Blockchain technology has been no less than a revelation, and its proudest exponent, Bitcoin, is priced at a whopping $9100.00, as of the 5th of April, 2020. Cryptocurrencies are finding global acceptance with each passing day, and some Governments have gone on to create cryptocurrencies of their own. Investors are always looking for opportunities to invest in a cryptocurrency, and reap profits off its rising price. With that being said, Bitcoin and the crypto market are very volatile and everyone who has been in the market for a while knows that crypto tend to also drop in price rather swiftly. That is why we will today cover a guide on how exactly you can profit from the decline of cryptocurrency prices.
1. Buy The Dip
Buying the dip is easier said than done. As is the case with the market right now, cryptocurrency prices are falling. While buying the dip can lead to the generation of compelling returns, in practise, timing it is quite difficult. To pull this strategy off effectively, you must time the market, and this is challenging to say the least. You must keep in mind, that searching for the bottom price of a dip is near impossible.
When the price of a cryptocurrency seems to be falling, perform your due diligence, and invest in the cryptocurrency when the time seems right. You may miss out on the dip in price of your favoured cryptocurrency if you are seeking its exact bottom.
2. Look for Strong Opportunities
The cryptocurrency market being volatile, the price of your favoured cryptocurrencies may rise and fall, from time to time. It is essential that you pinpoint strong opportunities, and invest in projects that have a solid business model, and a compelling foundation. The price of cryptocurrencies do rise and fall, and what’s important is that the project of the token in question justifies its standing in the market.
When the price of a cryptocurrency belonging to the above mentioned category falls, you can go on to invest in the cryptocurrency, without the fear of its bubble bursting, and the token devaluing completely. If you are uncertain about the cryptocurrency you want to invest in, you can use automated bitcoin trading systems that can help with this decision.
3. Hold On For Dear Life
This is a strategy that many in the industry refer to as HODLing. Having already invested in a cryptocurrency, you may see that its price is dipping, or has dipped substantially. Do not panic, and keep hold of your cryptocurrencies. If the foundations of your cryptocurrency’s project are solid, the cryptocurrency will soon gather steam, and its price will rise again.
In fact, if you are keen on investing in the top 5 cryptocurrencies, or have an investment in one, or a few of them, you can even purchase more of these cryptocurrencies during their dip.
4. Fiat Currencies
There are several investors who cash out when the price of the cryptocurrencies they have invested in fall, or are on the verge of falling. They go on to invest in fiat currencies, and return to the cryptocurrency market when their favoured cryptocurrencies are back on track. This strategy too, is easier said than done, and timing the jump from cryptocurrencies to fiat currencies, and back, is difficult. Nevertheless, this is a viable strategy.
According to Marshall Swatt, Founder and CTO of Coinsetter,
"Exiting to fiat requires that you be able to time the market, both when you exit and again when you return. The smartest strategy is to allocate money you can afford to put at risk, and then stick with your plan regardless of the variations in the market."
5. Short Bitcoin and other Cryptocurrencies
Shorting basically refers to the act of borrowing an asset, and selling it at its current market price. You can then go on to purchase the asset from the person you borrowed the asset from, in turn paying him back. If done correctly, traders can earn handsome returns by shorting Bitcoin.
This opportunity is offered by many exchanges, including the likes of Kraken, Poloniex, and Bitfinex. This strategy is for sophisticated, seasoned investors, and holds a high amount of risk. You must perform your due diligence, before implementing this strategy.
Conclusion on how profit from the Decline of Cryptocurrency Prices
In dip in price of your favoured cryptocurrency isn’t a cause of worry. You can go on to invest in the cryptocurrency at its low price, provided its project foundations are strong, or hold on to your investment if you have already purchased some tokens.
Shorting cryptocurrencies, and switching to fiat currencies require extensive trading experience, and thorough research. That being said, do not panic and sell your tokens if its price dips – HODL!