Service, Pentafund, and Crypto20 and they make cryptocurrency purchasing as easy as getting a single token. However, which one is the best?
There are numerous theories and methods on how to get profit from the blockchain-related sector and each of them has pros and cons. Some of these strategies are similar to traditional investments, still, they transform when applied to the unpredictable crypto market.
Now we will compare some strategies that will give an understanding of the way they work and which ones suit your preferences.
Algorithmic trading and manual trading
Crypto funds are all about making profitable trades. For instance, buying BTC two years ago and selling it today is a profitable trade. To do this effectively, your fund needs a good process. Two main approaches are called algorithmic and manual trading.
Manual trading means that you have to do everything by-hand. You need to have a good background to develop personal strategies and intuition to decide which currency is worth investing. In most cases, funders are focused on currencies that have a strong outlook and avoid those that are weak and short-selling.
On the contrary, algorithmic trading is connected with following the computer program that helps a trader to define the rules. The program defines which currency is better to invest in automatically using the analysis of real-time market information.
You may perceive algorithmic trading as relying on bots that make more than 90% of all trades on the market since they make the process simpler and faster. On the other hand, manual trading is more conscious and bring more returns if approached wisely.
Both methods have pros and cons and the best option is a combination of them. Manual trading is efficient when you choose the perspective coins. Algorithmic trading is great when you find the right patterns. To use these things, you have to be aware of some analysis techniques. Let’s discuss them.
Fundamental and technical analysis
Fundamental and technical analysis are two different ways to find out which cryptocurrency have chances to grow up or fall down.
Technical analysis is about finding patterns in the volume and price graphs for a certain coin. The fundamental approach considers the intrinsic currency values and predicts its future moves. The main difference between these two methods is that a fundamental analysis focuses on “why” while the technical analysis focuses on “what”.
Algorithmic trading usually uses technical approach. The main concept is based on the human behavior – we act in a predictable way and repeat the same moves. If you consider this factor, you have chances to profit from this understanding. Knowing the patterns, you can create a software that monitors patterns and graphs and makes profitable deals for you.
A fundamental approach involves such market indicators as forks, conference announcements, new coins, user base, technology patterns, network’s size, and token utility. The fund weighs these factors and determines what price will a cryptocurrency have. This can be compared to the current price and purchased/sold. If the fundamental analysis is correct, long-term profits are likely to come.
Arbitrage and buy-and-hold
Buy-and-hold is a simple and clear strategy with a name that speaks for itself. You simply buy coins and hold them in your wallet until the price rises, so you can sell them for a bigger price. Despite being straightforward and obvious, this strategy has proven its efficiency in the world of cryptocurrency trading.
Arbitrage means that you hold your currency for as small amount of time as possible. In the perfect scenario, less than a second. It means that you buy a coin on one exchange and simultaneously sell it on another exchange. As you have already guessed, the trick is getting profit from the price difference. Instant income, no risks.
Arbitrage trading works because the crypto market is relatively young and unregulated, which creates great opportunities. Sometimes, prices for coins differ dramatically (up to 50%). Combining these approaches can increase your chances of success significantly. As the blockchain industry grows, the arbitrage opportunities become more and more attractive. When the market becomes unstable, unprofessional traders act irrationally and experts get their profit.
The cryptocurrency market is unique. There are many ways to get money from this industry and funds are a perfect tool to start with. There are numerous strategies with their own advantages so choose the ones that feel right for you.