Cryptocurrency is in a manic phase right now. Demand is just so high, so the safest bets and highest returns are from buying and holding, or going long. Here are some strategies to maximize earning potentials.
Disclosure: I’m not your financial advisor. Trade at your own risk. You’re an idiot for trading crypto, but you probably already knew that.
Constantly hold long positions on margin
If you’re not familiar with margin trading, Google it. Margin trading lets you use your existing assets as collateral to borrow money for positions. On some exchanges you can enter positions with up to 3.33x leverage! That means if you have $1000 worth of collateral, you can buy/short up to $3333 worth of crypto. However be aware of liquidation prices (if your positions drop, the exchange will close your positions and take your assets).
So I like using Ether (ETH) as margin collateral, because it seems to have the most price stability which is great for not getting liquidated in the event of a market downturn. Be careful using backing assets to go long on those same assets, as the liquidation price may cut it extremely close due to the combined effect of price movement.
Which coins should you go long with? Right now the market is so bullish it doesn’t even matter. But fundamentally, your risk is amplified when using leverage, so I avoid risky coins and go for higher volume/higher market cap coins. I generally hold long positions for days to weeks depending on my expectations for momentum. Keep in mind you’re paying interest daily, so if the price flattens, it may be best to take profits and exit.
If you’re bullish, you can claim your positions (buying the asset you had a margin position on rather than selling it and taking cash profit). This is inadvertently a great way to “lock in” a price if you expect it to go up and want to own it, but don’t have cash available at the moment. The upsides of margin trading are crazy!
Short coins at their all time highs
3 all time highs immediately followed by quick decline. The best you could have done was about 10% in a couple hours after each peak.
This is an obvious strategy. When a coin hits its peak, it usually comes back down and trades sideways for a bit. The difficult part is assessing which coins to short. You want smaller cap coins because they are more volatile, and more likely to fall faster and harder within a period of hours. But not so small that new investors can pour new money in because its so cheap to take a bet on, thus making it difficult to identify if the peak is really the peak. You’ll typically short on news events and minute to minute graph analysis.
I personally use a utilitarian approach in determining which coins to short (which coin today provides the least utility relative to competitors?). Thus I have a bias against coins coming out of China for qualitative reasons which I won’t get into here. But you should follow your own research and belief system. Reduce your exposure by closing your short positions as soon as you hit your targets, don’t get greedy in a bull market. I’m happy taking 2–3% on a short. If you’ve got the fortitude to hold out for more, more power to you.
High risk token portfolio (aka Shitfolio)
If you’re feeling particularly risky, you can build a high risk token portfolio consisting of coins that don’t even have a product yet and are climbing purely on hype. With the current momentum behind crypto, an endorsement by a popular figure or positive news can send a coin skyrocketing. This is the ultimate get rich quick scheme, most of these tokens will lead nowhere and provide no long term value to society. You’re flipping them as soon as possible.
John McAffee endorses a Verge token (XVG) and it quickly takes off in price and news coverage.
The crypto market is a little crazy right now. People are buying up on pre-announcement “announcements” (“we have big news to announce next week!” and then the news is inconsequential, and the price tanks). Illegal pump and dump manipulation by large groups and whales is prevalent. If you are uninformed about the technical details of cryptocurrencies or trading concepts, it is best to research those things before diving in. With the way things are going, it is only a matter of time before governments clamp down and regulate or outright ban trading.
Until then, be smart, take profits, add to your HODL positions. Don’t use the maximum margin if you don’t understand it. And enjoy the ride!