ALBAWABA - The crypto market is infamously known for its extreme instability. As a matter of fact, the term volatile” has almost become synonymous with the crypto industry until this point. This can result in both sudden price increases and drops of more than 50 percent in a matter of months, and sometimes seconds.
Considering the fact that crypto has only been around for a little over 10 years, so even though the technology is in many ways revolutionary, the industry is still very new. So byproduct, it is very expected that the market is in significant volatility. Given the inherent risks and uncertainty of crypto investing, it's best to think defensively. To meet this end, here are 4 tips that help you navigate during the crypto market's instability.
4 Tips for investing during crypto market instability
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Investing in stablecoins
Stablecoins are cryptocurrencies that are pegged to fiat money, or to exchange-traded commodities. Being a great enmesh between the traditional financial system into the crypto market, stablecoins are always favorable to new traders as they are an excellent stable investment that keeps them safe from the eye-watering volatility of the markets.
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Manage risks
While there can be a lot of upsides, keep in mind that the downside can be abrupt and severe. Also, cryptocurrency has a higher chance of going to zero than many other assets. Given this, you may want to limit your investments to an amount you can afford to lose.
Due to its unpredictability, crypto may not be an appropriate investment vehicle if you want to diversify your portfolio or save for a specific goal, especially a short-term goal.
Consider reallocating at least some of your gains to more stable asset classes if you make gains that make crypto a larger part of your portfolio than you intended. This may help to smooth out some of the volatility in your overall holdings.
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Only invest money you can afford to lose
The golden rule for investing in a risky asset class such as cryptocurrency is to only invest money that you can afford to lose. When you hear about cryptos that have gained more than 5,000 percent in a year, it's easy to get carried away in the hope that you will see similar gains. However, only a few cryptocurrencies produced those returns last year. With over 17,500 cryptos on the market, picking the ones that will skyrocket requires a lot of luck. Indeed, given the changing economic environment, no coin can guarantee similar returns in 2022.
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Store your crypto safely
When you invest in cryptocurrency, you can keep your funds in a web-based wallet hosted by your exchange. While this is a low-cost option, it may cost you in the long run if you need to convert your coins to real money or if your exchange fails. Alternatives such as "hardware wallets" store your cryptocurrency's private key in an offline storage device. Alternatives such as "hardware wallets" store your cryptocurrency's private key in an offline storage device.
