The cryptocurrency market as a whole ended the previous year on a remarkable winning streak. After starting 2017 with a total value of only approximately $17 billion, the market grew by leaps and bounds especially over the second half. During the first week of the year, on January 6, 2017, the market for the first time hit a cumulative value of $800 billion according to data from Coinmarketcap.
But so much has changed since then and the market is now only worth about half of that value after a series of negative speculations based on media reports. Experts and analysts from the financial industry and elsewhere have all weighed in on what will happen next. While it may be difficult to get an accurate prediction on what the future holds, it is possible to plan your investments wisely so as to eliminate the risk of loss when the market trends turn bearish.
Prepare for the worst
Any seasoned investor knows that a bear market is inevitable. It is not so much a matter of “if” but “when.” Knowing this, the best way to safeguard your portfolio is to prepare for such crashes early in advance. For instance, crypto market veterans point out that digital currencies always dip in January.
When you are able to identify such patterns, it is much easier to time your moves so as to make the most of a potential crash. Predicting when the market is likely to turn bearish will help you avoid making purchases just before such seasons. Some traders also choose to exit to fiat currencies just before such crashes.
Always be updated
The cryptocurrency market is mostly controlled by speculation and sentiment. Knowing this, it is crucial to stay ahead of developments within the space and beyond that could have an impact on market trends.
For instance, many countries are in the process of developing regulations to govern this space and reports of such rules mostly send the market into a frenzy. Follow the trends carefully to be able to accurately predict market reactions and safeguard your investments.
Diversify your portfolio
In the cryptocurrency space or any other investment choice, a major way to safeguard your interests is by diversifying both within and outside a specific asset class. This could mean choosing a crypto project that has value above and beyond the blockchain sphere.
Such an asset could act as a shield when market trends turn unexpectedly which can provide a price floor when other digital assets are bottoming out.
Pinpoint value investments
A key point to keep in mind is that even when the crypto market as a whole crashes, there are some digital assets based on strong opportunities that will hold up under the pressure. Institutional investors take time to carry out due diligence in potential opportunities and at times find gold in highly undervalued projects.
The lesson from this is that you do not always have to follow the masses. Take your time to study a project before committing your time and money into it. When your investment is based on proper research and solid reason, you will likely find that it might stand a better chance of surviving speculative moves.
Avoid high risk trading activities
Trading on borrowed money, also dubbed as margin trading, is very risky because in case things head south then any loss incurred will be magnified. A general rule of thumb when investing in the cryptocurrency space is never to invest money that you cannot afford to lose. This way, when the worst happens you will be able to count your losses and move on.
HODL is a familiar acronym in the crypto community that was originally a typo in place of the word “hold”, and later was used to mean ‘hold on for dear life.’ To HODL basically means to hold on to your cryptocurrency for as long as it takes to turn a profit from it.
The crypto community is characterized by massive sell-offs at the slightest speculation. But in certain cases, there might be a reason to believe that the market will bounce back as it usually does. Some traders choose to hold on for dear life through the bearish market and wait it out.
When winter comes and the bears come out of hibernation and bring the market down, do not forget that summer is usually around the corner and they will soon go back to sleep. So always time your moves so as to make the most of the bear market and shield your portfolio from loss.
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