The cryptocurrency market has an interesting way of catching even the most seasoned veterans off guard as each bull and bear market initially shows similarities to previous cycles only to veer off in an unexpected direction and wipe out the fortunes of newly minted crypto millionaires.
This was the case with the weak close of 2021 which completely went against the bullish $100,000 BTC price estimates that crypto analysts and influencers were peddling nonstop.
Currently, Bitcoin price is more than 50% away from its $69,000 all-time high and altcoins have fared worse, with many down more than 60% in the last 2 months. In times like these, traders need to regroup and re-evaluate their investment strategy, rather than just buying every price dip.
Here are five strategies traders can use to survive an unexpected crypto winter and retain as much value in one’s portfolio as possible.
Reduce exposure to highly volatile altcoins
Once a widespread market downturn commences, the first step to take is to reevaluate current positions and reduce exposure to the most volatile assets.
Oftentimes these are new projects that have come out of the trending sectors of the crypto market such as meme coins, NFTs or rebase projects like Wonderland (TIME), because many of the token holders are new to the community and not long term investor like the user bases for more established projects.
$TIME to pack it up. pic.twitter.com/hJI3jB6eU0
— humble defi farmer (@PaikCapital) January 25, 2022
A good way to begin the evaluation process is by looking at a project’s GitHub account to see the level of activity and the number of developers dedicated to building out the protocol.
If there is hardly any development despite flashy marketing gimmicks and big promises, the project may be one an investor should cut when the market begins to lose momentum.
Traders could then put these funds in stablecoins that can be staked to earn yield or buy future market dips.
Dollar-cost averaging
Dollar-cost averaging (DCA) is the process of buying an asset in tranches over time to average out the price paid and account for volatility-induced changes in…
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