Cryptocurrency Market Volatility: How To Keep Your Assets Safe In 2023?
The crypto market has gained a reputation for its unpredictable price fluctuations throughout the years: this volatility arises from an interplay of factors.
The trends in adoption are important, for one; when major companies or institutional investors embrace cryptocurrency, it can drive prices higher. Conversely, technological advancements, vulnerabilities or shifts in market supply dynamics can trigger price swings. And, economic events like crises or currency devaluations make cryptocurrencies attractive as an alternative.
Manipulation schemes and the activities of large-scale traders (known as whales) can artificially deflate prices. Issues related to exchanges, such as security breaches further contribute to market instability. Media coverage plays a role in influencing market psychology, causing either fear of missing out (FOMO) or fear, uncertainty and doubt (FUD). And then there are global economic indicators to add to these psychological factors like fear and greed which impact market movements, too.
Currently, we find ourselves in a crypto epoch where extreme price fluctuations have become commonplace and can cause significant harm to casual investors. However, this doesn't mean that you should simply accept losses and passively observe your crypto portfolio suffering from volatility. On the contrary, there are practical measures you can take to safeguard investments and potentially thrive in the long run.
Here are three strategies to achieve just that:
Firstly, it is crucial to have more than a basic grasp of how the crypto industry operates. Seasoned traders would agree that conducting thorough research about the cryptos most likely to take off, like those highlighted on Techopedia.com, before investing is far and away the most effective approach. The more you understand about a protocol or project, the lower your risk of experiencing financial losses.
Every cryptocurrency investor dreams of finding a brand new crypto marvel in its early stages envisioning the opportunity to purchase tokens at low prices and later sell them for significant profits. Given that new crypto projects seem to emerge every week, identifying that particularly shiny jewel in the crypto crown can feel like searching for a needle in a haystack.
However, during times of market volatility, it is crucial to stay vigilant. During these challenging times, some ventures on the market deceive investors by offering deals that appear good to be true or resembling get-rich-quick schemes. One common fraudulent tactic is known as a "rug pull," where developers lure investors with a project before disappearing with their funds. Another scheme is called "pump and dump " where influencers artificially inflate the value of a token to attract large-scale investor support but abandon the project once they have accumulated funds. To avoid falling victim to scams and navigate through markets successfully, it is essential to do your homework on any potential new ventures.
Secondly, choosing stablecoins backed by assets can also be a way to protect your cryptocurrency portfolio from extreme price fluctuations. These stablecoins are designed to maintain their value by being linked to real world assets, such as fiat currency or gold. This feature makes them less likely to experience price changes, and also protects holders against scams.
Gold-backed tokens become particularly attractive when the cryptocurrency market is highly volatile. Gold has a track record of preserving its value during periods of inflation and economic crises which makes it a reliable safeguard against instability in the market.
Lastly, diversifying your investments is a strategy for navigating through cryptocurrency volatility.
While some devoted Bitcoin enthusiasts might solely focus on BTC, most investors understand the importance of diversifying their investments.
The cryptocurrency market offers a range of asset classes apart from Bitcoin and Ethereum. It's worth considering exploring utility tokens, payment tokens, security tokens, governance tokens and stablecoins. This widens your investment options and reduces the risk of being exposed to a single asset.
Diversifying your portfolio requires research into the assets you choose. Assess their potential evaluate the credibility of their developers and engage in discussions or AMAs (Ask Me Anything) to get a sense of community sentiment. Only invest when you are confident that your chosen assets are reputable and not associated with any scam risks. And remember, diversification is not a one-time action but an ongoing process. Keep an eye on how your assets perform as they may fluctuate and adjust your holdings as you gain insights and confidence in their reliability.