Lately, many financial analysts have offered various views on whether the crypto industry is in a crash. The market is jittery because the value of most of the cryptocurrencies has nosedived. Although the situation is a cause for concern, intelligent investors can discover opportunities. There are multiple ways you can benefit from the industry if it crashes. If you’re looking for tips on the tactics you can use to help from digital currency price dip, please keep reading.
Handling a crypto crash
Before delving into various ways of making money during the crypto crash, it’s essential to understand how to handle the situation. For some investors, a crypto crash can be traumatising. Here are some tips for managing the condition:
- Stay calm: While some investors may sell off their investment during a crash, others may see an opportunity of investing. Whatever position you may take, it’s critical to act with a cool head. Avoid making emotional trading decisions as they can have adverse effects.
- Evaluate the situation: The crypto market is sensitive to news. When there is a drop in the market, it’s essential to assess the situation and discover the information that might have caused the crisis. For example, the current drop happened because of China’s move to ban financial institutions from accepting crypto transactions. The situation was also complicated by Elon Musk’s tweet, indicating that Tesla may not accept crypto payments because of its environmental footprint.
- Remember that crypto is unstable: A prominent attribute of virtual currencies is that they’re volatile. Based on people’s sentiments, the volatility can be steep, which may result in a crash. Some people can see the crash as a blessing in disguise, while others may panic and start selling their investments.
- Evaluate the future: The present happenings in the crypto world can help you evaluate this market’s end. For example, China’s move to ban crypto transactions in mainstream financial institutions may be followed by other countries. On the other hand, some famous institutional investors have bought BTC as an alternative investment class. Also, the currency can be an excellent hedge against inflation because it’s capped at 21 million.
How to take advantage of the situation
Now that you know how to handle the situation, the next move is to determine how you can benefit.
Buy the dip and hold
The future of the crypto industry is bright as many institutional investors have bought the currencies. Many individuals are also accepting virtual currencies as a class of investment. So, the occasional dips in the market shouldn’t worry you at all. Instead, you can buy more cryptos when the price is low and trade them once the fee goes.
Before you decide to buy the dip, it’s critical to articulate a strategy that you want to use. Whereas some individuals may be comfortable buying and holding the currencies for a long time, others may prefer a short-term approach.
In most cases, the strategy an investor uses depends on their risk-tolerance levels. A long-term plan may suit risk-averse investors or those who are beginning their crypto investment journey in this connection.
During a crash, the ‘Hold On For Dear Life’ strategy, a long-term crypto investment tactic, can help you. The HODL strategy entails purchasing virtual currencies and keeping them for a considerable period. Here, fluctuation in the value of a particular token isn’t a significant issue of concern.
However, if your risk appetite is high, you can still utilise the short-term trading strategy. Because crypto trading is highly involved, you can save yourself from the stress by using Britishtradeplatform.co.uk.
The main perk of the HODL strategy is that it avoids high-frequency trading bots. You only perform a single trade and don’t necessarily need to be accurate. If you do it well, you’ll reap significant returns once the market starts experiencing an upward trend.
Do a deeper evaluation of the market to discover opportunities
Multiple cryptocurrencies exist in the market. When there is a dip, some of the virtual currencies could hold up nicely. Therefore, during this time, an investor should conduct a detailed study to discover whether some coins have a promising future. Many investors fix their eyes on major currencies and ignore some small tokens that can enrich their portfolios.
Research can help you to discover quality coins with an exceptional team that you can trust. Suffice to say, any crypto investor who wishes to succeed in the market must read the whitepaper of a virtual currency project widely. Once you evaluate the whitepaper, you’ll discover the viability of a particular coin and make an informed decision. The key areas to analyse in a whitepaper include project objectives, problems in the market, the solutions of the challenges, the team behind the project, and token distribution strategies.
Invest what you can afford losing
Investing in a crypto market comes with elevated risks. The industry is volatile and driven mainly by sentiments. If you’re a risk-averse individual, it would be advisable to think twice before investing in any crypto. However, if you’ve got a higher appetite for risk, you should only invest a small amount that you’re comfortable losing. Sometimes things can take a turn for the worse.
Remember, the main objective of investing is to increase value to assets and not to lose everything. Therefore, take caution and only invest what you can afford to lose.
The Crypto industry has a short history and swings wildly. Therefore, keeping your investment small can be helpful if you’re new in this market.
Keep a sound crypto portfolio
Investing in a single current exposes you to the risks in the crypto market. It would help if you avoided this danger by diversifying your portfolio. And a sound crypto portfolio entails investing in more than a single virtual currency. This tactic aims to hedge yourself from the elevated risks in the market.
Although diversification strategy has a fair share of challenges, it can be helpful as it assures you a profit even when there is a crash in the market. The crypto market operates so that when prices of specific currencies dip, the value of some tokens goes up. So, if you have a diversified portfolio, you stand a better chance of earning excellent returns.
Avoid investing based on hype
There is a lot of noise in the crypto market that can confuse you. If you’re new to this market, it’s essential to steer clear of the hype as it can lead you to make wrong decisions. Instead, take your time and study the trends in the market. You can also look for professionals with sufficient knowledge in investment and trading who can offer you reliable advice. The knowledge you acquire can help you make educated decisions.
This tactic involves capitalising on minor market motions where a trader enters and exits a position during a day or even on an hourly basis. The objective here is to make multiple negligible profits while avoiding risks. Traders using this strategy don’t require high profits per deal but aim to keep an elevated win/loss ratio.
Traders using scalping avoid high market swings and conduct their trades when the market is calm with meagre to no volume. Furthermore, a quiet market has high spreads between bids and asks, enabling scalpers to profit quickly on the gaps. So, buying and selling happen almost at the same time.
Scalping has various perks. For one, it’s a safer method because it works on small time frames. And traders can exit the trade any moment if they sense danger. Additionally, if you encounter numerous unfavourable transactions, you can quickly stop and relax.
Instead of trading with fluctuations, some risk-averse traders follow trends. If you use this strategy, you only open long trades when the market is trending upwards, and short works when the market is moving down. Trend traders begin their businesses after establishing a trend in the market. They use various tools to optimise their profits and reduce losses. Some of the tools they use include margin trading, leverage, and stop-loss orders.
Invest in crypto staking
This strategy works well for investors who want to diversify their portfolios. Staking tokens are virtual assets that can align with your diversification goals. After identifying the tokens you like, you take the next move of purchasing, locking, and staking them. The staked coins become validator nodes in their networks, which receive bonuses for creating new blocks. The technique works the same way as crypto mining. Here, you don’t need to purchase expensive tools but buy crypto tokens that you can dispose of quickly.
Tokenised crypto fund
A tokenised crypto fund is a pool of investor capital overseen by a team of investment experts. These professionals apply multiple tactics to earn profits on all the funds in their collection. If you invest in tokenised crypto funds, you can benefit from the skills of professional traders.
If you’ve been wondering how to handle the dip in cryptocurrency, now you know. Here, we’ve shared the best tips and strategies to enable you to make money during the crash, as many people are panicking and selling their investments.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.