- Investors are left wondering how to protect themselves against further losses, and extract gains where possible in the current market.
- Here’s three ways to do just that.
In the last month, the cryptocurrency market has turned from bad, to worse, to downright terrible after losing more than 45% of its value since mid-February. In this time, Bitcoin experienced its largest single-day drop in more than five years, while many altcoins crashed below crucial support thresholds.
Because of this, a huge number of cryptocurrency investors are left wondering how to protect themselves against further losses, and extract gains where possible in the current market. Here’s three ways to do just that.
Wait for the Right Signal, Then Buy/Sell Futures
Cryptocurrency markets are notoriously volatile and can often experience dramatic price swings over even short timeframes. This unique property makes cryptocurrencies excellent assets for scalp traders and arbitrageurs, who can successfully exploit the moment to moment changes in their value.
Likewise, while cryptocurrencies are a particularly volatile asset class, they have also demonstrated both long-term uptrends and significant downtrends, making them attractive to swing traders and margin traders that use leverage to amplify their exposure to market movements.
However, although extreme volatility is great news for volatility and algorithmic traders, it can be daunting retail traders and traders that typically trade over longer timeframes. As such, the current market conditions represent an excellent time to take a step back and reassess the fundamentals of the market and gain an understanding of the different chart patterns, indicators and strategies that can be used to extract profits in practically any market.
One of the best ways to achieve this is by trading with a cryptocurrency exchange demo account. These allow you to test out new strategies and get to grips with the market with absolutely no risk—since all trades are conducted on live markets, but with demo funds.
The popular cryptocurrency derivatives exchange StormGain is also running a competition for demo account traders, offering 100,000 USDT worth of prizes to customers that show off their trading skills using their StormGain demo account.
Buy Cryptocurrency Baskets
Although a significant fraction of cryptocurrency holders tend to pick just one, or a small handful of cryptocurrencies and hold them for a long time, identifying exactly which cryptocurrencies are going to perform best over any period of time can be a daunting task.
Likewise, manually rebalancing a cryptocurrency portfolio can be a time-consuming endeavor, since it requires constant market surveillance and vigilance. With that said, maintaining a diverse portfolio of low, medium and higher risk assets is a well-recognized trading strategy since it allows investors to benefit from the meteoric growth of outliers, while accruing the small gains from low risk assets.
Fortunately, there are now a variety of ways to gain exposure to several cryptocurrencies at once, without needing to track the market constantly to make the best decisions. One of these is the Bitwise 10 Large Cap Crypto Index—an index fund that tracks the top 10 largest cryptocurrencies, and rebalanced every month based on the market share of each tracked asset.
Likewise, it’s also possible to temporarily opt out of cryptocurrency volatility by investing in Saga (SGA), a cryptocurrency that is designed for stability and backed by the value of a basket of fiat currencies, including the US dollar (USD), Euro (EUR) and Pound sterling (GBP). By temporarily opting out of volatility with Saga, it is possible to safely wait until more profitable trading opportunities present themselves.
Open a Crypto Savings Account
As it stands, many cryptocurrency traders fit into one of two camps. They either try to trade cryptocurrencies and subsequently either profit or lose money, or they simply adopt a long term holding strategy which may or may not be profitable.
However, although these are the two most popular options, they are far from the only options available. Instead, there are an increasing number of less risky cryptocurrency investment opportunities available, many of which provide a small, but reliable return on investments with far less risk than trading.
One of the most prominent of these options is the recent rise of cryptocurrency savings accounts and interest-yielding platforms. Depending on the platform, customers can earn as much as 12% APR on their cryptocurrency investments, though this can differ depending on which cryptocurrency is deposited on the platform.
Bitcompare is a powerful resource for finding and comparing different crypto savings account options, whereas CoinDiligent has produced an excellent write-up about some of the most popular lending-based savings accounts available. With that mind, it’s important to double-check the terms and conditions for cryptocurrency savings platforms, since these often enforce mandatory lock-up periods that you might want to be aware of.
All-in-all, cryptocurrency savings accounts are a good way to recoup some of the losses incurred during the recent crash, and are an excellent way to turn an easy profit on stablecoin holdings.