The early times in 2017 were heydays for crypto investors as most of the coins were new to the market. The market booms to higher levels in the late 2017 due to heavy demand of the cryptos. Later, the prices went down as the investors booked all their profits and "big sharks" wiped out. This article will present you to How to manage your cryptos in the bearish market.
November 28, 2018 AtoZ Markets - The year 2018 has been a tough time for cryptocurrency traders. Bitcoin has dropped by more than 60% and famous altcoins have lost up to 90% of their value. However, there are still traders who are making huge profits in the crypto markets despite the bear market.
In the current market scenario, it is becoming increasingly difficult for traders and investors to stay positive when looking at their portfolios. These are tough times for traders, especially those who have recently entered the market.
Nowadays a lot of people pay attention to Thomas Lee, John McAfee and Erik Voorhees when they talk about Bitcoin and other cryptocurrencies. Following the crash of the first bitcoin bubble in July 2011 where the price dropped from $31 to close at $2 on 31st of December that year when Erik Voorhees predicted that the future of Bitcoin price would hit thousands of Dollars. Later, Bitcoin hit its all-time high on the December 17th, 2017 at $19,783 mark.
Successful speculators in cryptos have posted returns in the thousands and funded the Initial Coin Offerings. Many traders lost as the market turned in early 2018 like the DotCom bubble.
This article will introduce investors to several strategies to cut their losses and manage your cryptos in the bear market.
Hedge Portfolio by Shorting Cryptos
One of the common practice among crypto traders is to manage a crypto asset portfolio in a downturn is to protect your portfolio with a Bitcoin short position. In simple words, short Bitcoin so that the drop in the value of your portfolio is partly or wholly offset by the profit from your Bitcoin when the market declines.
For example, if your portfolio current worth is around $10,000, you might enter into a short BTC position at a CFD broker that supports the BTC/USD trading pair. You could set the hedge ratio to 75% such that a decline in the portfolio value would be covered by around 75 through the profit from your Bitcoin short position. This means that your portfolio would only lose around 25% of the value. And, if the market rallies, you would only gain 25% as much profit due to the loss on your Bitcoin shorting.
Balancing Stablecoin and Cryptocurrencies holdings
The approach of balancing the crypto portfolio towards stablecoin like USDT and cryptocurrency is the best practice to play safe in the bear market. Allocating more funds in the form of USDT as the market signals bearish reversal and decreasing the crypto holdings. Traders might keep on changing the ratio between stable coin and cryptoassets according to the market. In the bear market, traders should move their funds to USDT and keep on changing as the market starts to turn bullish.
Use Swing Trading
Swing trading refers to actively entering and exiting positions within a matter of days or week to capitalize on short-term market trends. This strategy could work well for experienced traders who can understand market-moving news quickly and are able to position themselves accordingly to profit from resulting price movements.
This is the most common word among crypto belivers. Hodl is slang in the cryptocurrency community for holding the cryptocurrency rather than selling it. Most of the traders don't probably want to hear this but if they believe in the future value of the crypto ecosystem and technology behind it. Traders might also hold or "HODL" their crypto assets as the market volatility continues to unfold.
Diversify Crypto Asset Types and Investment Duration
Diversifying the crypto portfolio is crucial in any market, but it is extremely important during a bear market. As far as cryptocurrency is concerned, many traders see it as a great option for diversification. A famous quote by a notable investor- Warren Buffett “Do not put all eggs in one basket” also suggests that it is always safe to diversify the holdings.
Diversify the Crypto Asset
Most of the traders see cryptocurrencies as a good option to add to the portfolio that combines crypto with traditional investments like stocks and bonds but most neglect to diversify within the crypto asset class. There are many different crypto investments segments that all represent different levels of risk and rewards.
- Coins - Choose a mixture of steady coins such as Bitcoin and Ether and highlly fluctuating altcoins that have a higher growth potential.
- Tokenized Assets -Traditional asset classes such as real estate are becoming tokenized, offering increased liquidity and a lower barrier to entry while still presenting the same level of growth potential.
- Initial Coin Offerings - ICOs are potentially the riskiest crypto investment asset in the crypto market. But selecting the best ICO project for investment might turn your portfolio to green.
Diversify Between Short and Long Term Investments
Create a portfolio with a strong mix of short and long term investments for the best rewards. While many cryptocurrency investments during the bear market will require traders to play the long term game, there are many opportunities to make short term gains.
Scalping is one example of a riskier strategy that takes advantage of small price movements which can result in huge gains during a bearish market. Choose a mixture of investment types that fit your risk horizon but consider putting at least some percent of your portfolio in short term and high yield investments.
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