How Investors and Traders Can Best Deal With Crypto Volatility

Any investment that a person might be interested in making will have its own level of risk associated with it. What this means is that there is never a 100% guarantee that investment can turn in your favor. This is also the case with cryptocurrency investments as well, where the markets have a reputation for being extremely volatile.

This high level of volatility essentially means that prices have the opportunity to change drastically, which could either allow an investor to essentially make a significant profit if they are able to navigate it or lose out a lot if they are unable to do so.

Handling the associated risks with volatility within the crypto space can play a key role in terms of investment success, and at the end of the day, the more time and effort you contribute to learning as much as possible about handling volatility, the more educated of a decision you can make when the time comes to actually start investing, especially when you start trading some of the Most Volatile Cryptocurrency options out there.

As such, the team here at DXONE will go over some of the key tips that you can utilize to minimize the impact of cryptocurrency volatility as an investor.

Top 3 Tips against Cryptocurrency Volatility as an Investor

These are the top 3 tips that you can utilize as a means of minimizing the effect of volatility throughout all of your investments.

Don’t Become Emotional

You cannot, under any circumstances, let your emotions control your actions. You need to understand and be aware of the fact from the very beginning that not all of your investments will pan out and, with that risk in mind, enter the world of crypto investments.

According to the historical data of cryptocurrencies such as Bitcoin (BTC), for example, even at a point in time where they saw significant dips in their value, they managed to eventually recover. Your main goal here should be to select a trading strategy that you are comfortable with using, and stick by that trading strategy, no matter in what direction the market swings. If a token falls in value dramatically, it still has just as big of a chance to get back up and spike in value if the underlying blockchain and project are appealing to investors, users, and the general public, which can lead to mainstream adoption.

Do not put yourself in a position where you might regret your actions later on when you calm down. Emotionally led thinking can lead to poor decision-making, where you might chase after the best-case scenario at the expense of paying attention to indicators behind an investment.

Use a Hardware Wallet

A hardware wallet is typically recommended due to the fact that it is, by far, the most secure way through which you can store cryptocurrencies. This is due to the fact that you can essentially disconnect your wallet from the internet completely, after which you will feel less inclined to, for example, regularly re-transfer the tokens to exchange.

Additionally, when you move cryptocurrencies from a hot wallet, which is typically the exchange-based wallet that is given to you on specific centralized exchanges when you make an account, to your private wallet, you might have to pay some fees.

Paying these fees constantly back-and-forth can discourage you from using the tokens you have as much, which will encourage you to HODL (Hold on for Dear Life) to your cryptocurrencies even at times of high volatility within the cryptocurrency market, and you are less likely to make impulsive sales of your crypto this way. If you want additional strategies, you can also use a Trusted BTC Investment Site.

Diversify to Minimize Risk

Never invest all of your funds within a single cryptocurrency token. The fact of the matter is that there are literally tens of thousands of cryptocurrency tokens currently available to buy on numerous exchanges.

On DXONE exchange, you can get access to and data on over 250 cryptocurrencies. By putting your funds in more than a single cryptocurrency exchange, if one token falls in value, you still have the chance of another token in your portfolio spiking up in value, leading to potential gains instead of losses. In any case, it is always recommended for you to diversify your portfolio as much as possible.

Set Clear Goals

What this essentially means is that you need to find a cryptocurrency strategy and set a specific goal for how long you will be using it. You can also set a goal for how much you would like the token you bought to increase prior to selling it. Know when to sell, and always plan ahead. Only you know how much you would feel satisfied with getting back from your investment, so always aim to follow your goals down the line, which can span from a few months to even years.

Risk Management in the Crypto World

When cryptocurrency investors consider the question of how to optimally manage their cryptocurrency risks, they often take a few things into consideration. The first challenge is to diversify the portfolio as much as possible.

Then they go over the liquidity and trading costs due to the fact that the cryptocurrency markets are typically less liquid and more expensive than traditional markets. What this means is that the very basic trading tools available on an exchange need to be used as a means of reducing risk. These include establishing trading rules, such as market orders, limit orders, or stop-loss orders, all of which will allow traders to limit their losses. Ensure that you take this into consideration when you are learning to trade cryptocurrencies.

Most Volatile Cryptocurrencies

The most volatile cryptocurrencies will typically be the ones that have extremely small market capitalization due to the fact that they do not have much trading volume and they are not that well-known within the marketplace.

These are typically tokens that pop up with a lot of promise but, over time, lose both popularity, appeal, and ultimately, value.

When you go to any exchange and select a filter that showcases the tokens with the lowest market cap, you will find a lot of currencies that might see an increase of 100% within a day, but ultimately, all of these will, at some point experience just a sign of a decrease in value as-well when the initial hype or pump period and excitement ends.

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