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With a crypto bull market around the corner, investors must thoughtfully decide whether to bank on the stability of Bitcoin (BTC) or explore the Wild West of altcoins. Those with limited capital will need to think carefully before making a decision.
However, the Bitcoin community believes the asset will grow indefinitely in each cycle. Can it manage that level of growth this time, though?
An effective crypto investment strategy requires a thorough understanding of key market factors. The cost of missed opportunities and an investor’s risk appetite, to name a few, must be considered well in advance of any investment.
Cost of a Missed Opportunity
The evolving nature of the crypto market makes the cost of a missed opportunity a nontrivial concern. Should assets be invested in BTC, an asset widely regarded as digital gold, or in altcoins that offer gains of 100% or more?
Read more: What Are Altcoins? A Guide to Alternative Cryptocurrencies
The cost of missed opportunities becomes important when investors compare returns from investment alternatives. Since time and capital are finite resources, they must quickly recognize trade-offs that will optimize their portfolios.
Making these decisions is not easy. Understanding that choosing one asset is inseparable from abandoning another is a foundational aspect of investment decisions.
What About the Risk?
The cryptocurrency market, notorious for high volatility, requires one to assess risks carefully. Bitcoin can be attractive to new investors in difficult markets because of its price stability.
Altcoins that tank in a bear market can offer a significant opportunity for gains but also present higher volatility and, therefore, more risk. A good grasp of risk tolerance will help the investor make a decision.
Any altcoin investment should be guided by the value of the token as well as the progress of the associated project. Bitcoin investments, on the other hand, are usually based on faith in the asset’s potential, even during a bear market. Bitcoin investors should adopt a passive attitude during bear season.
The Investment Strategy
A well-defined investment strategy must guide decision-making. Investors need to ascertain their time frame, goals, and contingencies to deal with crypto market complexities.
Those eyeing a long-term value store and an inflation hedge may want to invest in Bitcoin. Those seeking short-term profits and a diversified portfolio could use a blend of select altcoin investments. For those willing to watch markets and be consistently in the know, it may be worth allocating more capital to altcoins.
What Does the Altcoin Market Have to Offer?
The diverse altcoin market favors rapid growth, and those actively doing market research should find coins with the potential for higher short-term gains that align with their strategies. For those whose investment strategy is to diversify, a more conservative strategy may be better. Bitcoin should dominate their holdings, although the exact split between Bitcoin and altcoins depends on risk tolerance, commitment, and the strategy chosen.
Bitcoin has gained more than 100% since the start of the year. These gains outstrip the growth of the other top nine cryptocurrencies over a one-year period.
However, some altcoins are showing trends of significant gains, confirmed by their crossing of the 50-week simple moving average (SMA) barrier. This bullish momentum augers well not only for them but also for other cryptocurrencies.
Current price actions mimic movements last seen in 2016-2017. Price behavior reveals an early cycle that would otherwise occur in the following year. The chart suggests a strong and promising period for Bitcoin and altcoins, without the fluctuations last seen in 2020.
The return on Bitcoin investment, seen by those who invested in Bitcoin since last year, exceeded the profits of many professional investors. But even they can net better results by investing in the top 100 altcoins.
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