A robust investing plan is key to successfully investing in cryptocurrency markets. An unfathomable percentage of people who have recently joined the crypto investment space has ended up trading in the red. Those who end up making something make minimal and insignificant profits. Therefore, it is critical for all potential investors to have a consistent, consistent plan to make a substantial amount of income with reduced risks.
How to Avoid the Pain of a Crypto Market Correction
The following are five ways to circumvent crypto space during corrections successfully.
Preparations to Purchase Assets at Discounts
Prior preparations prevent poor performance. There are several ways one can prepare for a crypto market correction. One way is to save enough money to throw into the markets when the digital assets are selling for a discount. During a correction, investors should take advantage of the discounted prices due to the massive sell-off from panic traders and investors. Ignoring all external noise from panicking YouTubers and bloggers puts visionary investors in a better position to make sound financial decisions about when to buy and to sell.
Another way to prepare for market correction is by researching new crypto projects. Updating your crypto portfolio could help you land on projects before they become oversaturated. Some new projects can produce insane returns in a brief period. For instance, Shiba Inu pumped a whopping 46,000,000% in 12 months. A $10 investment before the pump would make an investor $4.6 million.
Dollar Cost Averaging
Dollar-cost averaging refers to an investing practice that involves spending a constant amount of money regularly and throwing it into the market regardless of the current market sentiment. This strategy is very effective and can produce huge returns when the market sentiment shifts from a bear market to a bullish run. It also helps the investor to practice some of the best investing skills, which include discipline and patience. It is better than putting in a large sum of money and waiting for it to produce returns.
Dollar-cost averaging also helps investors in investing psychology. It is advisable to set aside money to invest in cryptocurrencies consistently. Investors should only set the amount to one the investor is willing to lose. This makes it vary from one investor to another. For instance, one investor might be conformable, sending $100 weekly to his selected coins and tokens. One may be comfortable buying $10 of crypto every night before sleep. It does not matter as long as the amount is consistent and it’s some amount that the speculator is ready to lose in case everything crashes down and all digital asset projects become worthless.
Airdrops and ICOs
Airdrops refer to the distribution of digital assets to the public as a reward. This is typically achieved in two ways. First, projects may issue an airdrop to a holder of an existing coin or token. Secondly, airdrops may be given by having an active wallet address on a particular distinctive Blockchain.
Keeping up with ICOs (Initial Coin Offerings) is an excellent way to hedge a crypto portfolio during bad times. Not only does it enable an investor to increase the number of coins on their portfolio, but it also gives the portfolio room for growth in case the coins offered during ICOs perform well. Good projects moon making the investor earn ‘free money.
Safe Haven Swaps
Safe haven swapping is an excellent way to improve and manage a crypto portfolio. It can, however, be risky if not executed correctly. A haven swap involves swapping unstable coins or tokens to stablecoins pegged to the United States Dollar and vice versa. Crypto fanatics should do this with extreme caution, as poor execution could lead to catastrophic losses or missing out on substantial bullish moves.
An investor should swap the volatile digital asset during a market correction with a stablecoin. For instance, when bitcoin is about to crash, instead of selling the coin and cashing out, an investor may swap BTC with USDC, which is a stablecoin. USDC’s value always equals $1, and its price does not fluctuate when the market corrects itself. During a bull, the investor may now swap the stable coin with the volatile digital assets, which would be costing low than what the investor initially traded them for. This also makes the cash unavailable for the investor to spend as the money is still in the crypto market.
Hodling Crypto Currencies
Hodling, or Saving Cryptocurrencies, is probably one of the best ways to circumvent the crypto market corrections. Saving crypto holdings enables an investor to earn passive income despite volatile market movements. Like putting money in a savings account, Speculators can also use cryptocurrencies to earn passive income. Exchanges like Binance allow crypto investors to earn passive income while holding digital assets. There are two types of crypto savings; flexible savings and locked savings.
Flexible savings make an annualized interest daily. It is also free for investors to withdraw at any time. Locked savings also work similarly to flexible savings. The only difference is that investors have to lock the coins for a certain period before they withdraw the funds. Investors may withdraw funds on locked savings at any time, but if redeemed before the specified closed period elapses, the investor earns no interest.
Circumventing the crypto market corrections depends on an investor’s preference and risk appetite. Conservative investors will use safe methods such as putting their crypto on savings accounts.
Aggressive investors may try out risky methods like staking their coins to provide liquidity to crypto transactions. Regardless of the type of investor one is, everyone should manage risk when dealing with the crypto market. A conservative approach should always be considered an over-aggressive method for capital preservation.