Is it too late to say that Winter is here?
Even if the temperatures are still warm outside, the crypto world is in the midst of a rough winter. Summer comes once a year, and so does winter, but in the cryptocurrency sector, we never know when a cold winter hits, or how long it lasts. Crypto investors are aware that winter can wreak havoc on the digital portfolio because only a few are prepared for such a period.
And even if we dread it, we’re knee-deep in the snows of the present crypto winter, and we cannot tell for sure when the warm sun will shine again. Panicked investors are selling their assets and looking for ways to lower this period’s negative impact on their finances.
However, seasoned investors know that crypto winters could provide investment opportunities if they adjust their mindset and employ new strategies. Crypto winters and bear markets are the ideal opportunities for some investors to get into a coin they couldn’t access before. Of course, they must use strategies that enable them to properly manage their risk.
Here are some suggestions that could help you thrive during the crypto winter.
Don’t panic and give up on crypto investing
Everyone knows that crypto winters are challenging, but it’s essential to bear in mind that many investors build wealth during these periods. Therefore, you should stick around for two reasons:
– Crypto projects that lack fundamentals will disappear from the market during the crypto winter. Challenging moments like crypto winters and bear markets force the sector to switch its attention from hype, marketing, and price action to business and product development. The leading crypto projects of the industry (Cosmos, Uniswap, and Solana) entered the market during crypto winters. Ethereum, one of the most popular altcoins on the market, was launched in 2015 during a Bitcoin bear market. Use this period to filter the projects you invest your finances in.
– Legitimate projects become greater fool assets and are mislabelled as Ponzi schemes, allowing traders to make money by selling them for higher prices when the crypto winter comes to an end.
Being successful in the crypto sector implies learning, analysing the market, and staying engaged when the industry goes through rough winters. The most successful crypto traders in the 2017 bull market were those who didn’t panic in the 2016 bear market but faced the dreadful conditions and learnt from them.
Reduce exposure to highly volatile digital currencies
The first thing seasoned investors do when the first signs of crypto winter hit is to re-evaluate their current positions and reduce their exposure to highly volatile cryptocurrencies. Usually, highly volatile currencies are the latest projects that emerged on the market (NFTs, meme coins, rebase projects). They’re considered more volatile than the others because they’re new to the community.
To identify the highly volatile projects you must remove from your portfolio, you should check their GitHub accounts to analyse their activity level and the community dedicated to the cryptocurrency. If there is no development despite the developers’ promises, cut it from your portfolio before the market loses momentum to lower the risk. Use the funds to invest in stablecoins or other assets.
Invest in projects with growing ecosystems
Only because the market has become bearish doesn’t mean you should give up on investing in crypto assets. However, you must change your approach and switch from investing in highly volatile currencies into projects with growing perks and ecosystems. Crypto projects that enable you to gain revenue through airdrops, borrowing, liquid staking, and staking are worth adding to your portfolio during the crypto winter. Staking is an easy-to-employ strategy because the number of tokens increases over time. If you use a platform like Binance you can easily identify the cryptocurrencies that are worth your attention. One example of a project that rewards investors is Bitcoin, due to its growing community and reliable network.
Use this time to research and learn
It might sound dumb to state the obvious that you must learn how crypto investing works, but seasoned investors emphasise the importance of proper research. Crypto winters are ideal for boosting your knowledge and learning more about the sector and different projects. It would help if you prepared for a potential bull run, so make a list of the projects that are most likely to survive the bear market and thrive in the bull run. Research the fittest strategies for each of them, and learn how to employ them to match your trading style. The current market status should prevent you from investing from a fear of missing out and encourage you to focus on what’s more important. Enhance your knowledge of digital currencies and learn everything there is to know about the industry. It’s also recommended to get up to date with industry news to identify the early signs of a potential bull run.
Understand how dollar-cost averaging works
Suppose you’re investing in different kinds of assets, not only in cryptocurrency; you might know about the strategy of investing equal amounts over regular intervals, regardless of the market’s movements and digital currency price. This strategy enables you to reduce the pains of volatility. In the long run, this tactic could outperform timed trading. Instead of waiting to purchase currencies at better prices, you purchase them at regular intervals for a fixed sum. In other words, you set the amount you want to invest in cryptocurrencies and how much you want to spend regularly on a single cryptocurrency. When you use this strategy, you lower the buying cost and place your account in a favourable spot.
Rethink your strategies
It’s never fun to lose your funds, but the lesson is quite valuable. Seasoned investors consider crypto winters as great opportunities to re-evaluate their strategies and learn from the mistakes they made during previous bear phases. Use this period to analyse the market’s movements and identify patterns in how particular assets evolve. Several factors could trigger movement in a cryptocurrency’s value, and you should learn to identify the market’s inefficiencies.