Cryptocurrency has been one of the most popular investment alternatives over the past few years. The value of digital coins has skyrocketed from virtually nothing to more than $850 billion in just a little over a year.
However, this meteoric rise in prices has also made it very challenging for investors who may not be as savvy or seasoned as others when it comes to analyzing their market risks and rewards. In an era where so many new traders are getting into the market, volatility is reaching all-new highs almost every day and that has made an already challenging space nearly impossible for laypeople to navigate successfully.
Cryptocurrency markets can be extremely temperamental at the best of times, so it’s obvious why experienced investors would prefer not to deal with them if they can help it.
Even experienced traders will often find themselves on the wrong side of a market when things get crazy and that goes for both long and short positions as well. What does that mean for you? You shouldn’t expect to become an expert overnight or even within your first month of investing.
However, there are still a few practical tips you can follow to help ensure your investment returns outweigh the risks more often than not.
Here are 5 ways crypto investors can survive volatile markets:
Cryptocurrency markets are incredibly volatile much more so than the stock markets. This can make it challenging for new trader to properly assess their investment risks and rewards.
Many investors get caught up trying to chase returns and end up taking unnecessary risks. Be sure to educate yourself firsthand about the fundamentals of a particular industry so you can make better decisions.
Not only will this help you avoid mistakes and better understand your investment returns, but it will also help you stay away from the intense herd mentality that plagues markets. In many ways, you can learn more about the current state of a cryptocurrency market by simply looking at the price action of other coins.
Volatile markets are almost always accompanied by intense price movements and/or extreme volatility in other markets. This is a great indicator of the overall health of an entire industry. Stay informed by reading blogs, forums, and other sources dedicated to your chosen cryptocurrency market.
This will help you get a better understanding of what’s going on in the space and will also help you avoid the herd mentality that drives markets so quickly.
Diversify Your Strategies
While it’s certainly possible to make a fortune by investing in just a single cryptocurrency, that’s not necessarily the best approach. Instead, diversify your investment strategies by investing in a variety of coins within the same industry.
This can help provide you with a little bit of insurance if one coin becomes particularly volatile. When you first start your crypto journey, it’s important to remember that you’ll be very inexperienced.
This means that you’ll likely make plenty of mistakes along the way and end up losing a significant amount of money. Instead, diversifying your investment strategies early on can help provide you with some much-needed protection.
Investing in a variety of coins within the same industry (e.g., four coins within the blockchain sector) can help provide you with some much-needed protection if one particular coin becomes volatile.
Holding Is Key
Invest in coins that have a good reason to be in the market and that have the potential to grow in value over time. However, it’s important to remember that the cryptocurrency market is extremely volatile.
This means that even the most promising projects can have a difficult time generating significant profits and growing their values. A popular tip among experienced traders is to “HOLD” your investments. This doesn’t necessarily mean that you should just sit on your coins.
Instead, it means that you should wait until they’re both profitable and safe before you sell. The cryptocurrency market is extremely volatile. This means that even the most promising projects can have a difficult time generating significant profits and growing their values.
It’s important to remember that investments with significant upside potential can be easily destroyed by significant market downturns. This means that you want to make sure that you don’t end up selling your most promising investments just because they’re currently generating profits.
Keep Track of Price Volatility
When it comes to assessing your market risks and rewards, it can be tempting to focus solely on short-term price fluctuations. This, however, can be extremely dangerous and can also lead you to make a variety of incorrect assumptions about the future performance of your investments.
Focus on the total return potential of a given investment. This means that you should focus on the returns that your investment could potentially generate over the long term. This will help keep you from jumping off the cliff prematurely due to current market declines.
You can use a variety of different tools to help you keep track of price fluctuations and/or fluctuations in price volatility. This can include keeping track of your investments in a spreadsheet, using a price-tracking app, and/or tracking price fluctuations in an online chat.
Don’t Be Afraid to Adjust Your Strategy
As with all investment strategies, it’s important to keep an open mind and be willing to adjust your strategies as you learn more about the market. This doesn’t mean that you should just follow the crowd or the tips from other traders.
Rather, it means that you need to follow the advice of your own experience and common sense. As you become more experienced, you’ll likely find that you’re able to generate higher investment returns by diversifying your investment strategies. This means that you’ll likely want to start investing in a variety of different assets.
The cryptocurrency market is incredibly volatile and is often the first market to experience significant increases or decreases. This volatility can be tough for new investors and can make it difficult to assess your investment risks and rewards.
The best way to ensure that your investment returns outweigh the risks is to follow a variety of practical tips. These include staying informed about your market risks and rewards and keeping track of price fluctuations.