Short-Term Crypto Investment: Which Coins To Consider?

When it comes to investing in cryptocurrency, there are a multitude of options to choose from. However, it is important to remember that the cryptocurrency market is extremely volatile and unpredictable. Thus, an asset that seems like a good investment today may not be a good choice tomorrow. With that being said, there are several cryptocurrencies that are often considered good options for short-term investments.

One popular option is Bitcoin (BTC), the original cryptocurrency created in 2009 by Satoshi Nakamoto. Bitcoin has high liquidity, making it easy for investors to quickly enter and exit positions. It is also highly volatile, which can lead to significant profits or losses in a short period of time.

Another option is Ethereum (ETH), a cryptocurrency and blockchain platform that is favoured by program developers due to its potential applications, such as smart contracts and non-fungible tokens (NFTs). Ethereum has experienced tremendous growth since its launch in 2015, and its popularity makes it a highly liquid asset.

Binance Coin (BNB) is another cryptocurrency that is often considered good for short-term investments. BNB is the native token of Binance, one of the largest crypto exchanges in the world, and can be used for trading, payment processing, and even booking travel arrangements.

Other cryptocurrencies that have been mentioned as good options for short-term investments include Dogecoin (DOGE), Shiba Inu (SHIB), Ripple (XRP), Cardano (ADA), and Avalanche (AVAX). It is important to note that the cryptocurrency market is highly speculative, and investors should always do their own research and assess their risk tolerance before investing.

High liquidity and high volatility

When it comes to short-term crypto investments, high liquidity and high volatility are key factors to consider. Here's why:

Liquidity

Liquidity refers to how easily an asset can be bought or sold in the market without causing a significant impact on its price. In the context of cryptocurrencies, high liquidity means that there is a large volume of buyers and sellers, allowing for quick and easy entry and exit from trades. This is crucial for short-term investing, as it enables investors to capitalise on short-term price movements and minimise the impact of slippage.

Cryptocurrencies with high liquidity are typically those that are widely adopted, have a large market capitalisation, and are listed on multiple exchanges. Examples include Bitcoin (BTC) and Ethereum (ETH), which are two of the most popular and widely traded cryptocurrencies. The ease of buying and selling these coins makes them attractive for short-term investors who need to act fast and capitalise on market opportunities.

Volatility

Volatility, in the context of investing, refers to the degree of variation in an asset's price over time. Cryptocurrencies are known for their high volatility, which means their prices can fluctuate significantly in a short period. While this volatility can be risky, it also presents opportunities for short-term investors to make quick profits.

When a cryptocurrency is highly volatile, it means that its price can change rapidly in response to news, market sentiment, or even a single tweet from an influencer. This volatility can be harnessed by short-term investors through various trading strategies such as scalp trading, day trading, and swing trading.

Examples of Cryptocurrencies with High Liquidity and Volatility

• Bitcoin (BTC): As the first and most widely adopted cryptocurrency, Bitcoin has high liquidity. Its price is highly volatile and responsive to news and market trends, making it suitable for day trading or swing trading.
• Ethereum (ETH): Ethereum, the second-largest cryptocurrency by market cap, has high liquidity due to its popularity. Its price is volatile and can be influenced by various factors, such as network upgrades or the launch of new applications.
• Binance Coin (BNB): As the native token of the Binance exchange, BNB has high liquidity among traders who use the platform. It exhibits moderate volatility, making it suitable for day trading or scalp trading.
• Dogecoin (DOGE): Dogecoin is a highly volatile memecoin that gained popularity due to Elon Musk's endorsements. Its price is sensitive to news and social media posts, making it a liquid asset for short-term trading.
• Shiba Inu (SHIB): Another memecoin with high volatility, SHIB's price is heavily influenced by hype and Elon Musk's tweets. Its low price makes it suitable for scalp trading, where small price fluctuations can lead to profits.

Remember, short-term investing in cryptocurrencies with high liquidity and volatility can be risky. Conduct thorough research, understand the fundamentals, and practise risk management to make informed investment decisions.

Moderate risks

Moderate-risk investments in cryptocurrency are those that aim for short-term gains, usually no longer than a year and often less than six months. These investments are intended to generate quick profits and free up finances for the next investment project.

Some of the best cryptocurrencies for short-term investment are high-liquidity coins that are among the top 100 coins by capitalisation. Their daily profitability can be between 1% and 3%.

• Bitcoin (BTC) is the most well-known cryptocurrency and is highly liquid, making it easy to open and close positions. It is also highly volatile, which can lead to significant profits or losses in a short time.
• Ethereum (ETH) is the second-largest cryptocurrency by market cap and is also highly liquid. It has moderate volatility, making it suitable for day trading or swing trading.
• Binance Coin (BNB) is the native token of the Binance exchange and is often used to pay trading fees, offering a discount of up to 25%. BNB is quite volatile and has growth potential due to the popularity and expansion of the Binance exchange.
• Ripple (XRP) is the native token of the Ripple network, which provides low fees and fast transactions. XRP is highly liquid and suitable for scalping due to its small price fluctuations.
• Dogecoin (DOGE) is a well-known memecoin that is highly volatile and liquid, making it suitable for short-term trading. However, it is driven mainly by hype and speculation, so it is an extremely risky investment.
• Shiba Inu (SHIB) is another memecoin similar to Dogecoin and is highly volatile and liquid. It is also influenced by Elon Musk's tweets, making it susceptible to sudden price movements.

It is important to note that short-term cryptocurrency investments are risky and require constant monitoring of the market. The basic rules for short-term crypto investing include only investing what you can afford to lose, doing your own research, and keeping a cool head. Additionally, risk management strategies such as diversification and stop-loss orders are crucial.

Short-term trading options

Buy and hold

This strategy involves buying cryptocurrencies after news drivers are released and then selling a few days later.

Trend trading and swing trading

This strategy is based on short-term intraday trading and relies on technical analysis indicators.

Scalping

This strategy involves two-directional trading, with holding positions on the market ranging from several minutes to several hours.

When choosing a cryptocurrency for short-term trading, it is important to consider coins with high liquidity and high volatility, while also keeping in mind that these coins come with moderate risks. It is also crucial to keep in mind that short-term trading is more time-consuming and stressful, as it requires constant monitoring of the market.

Some of the best cryptocurrencies for short-term trading as of mid-October 2022 were:

• Bitcoin (BTC)
• Ethereum (ETH)
• Binance Coin (BNB)
• Ocean Protocol (OCEAN)
• Cardano (ADA)
• Polkadot (DOT)

Capitalization

When considering short-term investments in cryptocurrency, it is important to remember that the market is extremely volatile and unpredictable. Therefore, an asset that appears to be a good investment today may not be a good choice tomorrow. However, there are a few factors that can help guide your decision-making process:

• Market Capitalization: The higher the market capitalization of a cryptocurrency, the higher its volatility. Market capitalization indicates the total value of all the coins currently in circulation and can give you an idea of the level of investor interest in a particular cryptocurrency. Bitcoin, Ethereum, and Binance Coin are among the cryptocurrencies with the largest market capitalizations.
• Price Movement History: By analyzing long-term charts, you can identify strong support and resistance levels, average volatility, investor interest, and fundamental factors that have led to sudden price movements in the past. This can help you anticipate potential price movements in the future.
• Startup Sector and History: Startups with a narrow specialization may show sudden growth in the short term, but their long-term growth prospects may be questionable. It is also important to consider the reliability of the project, its utility for the community, and any news or events that may impact its price.
• Developers and Major Investors: The involvement of prominent developers or investors can significantly influence the growth of a cryptocurrency. For example, Solana's association with FTX contributed to its price growth.

When deciding on short-term investments, it is crucial to remember that short-term trading is more complex and risky compared to long-term investing. Short-term investments require constant monitoring of the market and can be emotionally draining. Additionally, it is important to conduct your own research, assess your risk tolerance, and only invest what you can afford to lose.

Price movement history

When considering short-term investments in the cryptocurrency market, it's important to understand that it is a fast-paced and volatile environment. Short-term crypto investments can swing wildly in value, with the possibility of substantial gains or losses in a short time.

Some cryptocurrencies that have been popular for short-term investments due to their high liquidity and substantial trading volume include Bitcoin and Ethereum. Bitcoin, being the first and largest cryptocurrency by market capitalization, is highly liquid and volatile, making it attractive for those looking to make short-term trades. Ethereum, the second-largest crypto asset, also exhibits high liquidity and volatility, making it suitable for day trading or swing trading.

Other cryptocurrencies that have gained attention for short-term investments include Binance Coin, the native token of the Binance exchange, and Shiba Inu, a meme coin that has developed a passionate community. These coins have seen significant short-term price fluctuations, often driven by news announcements, social media trends, or the actions of influential individuals.

When assessing the price movement history of a cryptocurrency for short-term investing, it's crucial to consider factors such as trading volume, transaction speed, recent price performance, and overall market trends. Additionally, understanding the volatility and historical price patterns can help identify potential entry and exit points.

It's worth noting that short-term trading requires constant monitoring of the market and can be emotionally draining. It's important to have a clear strategy, discipline, and a firm grasp of risk management techniques to navigate the highs and lows of the volatile crypto market.

Frequently asked questions