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How Can You Earn Big With Short-Term Crypto Investments?

By February 7, 20244 minute read

Are you considering taking a “dip” in the thrilling waters of crypto investment? Perhaps you just wish to diversify your investment portfolio, or you’ve heard stories of exceptional profits. For whatever reason, it takes thoughtful consideration and a well-thought-out plan to navigate the short-term crypto investment space successfully.

Let’s find out how you can have big gains with short-term crypto investments.

Understanding Short-Term Crypto Investment

Before getting into the specifics, it’s important to understand the idea of short-term investment in the crypto space. Purchasing and selling crypto assets within a short period—typically a few weeks to months—is referred to as a short-term investment. Short-term investing seeks to profit quickly from market swings, in contrast to long-term strategies, which concentrate on keeping assets for a longer period.

Key Points to Consider Before Short-Term Crypto Investments

  • Liquidity: It’s imperative that the chosen crypto investment plan is highly liquid, ensuring seamless conversion to fiat currency. Opt for cryptos listed on major exchanges with robust liquidity, allowing investors to trade and convert them swiftly into cash when needed.
  • Intention to Sell: Optimal short-term crypto assets are held by entities with a clear intent to sell or liquidate within a brief timeframe, typically less than 12 months. Short-term crypto options like tokens with upcoming utility or events fall into this category.
  • Stability: The best short-term crypto investment plans are known for their stability, often protected from regular market fluctuations. Checking for factors like a project’s solid fundamentals, partnerships, or governance mechanisms can help identify a stable short-term crypto investment.
  • Low Transaction Costs: Favorable short-term crypto investments facilitate easy entry and exit for investors. This characteristic is crucial in safeguarding investors from losses, especially when dealing with assets that may have lower liquidity or lower market capitalization.

3 Steps to Earn Big With Short-Term Crypto Investments

Achieving success in short-term crypto investments involves discerning profitable opportunities from less favorable ones. Relying solely on the evening news and financial pages may not be sufficient, as markets may have already reacted by the time information becomes public. To navigate the crypto markets effectively, consider the following steps:

Step 1: Monitor Moving Averages

Utilize moving averages, which depict the average crypto price over a specific period, such as 15, 20, 30, 50, 100, or 200 days. A rising moving average often signals an upward trend, presenting a promising investment opportunity. Conversely, identify cryptos with a plateauing or declining moving average for potential shorting opportunities.

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Step 2: Understand Overall Cycles or Patterns

Acknowledge crypto market cycles and patterns, leveraging historical data to anticipate market movements. For instance, observe whether certain cryptos tend to experience gains during specific months or exhibit seasonal patterns. Use this understanding to time your entries into long or short positions strategically.

Step 3: Learn to Assess Market Trends

Evaluate the overarching trend in the crypto market. In a bearish trend, consider shorting positions and minimizing long positions. Conversely, focus on buying opportunities with limited shorting in a bullish trend. The prevailing market trend significantly impacts the likelihood of a successful crypto trade.

By adhering to these fundamental steps, you can improve your ability to identify the best trading opportunities and make informed decisions in the dynamic world of crypto investments.

Best Short-Term Crypto Investment Strategies

  • Day Trading: Day trading is a dynamic strategy wherein traders quickly buy and sell cryptos within the same trading day. The primary goal is to capitalize on intraday price fluctuations. Day traders heavily rely on technical analysis, chart patterns, and real-time data to make rapid and well-informed decisions. Achieving success in day trading demands discipline, a robust trading plan, and the ability to promptly respond to market shifts.
  • Scalping: Scalpers, akin to micro-traders, aim to profit from minor price movements. They execute numerous small trades throughout the day, with the goal of accumulating profits incrementally. Scalping demands precision and often involves margin trading to optimize returns. Traders engaging in scalping must be prepared to monitor the markets and execute trades swiftly and closely.
  • Swing Trading: Swing traders adopt a somewhat longer-term perspective, seeking to profit from short- to medium-term price swings. By analyzing price charts and identifying trends, swing traders enter positions when anticipating favorable asset movements. This strategy typically entails holding positions for several days to weeks, allowing traders to capture more substantial price fluctuations.
  • Arbitrage Trading: Arbitrage traders exploit price differences between various crypto exchanges. They purchase an asset at a lower price on one exchange and sell it at a higher price on another, profiting from the price gap. While seemingly risk-free, this strategy necessitates rapid execution and access to multiple exchanges to be effective.
  • News-Based Trading: Crypto markets are significantly influenced by news and events. Traders closely follow developments in the crypto space and engage in news-based trading. They anticipate how major news announcements, regulatory changes, or market events may impact crypto prices. News-based traders execute short-term trades based on their predictive analysis.

Risks Associated with Short-Term Crypto Investments

  • Market Volatility: The values of cryptos can change significantly in a short period due to their extremely volatile nature.
  • Regulatory Uncertainty: The value of cryptos may be impacted by shifting laws and government initiatives.
  • Liquidity Issues: It may be difficult to buy or sell cryptos in large quantities if there are liquidity problems.
  • Security Risks: Investors’ holdings can be in danger due to cybersecurity threats and hacking events.

Bottom Line: Is Short-Term Crypto Investment Profitable?

While short-term crypto investments might be rewarding, there are drawbacks as well. Although the promise of quick profits is irresistible, there are higher risks because of the crypto market’s volatility. Short-term strategy success depends on exact timing, risk management, and correct crypto forecasts. It’s similar to navigating choppy waves; some people succeed while others get washed away. Keep up with news, sentiments in the market, and pricing patterns if you want to have profitable investments. Remember that although it can be profitable, not everyone should pursue it. Balancing long- and short-term methods in your crypto investing strategy could be a good idea.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
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Harshita Shrivastava

Harshita Shrivastava is an Associate Content Writer with WazirX. She did her graduation in E-Commerce and loved the concept of Digital Marketing. With knowledge of SEO and Content Writing, she knows how to win her content game!

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