Cryptocurrencies are nothing if not volatile – and recent swings in the market have demonstrated this all too well.
With bitcoin prices dipping during the first half of the year, and many other currencies following suit, it’s no surprise that many investors are feeling cautious. But within the context of crypto, it doesn’t necessarily need to set of any alarm bells. Instead, it’s important to look at how this kind of market performance should influence an investor’s strategy.
Buy and hold
The most common crypto strategy is to buy and hold – what cryptocurrency fans refer to as hodling, or ‘holding on for dear life’. The reason that it’s so important to hold on to your coins is precisely because these kinds of market dips are so common: they need to be baked into your investment strategy. The idea is that rather than worrying about the short-term performance of your investment, you can rest easy in the knowledge that the value should eventually recover and bring you out on top.
What investors should try to avoid is panic selling. Instead, look at the historic performance of your chosen currency and consider the likelihood of recovery. The last thing you want to do is sell low only to see the market recover over the coming weeks or months.
Buy the dip
If you have a little spare cash and you’re wondering what to do with it, then you could also consider ‘buying the dip’. Since prices are lower at the moment, they’re likely to swing back the other way soon, which means that getting in now could help you to maximise your profits. By buying coins at a low cost, it stands to reason that you’ll make a bigger return when it’s eventually time to sell.
Remember, while prices are likely to recover they will eventually dip again – it’s the nature of the crypto market. So make sure you understand what you’re getting into, and try to go in with a strong stomach as it may well be a bumpy ride.
For day traders, the high volatility of cryptocurrency is exactly what makes it so appealing. Rather than buying some coins and holding onto them until their value (hopefully) skyrockets, you are making daily transactions that take advantage of the market’s fluctuations. This means that being in a dip as we are currently shouldn’t matter at all, particularly if you’re using crypto trading software such as Bitcoin Champions to give you a market edge.
Trading software works by carrying out market analysis and then either suggesting profitable trades for you to make, or automatically trading on your behalf depending on which settings you have opted for. The software uses an algorithm to predict future market performance based on what has happened historically, and feeds this information to you so that you can make informed trading decisions.
Overall, the volatility of the cryptocurrency market is to be expected. For long-term investors it shouldn’t cause any undue panic, and for traders it could even provide a welcome boost.