For traders and investors, it used to be hard to navigate this immature market. Early trading platforms missed the required security and other tools that enabled people to control their exposure. Moreover, Bitcoin, Ethereum, and other early cryptocurrencies gave traders almost no options for hedging volatility, and this is why institutional finance and investment stayed away from this asset for so long.
But the current crypto ecosystem has changed. It is a lot more different than its predecessor. Now you can save yourself from volatility.
You will be eager to know how to avoid crypto volatility?
Well here are 4 ways to do the same.
- Understand Timeline: If you are wondering, the volatility will end with time, you need to reconsider. It is either going to remain the same, decrease, or further increase. You can’t do anything about it. But yes, you can understand the timeline. This will give you a better idea about when to buy or sell crypto assets. Apart from this, it is going to help you with crypto payments.
Let us understand through an example. If you are in need of accessing liquid capital from your portfolio and that too on short notice, it is better to avoid investment. Want to know why? Because in the year 2018 it took 3 years for Bitcoin to regain the highs of US$20,000 after hitting the price of US$70,000. So, understand the timeline and take decisions accordingly. It will prevent you from volatility a lot.
- Avoid making decisions in Panic or due to FOMO: These days you will often find a lot of rumors regarding an increase or decrease in price of a certain cryptocurrency. Some people believe these rumors and sell their crypto assets. Others buy a lot of them. After a few days they realize their mistake. But most of the time they have already suffered a loss.
It is better to avoid getting carried away by these rumors. Don’t overlook the fundamentals in haste. It is better to take a step back, analyze the situation and then proceed ahead. It will prevent you from taking a wrong step due to Fear of Missing out (FOMO) or due to any panic. Don’t be emotional. Go for deep research. Take the help of trusted resources and only then proceed further.
- Diversification is the Key: It is good to move ahead with a clear and defined strategy. This is so because sometimes we are in an illusion that a ceratin crypto asset might be on its way to the moon. But the very next morning the results seem to be different.
So it is better to diversify your investments. This is so because if one or two investments don’t work then you are not going to go bankrupt. You will be having other crypto assets by your side that will give you a profit. Even if the profit is not too much it will compensate for the loss.
But on the other hand, if you have invested in a single crypto and if its value goes down overnight, you will be left with none.
- Go for a long-term strategy: It is good to go for a long-term investment instead of checking prices daily and worrying about volatility. It is best to hold a crypto asset as long as you can. This will help you to reap the benefits once it is booming. So avoid selling crypto as soon as it falls.
Holding crypto in some countries will benefit you with taxes. So go and collect some information. Listen to some trusted news and dig out in detail what experts have to say about crypto. This will give you an idea of how long to hold your crypto asset and when it’s the ripe time to sell.
Conclusion:
Crypto volatility is something that is not under one’s control. It is one of the biggest fears that prevents many from investing in crypto. But many have gained enough experience to tackle this volatility. Although they can’t avoid it, they can reduce the effect of volatility. You might be wondering, it is only the experience that is helping them. But the reality is entirely different. They are adopting several ways to prevent its effect. Some of the ways are presented to you here. So the choice is yours.