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The crypto market might be the most recent financial market to have emerged on the horizon, providing investors with tons of opportunities and special case investment designs that allow them to diversify their portfolio from stocks to the forex market, but still, it is not a game for someone who has absolutely no knowledge of the financial community.
If you were going to explore or interact with the crypto market on the basis that you would eventually get it right and that you can earn a handsome return on your investment without knowing what you are doing, then you are clearly wrong and should not approach crypto market at all. But, on the slight chance that you are someone who has enough knowledge about financial commodities and assets and want to test out your knowledge, then the crypto market is the place to do so.
If you have interacted enough with the crypto market already, then you must have bumped into a lot of volatility aspects of the market; you might have lost your original investment, you might have lost your profit, or you might have experienced certain price drops. This is what the crypto market is notorious for, volatility chipping at you from nowhere, out of the blue, and just hurting not only your performance but whatever asset that you have chosen for investment purposes as well.
What you want to do here is that you want to dodge this volatility bullet as best as you can and avoid running into consistent and heavy losses; you can minimize those losses when the market is falling, but how is the question you should be asking yourself.
The crypto market began its journey back in 2009 when Bitcoin was launched as the flagship cryptocurrency, and since then, it has seen multiple cycles of both growth and decline in the prices of cryptocurrencies across the board.
You might want to get into some action of a bullish cycle and avoid a bearish one, but the reality is that sometimes both these cycles coincide with each other and coexist at the same time. So if it is bullish for Bitcoin, then it is going to be bullish for some other cryptocurrency and vice versa.
There is actually no way to dodge volatility and minimize your risks in the crypto market, and it is the only solid approach that you can go after. Taking a peek at the present data for all the dedicated bulls and bears of the crypto market, there is one consistent trend, and that trend is recovery; some cryptocurrencies have shown significant growth over time, and there was a decline too.
But the only constant coefficient of the equation remains recovery. Whenever there was a decline for a dedicated cryptocurrency, it did recover after some time, but how closely attributed that time period for recovery can be different for different cryptocurrencies.
Depending on how much you can wait out for dedicated crypto to recover says everything about your investment tactics and if the crypto market is cut out for you and you for it or not. There are different strategies that you can adopt for the sake of minimizing your risks of crypto investments, especially when the market is in a consistent dip. So without further ado, let’s get right into it.
Don’t React to FOMO or FUD
It goes without saying that if you are exploring a financial market, then it is better if you stay on top of it by consulting yourself with the latest trends and news and the best way to do so is to scour through social media about that particular cryptocurrency or financial asset that you are interested in.
But too much information in this regard can be damaging for you and your overall investment career. Make sure that you don’t take in a lot of that information, and then try to make some far-fetched claims regarding your next move when it comes to investing in the crypto market.
Because if you are diving too much into that information, then you are really going to disturb your investment strategy, and that will hurt your credibility for investment within the crypto market. Once the market is down and the assets are crashing, people tend to throw away farfetched ideas regarding those elements; some would make you believe that the market is done for good and that you should not invest another dime while there is a clear-cut opportunity to take advantage of.
Follow your instincts, and don’t try to listen or give too much attention to those claims made by traders and people out there on social media. The fear of missing out (FOMO) and the fear, uncertainty, and doubt (FUD) protocol are some of the common terms that are associated with crypto space. You might be fearing an opportunity, you might be uncertain about an opportunity, and you might be doubting your own instincts towards that particular opportunity.
It is a totally normal thing to do, but what’s not normal is not following your instincts and the investment strategy that you have cooked up after so many years of interacting with the market and the assets that it does throw out in the first place. Suppose that Bitcoin reaches a particular price point that is just the sweet spot, and people are rushing in to buy as much as they can; that is an opportunity that particularly triggers FOMO, which is the fear of missing out.
You would want to try your best to get on that train with all those lovely people who have invested tons of their money into Bitcoin but guess what? The next day it’s going to crash hard, and there is already a prediction or two about this happening, but you ignore those trends, and you just don’t want to miss out on this opportunity.
Not only this is foolish on your part but also pretty devastating for your investment regime. Don’t give into too many rumours, news articles, or other significant figures proposing certain price decreases or increases, and stick with your gut as this is the most important thing anyone is going to advise you.
There is just no possibility for someone to predict the future with a higher probability for something to happen. Eventually, your own research into whatever crypto that you are following will benefit you instead of taking someone else’s word for granted.
Influencers and publishers often tend to far fetch an argument to make sure that it gets a higher audience and exposure within the market either on social media or on their own TV channels, and sometimes the advice that is being thrown away at those stations is not accurate or healthy even.
Build a Trading Plan
The next thing that you want to do is to set yourself some clear and transparent goals when it comes to investing in the crypto market or any other financial asset for that matter, you need to diversify your portfolio and you need to explore the crypto market to its extent, but you don’t need to break your bank account or your back in doing so.
So, first of all, you need to set yourself some clear goals regarding your financial journey within the crypto market and never explore further or reach for than the means that you have presently.
Emotions have nothing to do with financial investment; if you are too emotional to handle a few dips here and there and losses into financial assets, then clearly, you are not cut out for the world of finance and are better suited for a nine to five job, this is not a verdict but a subtle explanation of odd behaviour from certain people who give in to their emotions rather than giving in to rational thinking.
Think of investing in multiple assets as this would allow you to diversify your portfolio in some of the stocks, exchange-traded funds, and other forms of investment. Always have an entry and exit point when it comes to crypto investments; the volatility factor is so significant that it might not even take a few minutes for prices to dip as it is already doing so in a matter of seconds.
Prices are susceptible to plummet either by a strong rumour circling the Internet, words of a well-known influencer, or a hack that has been reported for certain crypto, as these things could really set your financial strategy in the opposite direction, and you want to avoid it as much as possible.
That is why it is crucial to have a plan for these events so that you are not completely in the dark when something like this happens, which is believed to be unexpected. In scenarios like these, dollar-cost averaging can work like a charm for you.
What you do here is that you set aside a particular amount each month for a dedicated period of time, and you continue to invest that money into the crypto market, targeting a specific cryptocurrency of your choosing. This way, you get direct exposure to the crypto market and the changes that it throws your way; you have plenty of time to determine if your investment strategy is going into the right course or if you need to revise it or enforce some changes into this policy.
It is extremely easier for someone who is a beginner to be carried away when holding cryptocurrencies by the advice of influencers or some other random people on the Internet. But those who trust their gut and formulate a proper strategy towards investment in the crypto market are actually better off than those who give in to every rumour and believe in fear of missing out.
HODLing is a Good Strategy
Everyone is investing into whatever financial asset they like for the sake of earning a handsome return on their investment; no one likes to appreciate the thought that sometime in the future, their asset is going to depreciate in value and because the crypto market is home to sudden price drops and volatility people often would just give away their whole lot if they see the ship sinking.
But as told earlier in the very beginning of this article, if there is one constant coefficient in the equation of the crypto market, then is the fact that whenever there is a price drop, the market revives itself, and there is a recovery. So instead of getting panicked and giving your hard-earned assets for dimes on the dollar, you should actually hold on to it and continue investing in it because if not in a week or a month, then surely in the next year or so, the returns are going to double down or increase from the present value at which they are holding.
This approach will truly help you to understand the spirit of the crypto market and how it works. You would be absolutely shocked to know that there is a centralized financial firm by the name of MicroStrategy who have been investing in bitcoins since the launch of the asset.
The strategy that MicroStrategy has followed all these years is simple but elegant, whenever there is a price drop in Bitcoin, they buy that dip and then they hold onto it. You would be shocked to know that this firm has not sold even a single Bitcoin all these years, and the overall capacity at which they are trading in the crypto market with Bitcoin is close to a gigantic amount that no one on the planet has.
That is actually quite a statement that you should be looking out for; if you can afford to invest in the crypto market, then do it despite volatility and price drops along with the rumours that you find on the Internet right next to the words of the influencers that the whole crypto market is going to tank and along with that your hard-earned money.
Market corrections are often going to be cruel, but these are crucial as well; when an asset hits an all-time high, there are usually market corrections that follow that particular asset over a few days or even weeks.
What market correction does is that it visualizes the state of that particular cryptocurrency in terms of its pricing and how valuable it is. Market corrections are not the same as a bearish market because market corrections apply to a particular cryptocurrency or financial asset only one time, but a bullish market could sustain for a longer period of time, thus making it more of a nuisance than a welcome sight.
Sure there are some investors who are actively seeking a bullish market because that is the particular segment of the market that they are targeting in terms of investment.
So what they do actually is that they buy dips and don’t mind how many there are because when the bearish market ends, and there is a bullish market, they are actually going to sell a whole lot of crypto that they bought in the bearish market to turn in a huge profit. You really need to set your priorities straight; you need to analyze which side of the market you are on and which particular segment you want to target; it is either going to be bearish or bullish, but it can’t be both at the same time.
Avoid Volatility and Invest in Stable Assets
The ultimate purpose of every investor who is seeking to invest in the crypto market is to avoid volatility and reduction of the overall value of their assets by a great margin; this is why these people get up every morning and get to work. There is absolutely no way that a person or financial organization can outrun volatility, especially in the crypto market; if you are an investor or trader, then eventually, volatility is going to catch up to you.
You can, however, protect yourself best, especially during a dip, if you can convert some of your volatile assets from your portfolio that are falling like pieces of domino into less volatile and more stable assets. This will give you an edge over the market that is crashing hard here you would be able to reduce your risk while at the same time getting the chance to manage your portfolio so that you can ride out this particular dip that the crypto market finds itself in and live another day to see a bullish market.
You need to be really smart about this whole thing, or otherwise, you are not going to survive for long. What you can do here is you can convert some of your volatile assets into stable coins; for those who are new to this, stable coins are actually a hybrid manifestation of both centralized and decentralized finance. It enjoys rigorous security metrics of the decentralized world while at the same time being governed by a centralized body just like in the fiat world.
These assets are less volatile, and they don’t appreciate or depreciate in a matter of seconds or even minutes which gives you a really nice hedge against the market dips that are a constant nuisance within the crypto market.
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