While the famous volatility of cryptocurrencies can be scary for investors, it is something that needs to be overcome. Their volatility has been a portion of what has cemented cryptocurrencies on the chart since they burst into the traditional investor market. Investors were flooded with products like Bitcoin when, during November and December 2018, the value of the cryptocurrency increased in value exponentially.
However, it takes a lot of courage and some tactical savvy to successfully navigate the lows to keep yourself. Safe and sound and positively contribute to a growing crypto economy.
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Why is Volatility Important but Deadly?
There is a lot to remain said for the role that volatility played in helping cryptocurrencies break into the mainstream market .
Cryptocurrencies, and Bitcoin, in particular, were only pushed into the media mainstream as a tool of the dark web when the infamous Silk Road was shut down. It was far from being careful a good investment for the Wall Street types, but they soon joined the party.
Suddenly the banks, the thought leaders of the banking and financial institutions all had an opinion on Bitcoin: many thought it was a fad. Or even rat poison and too volatile to take seriously. But the conversations around Bitcoin were beginning to celebrate in investment circles.
The Chicago Board Choices Exchange ( CBOE ) and the Chicago Mercantile Exchange ( CME ) introduced. Bitcoin potential trading on December 18 and 10, 2018. In addition, Goldman Sachs and Barclays are rumore to be looking into cryptocurrencies, and people can’t get enough of this crazy asset that could double in price in a matter of weeks.
The High Volatility of Crypto Assets
“I think this is a key driver, even more so because perceptions are much more volatile for a digital asset. Than for ‘real world’ assets like gold, real estate, corporate profits, or government-backed currencies. In other words, there remains a big gap between the physical world and the digital one.
“The mortgage industry is a faultless example of an industry that seems to remain to help to bridge the gaps, just like the real estate industry or any other industry that has a foothold in the ‘real’ world.”
How to Handle Volatility?
Managing volatility is nothing new for institutionalized investors. Assets, stocks, bonds, and even forex are prone to swings, but the problem is that cryptocurrency volatility is off the charts.
Also, cryptocurrency investors are often new to the game and haven’t experienced the range of changes. Above – seeing their money grow and shrink substantially by the hour.
As the stock market has been around much longer than cryptocurrencies, it is an excellent place to start. However, tips for managing these sickening lows and highs are relevant and can be carry over to cryptocurrency.
Like in the cryptocurrency space, there are long-term and short-term investments in the stock market. Roger Ma, a founder of Lifelaidout, a certified financial planning firm in New York, explained how. In stocks, it’s essential not to forget your time prospect.
Investing in Stocks Rewards You inthe Long Run.
It reflects much in the same vein as the so-called ‘ Hodl ‘ strategy for crypto. Essentially, the strategy says that there remains no want to let “day-to-day changes get to you” but to hold on to your cryptocurrency to avoid volatility altogether.
However, there are times when even seasoned cryptocurrency investors feel the urge and want to make. A profit or a high and escape the market. But getting out of the need for an investor is problematic if that money is design for assets.
Many have seen the value in diversifying their portfolios through cryptocurrencies and by hedging their bets with more stable assets, primarily gold.
Gold is an asset almost synonymous with stability, and it has a long history of running with cryptocurrencies as its antithesis. However, there have been times when it is apparent that gold and cryptocurrencies. Have inverse relations with the precious metal speaking in times of crypto lows.
Daniel Marburger, director of Europe-based online gold dealer Coin Invest, said gold coin sales increased fivefold on January 16 when cryptocurrencies plunged.
Cash is another insurance that crypto investors readily turn to when the crypto market takes a nosedive. It is as simple as selling digital money for something that can at least be use in everyday life.
The problem with converting digital currency to cash is that the value of money is constantly changing but slowly losing weight. So as an investable asset, it isn’t a good bet.
Government-issued bonds are generally perceived as safe-haven investments because the general view is that countries are often more financially. Secure than companies and more stable than cryptocurrency. However, suppose the bond issuer can’t meet interest payments or repay principal when due. In that case, it could lose its entire investment, and that’s happen before, even in economies as big as China’s.
These safe havens mainly have ways in which cryptocurrency investors can escape market volatility and protect their assets from falling too far. However, the main problem is taking their investment entirely out of the crypto economy. With the volatility, it is often difficult to get back in and make a profit when the markets are green.
A Duty to Weather the Storm
There is evidence to suggest that Bitcoin’s volatility is decreasing, that the wild swings are not as rough, and that they are becoming more manageable over time. It has a ration to do with the increased adoption and distribution of Bitcoin in a wide and varied market.
On the other side of things, volatility remains also sometimes appreciated. Arthur Hayes, the CEO of BitMEX , a Bitcoin merchant exchange, trades volatility and sees it as necessary to the space.