Avoid Crypto Volatility: Guide to Blissful Investment [2024]

Introduction

Avoid Crypto Volatility – In the ever-dynamic world of finance, cryptocurrency has made a long-lasting impact. Although the crypto market is still in its infancy, it poses a lucrative opportunity for returns. When looking to invest in crypto, one cannot deny the haunting specter of volatility.

Since its inception, the world of cryptocurrency was wired in a certain fashion that allowed investors no tools for hedging volatility. Early platforms were susceptible to financial fraud, lacked security protocols, and inevitably methods that allowed investors to regulate their exposure.

Technically speaking, cryptocurrency’s volatility stems from two things: varying perceptions about its intrinsic value and its investment raising strategy. While some people consider it as a revolutionary alternative to coercive banking systems, others point out that it is a mere store of value.

Since its inception, the world of cryptocurrency was wired in a certain fashion that allowed investors no tools for hedging volatility. Early platforms were susceptible to financial fraud, lacked security protocols, and inevitably methods that allowed investors to regulate their exposure.

In stark contrast, today’s world of crypto is mature. With the rise of gold-backed assets and other financial instruments, there are a variety of ways to securely hedge against crypto volatility. Here is an outline of the evolution and strategies of preventing volatility in crypto trading:

ICO to STO: Crypto Has Come A Long Way

Initially, the announcements of new coins were coupled with an Initial Coin Offering. Because thee offerings were not backed by any underlying investment, volatility was fueled.

To cater to this, experts came up with security token offering (STO). In case you are wondering what an STO is, it is similar to an ICO in terms of the initial investment offer in the form of a coin, but is backed by an underlying asset such as a bond, stock, or any other trust. The addition of a security was instrumental to drive down unchecked volatility.

Balancing Your Portfolio Is Key

Avoid Crypto Volatility – Putting all your eggs in one basket is foolish. Similarly putting all your investment in the crypto basket is equally foolish. Seasoned investors are in unison when it comes to diversifying money portfolios. This principle of money management has a universal appeal: it extends beyond the type of asset class.

Volatility becomes a plague for an investor that has invested all their worth in the crypto market. To avoid the impact of a sharp decline on your, ensure to invest in traditional asset classes such as commodities, stocks, bonds, and real estate. Even if traditional assets do not entice you, then while investing only in crypto, make sure to drop your capital in different coins.

By investing in more than one crypto coin, one can naturally fortify against volatility, since every cycle of ups-and-downs sees some winners and losers. With a diversified asset portfolio or crypto portfolio, you can increase your chances of coming out as a winner.

Stablecoins: Pegged to Fiat Money

In the early years of crypto, it was nearly impossible to exchange back and forth from fiat money to cryptocurrency. Investors craved these exchanges because once they could change fiat currency to crypto, they could then go on to invest in a range of coins. When volatility struck the crypto market, it was also extremely difficult to unlock the reverse process where crypto could be exchanged back to fiat currency to protect against future losses.

Given this context, if you are wondering what is a stablecoin, then think of an added layer of financial certainty. Stablecoins cut through the difficult process of changing between fiat and cryptocurrencies. Because their prices are pegged to those of currencies such as the USD and EUR, investors can quickly exit a crypto position and temporarily hold the Euro or the Dollar.

Tread Cautiously, Trade Cautiously

A smart investor is never lured in by the promise of sharp returns, when there is a significant risk at play. This principle stands true for cryptocurrency trading as well. Before entering a trade it is necessary to chalk out how much you are willing to put at risk.

Most exchanges have developed their trading interfaces around this psychology. With the help of stop loss and take profit orders, you can set the decrease or increase in price at which the system automatically exits the trade. As the words suggest, stop loss orders specify the decrease in asset price at which the trade should be excited to avoid further loss in a volatile cycle.

Volatility Is What You Make Of It

Avoid Crypto Volatility – When stepping in the crypto market, keeping a vigilant eye is crucial. All the tools and strategies mentioned above are available from the onset with investors. Taking advantage of these strategies depends on the individual investor. Responsible and mature participants will always make use of smart strategies to cut through volatility and risky decisions. After all, success in the crypto market, like all other financial markets, is based on effective risk management.