For years the cryptocurrency market has been flying high, with prices spiking into the stratosphere and occasional corrections fairly mild. The relative stability of the crypto market ended up lulling long-time investors into a false sense of security while enticing millions of newcomers to the asset, but long-time crypto watchers know that fortunes can turn on a dime, as they’ve done in early 2022.
For those who are unprepared, the occasional crypto crashes can be as frightening as they are jaw-dropping. The very intensity of these periodic pullbacks has left many people stunned, and many others wondering what to do. So how do you survive the volatility of the crypto market and turn it to your advantage? Here are seven timely tips to get you started.
- Start with a top-to-bottom asset allocation analysis. Whether it’s flying high or lying low, cryptocurrency is a speculative investment, and it should make up a very small percentage of your overall portfolio. A top-down analysis will let you know where you stand and guide what you do next.
- Check your initial cost. If you have been investing in crypto for some time, the carnage may not be as bad as you think. Bitcoin and its brethren may have fallen sharply in the short term, but many cryptocurrencies are still up big compared to a few years ago.
- Consider some profit-taking. If you do have profits in your cryptocurrency holdings, now may be the time to take them. These investments could turn around and rocket back up, or they could fall to earth. Taking profits now will reduce your future risk and allow you to sleep a bit easier at night.
- Do some research. The crypto crash of early 2022 has revealed some uncomfortable truths about these alternative forms of payment, including the fact that some of them are built on nothing but hot air. Researching the various types of cryptocurrency and the basis they are built on will be a good use of your time during the current crypto crash.
- Learn about the blockchain, not just cryptocurrency. The cryptocurrency market may be frothy but it is not entirely without merit. There is real promise in the blockchain, and learning more about how these distributed ledgers work will make you a smarter investor.
- Seek out companies that will benefit from the blockchain. From banks and brokerage firms to real estate agents and property investors, many industry sectors stand to benefit from the blockchain. Researching those alternative investments can help you spread the risk around while profiting indirectly from the crypto market.
- Invest in crypto-adjacent companies and funds. Now that you know which businesses are likely to benefit from the blockchain, you can redirect some of your crypto cash, essentially enjoying the best of both worlds.
The periodic pullbacks of the crypto market may be scary, but these heart-stopping declines in prices do not have to spell doom for your finances, and they do not have to mean the end of your investment adventure. With a few timely moves and some smart allocation, you can invest in the future money without losing your shirt.