What to do during the downturn phase of the cryptocurrency market? Top tips to kick-start the crypto-zima
Despite all the optimism from traders and investors a couple of months ago, Bitcoin’s price is currently trailing its all-time high by nearly 40 percent. At the same time, the market is not showing clear signs of a rebound – at least it did until last week. Overall, some analysts believe that the fears have become a reality, and we are indeed on the verge of a new “crypto-zima”, i.e. a prolonged period of collapse of Bitcoin and the coin market as a whole. However, this is not a reason to lose heart – “crypto-winter” can be a very fruitful period if you follow these five recommendations. We tell you more about the situation.
Content
- 1 Tip #1: Don’t hold high volatility altcoins
- 2 Tip #2: Take advantage of the DCA strategy
- 3 Tip #3: Steaking, steaking and steaking again
- 4 Tip #4: Explore projects with a growing ecosystem
- 5 Tip #5: Invest in yourself
Tip #1: Don’t hold altcoins with high volatility
As soon as the market turns to the bottom, the first thing to do is to get rid of the assets with the highest volatility, i.e. the ability to change sharply in price. Traditionally, such assets are altcoins, and especially relatively new projects with small market capitalisation, i.e. the product of the exchange rate by the number of coins in circulation. While Bitcoin is down 10 per cent, many new coins can fall much more seriously.
A good way to start the process of re-evaluating your investment portfolio is to look at the project pages on GitHub to see the level of activity and number of developers building protocols. And if, contrary to shouted marketing tricks and promises, there is little to no development, an investor should abandon such a project when the market starts to lose momentum.
Tip #2: Use the DCA strategy
DCA or Dollar-cost averaging is buying an asset in equal or roughly equal amounts as its price falls. That way, the average purchase price of a coin by an investor will go down all the time while the downtrend is going on. Eventually the market will go back up and the investor will already have a good entry point.
It is true that DCA only works with projects that are profitable to invest in over the long term. It's like the first tip here: only the most fundamentally important coins and nothing else. Most altcoins can easily drop to near zero, meaning DCA won't work with them, according to Cointelegraph.
Tip #3: Steaking, steaking and steaking again
Steaking is probably the easiest way to add value to a portfolio in the long term. Stacking takes the pressure off an investor to obsess over daily price fluctuations, as they simply accumulate tokens with relatively little risk.
In addition, continually increasing the number of coins is a good option for hedging - that is, reducing risk - against the backdrop of a declining exchange rate.
Most Tier 1 protocols offer the ability to place their own tokens online to generate revenue. These include Solana, Cardano, Polygon and Avalanche. Ether owners can also place their tokens in the Eth2 smart contract with the long-term goal of receiving rewards after the altcoin’s transition to Ethereum 2.0.
There are many other stacking options from gaming protocols like Axie Infinity and Illuvium to NFT trading platforms like LooksRare. Once you've done your research and chosen fundamentally solid projects, staking becomes a good source of passive income.
Tip #4: Explore projects with a growing ecosystem
Here we are talking about those startups that are very active in attracting new users to them. They can do this by giving away their tokens, NFTs, running promotions, paying prizes for social media activity and so on. All this is a great way to find promising projects and make money during a bearish trend.
The most recent examples of ecosystem growth during the year were the already mentioned Solana, Avalanche, Fantom and Atom.
Tip #5: Invest in yourself
One of the best things any investor can do is to add value to themselves. It’s about self-education, learning new skills, learning how the market works, taking care of loved ones, hobbies and so on.
All this will help in developing the key traits of a successful player in the crypto industry – patience, finding new ideas and honing your skills in making money from digital assets.
We believe that while the prospect of a bearish trend sounds entirely unhappy, such a period is in any case the best time to accumulate assets and prepare for the bull run. After all, coins are selling at crazy discounts during the downturn phase, which means that hoarding them can bring maximum returns in the long run. And such a chance is clearly worth taking.
If you are interested in such topics, join our millionaires cryptochat. Let’s be successful together.