Protect Your Crypto Portfolio When it’s in the Red With These Tips
It is no secret that the cryptocurrency market is volatile. This is evident by the extreme price swings of two of the biggest cryptocurrencies, Bitcoin and Ethereum. The former managed to climb to its all-time high of $63,729.50 back in April but soon took a plunge to $29,726 amidst the market crash in May. The latter also had its fair share of ups and downs as it surpassed the $4,000 mark earlier in May but is now trading at a low $3,000.
As such, crypto investors are likely to face periods of time where their crypto portfolio would be in the red - and yes, this is true for the pros too!
With market downturns, bearish sentiments, and unexpected price swings being a norm in the crypto space, it is important to know some of the tips and tricks to help you get through a negative portfolio.
Ahead, we discuss five tips to know to protect your crypto portfolio when it’s in the red.
1. Do Not Panic Sell
When your portfolio is in the red, the first thing you should not do is sell your crypto assets in a state of panic. Instead, it is best to hodl it out!
We are all aware that the crypto market is highly volatile. However, the underlying goal of buying into digital assets is to hodl them for a long period of time till prices appreciate. Always understand and keep in mind the potential of blockchain technology that has started picking up pace in terms of institutional adoption over the years.
This year alone, a number of financial giants and retail firms such as PayPal, Amazon, and even J.P. Morgan have started implementing aspects of blockchain technology and cryptocurrency into their business. This shows that mainstream adoption is indeed picking up speed and it is a matter of time that such digital assets become widely used and adopted.
So really, don’t be afraid of price dips - it is definitely bound to happen.
2. Buy More Crypto
The upside of a dip in the market is the opportunity it gives to allow you to take advantage of certain cryptocurrencies and buy them up. However, it is important not to rush into buying digital assets without doing the necessary research since you won’t want to regret your decision in the future.
To prevent any impulse purchases, it might be a good idea to plan out a list of cryptocurrencies - similar to a wishlist - you’d want to buy when the market dips. This way, you would have done your research prior and know fully what you’re buying into.
It is also essential to make sure that you only use money that you have set aside for investing. If you do come across an opportunity during a market dip and choose to use your emergency funds, you would be putting yourself in a state of financial risk.
3. Diversify Your Crypto Portfolio
Portfolio diversification refers to the act of buying into a range of different investment products. This helps you to limit and reduce your exposure to one type of asset. By doing so, you’ll be able to reap the benefits of the different currencies included in your portfolio while cushioning the negative impacts of major price dips when one - or a few - of your assets are experiencing bearish sentiments.
To put it into perspective, if your portfolio is in the red because of the price dip from Bitcoin and Ethereum, you can rely on other currencies such as stablecoins that may do better in that period of time. Hence, this helps to minimize the overall risk exposure of your portfolio.
4. Deposit Your Crypto into Interest-earning Accounts
One of the best ways to consistently earn even when the market is seeing bearish sentiments is to deposit your crypto assets into interest-earning accounts like Hodlnaut.
Hodlnaut allows users to earn weekly payouts, enabling them to generate a consistent flow of income to mitigate the negative repercussions of market decline. And no, you don’t just earn when the market is going downhill - platforms like Hodlnaut allow users to earn regardless of the direction in which the market is headed. This means that when the market is seeing a bull run, users would still be earning interest on a weekly basis!
Moreover, Hodlnaut offers up to 7.25% APY on six of its supported currencies including BTC, ETH, USDC, USDT, DAI, and WBTC. These are some of the highest crypto interest rates in the market at the time of writing.
The best part about interest-earning platforms is that they offer referral programs that help users earn a commission when they refer their friends. At present, Hodlnaut has an Upsized Referral Program that is offering users a bonus payout of 40 USDC for the first active user referred and 20 USDC per new active user referred after, capped at 50.
Do note that to qualify as an active user, you must get approval for your KYC verification and deposit a minimum of US$1000 worth of supported crypto assets in a single transaction as your first deposit or within one week of the first deposit.
Thus, such referral programs provide an additional opportunity for users to earn more on their crypto assets even when their portfolio is in the red - what’s not to like?
5. Opt to Earn in Stablecoins
Another way to protect your portfolio is by choosing to earn in stables. This is because stablecoins are backed by real-world assets (think fiat currency and precious metals) where their daily fluctuations are almost negligible. Thus, stablecoins are known to be “safer” options, which then allows you to protect your portfolio from any market volatility.
Hodlnaut offers users the option to earn in stables with its Preferred Interest Payout feature.
With this function, hodlers are able to choose the currency they wish to earn in, enabling them to have more control and flexibility over their deposited crypto assets. Not only that, it helps users boost their annual percentage yield (APY) when they choose to earn in stablecoins.
If Bob deposits BTC into his account, he will earn 4.08% APY. However, if Bob chooses to earn in stablecoins such as USDT instead of BTC, he will be able to earn the interest in USDT, which offers a higher interest rate compared to BTC. This way, Bob will be able to optimize his crypto portfolio by earning interest in “safer” crypto options like stablecoins that also provides a higher interest of 7.25% APY.
This function allows users to hedge against any negative implications posed by market volatility by simply opting to earn interest in stablecoins, enabling them to increase their APY.
If you just started investing in cryptocurrency, you’ll soon learn that having your portfolio in the red is pretty normal. But if you’re looking to invest in the long run, you should not be disheartened by such price swings. Instead, look at the bigger picture and find ways to earn even when the market is going downhill.
While you can diversify your portfolio, it is good practice to earn consistent returns by depositing your crypto assets into interest-earning platforms. It is a simple, fuss-free, and easy way to start earning passively while protecting your portfolio in the long run.