While the crypto market has always been renowned for its volatility, this measure has continued to escalate since the beginning of 2022.
On a year-to-year basis, the market has shed some $470 billion since January 1st, from a total market cap value of $2.21 trillion to $1.74 trillion as of February 20th.
But why are cryptocurrencies so volatile, and what are the best crypto investment strategies to help manage this?
Why Are Crypto Assets so Volatile?
There are a few reasons why crypto assets are so volatile, with the primary example being their relative newness and immaturity in the financial marketplace.
Of course, some will argue that assets such as Bitcoin (BTC) have achieved global prominence during the last decade, while a market that commands a market cap in excess of $1.7 trillion can hardly be described as a fledgling.
However, cryptocurrencies remain relatively new as an asset class, and therefore lack the stability and acceptance of buy-and-hold crypto investments such as gold or equities.
As markets mature, investors also begin to understand the associated assets in greater detail and appreciate the factors that impact price movements.
Until such a time, however, assets remain vulnerable to speculation and the interventions of industry experts or respected investors. This means that crypto-asset values can fluctuate wildly in a short period of time, based solely on sentiment and (in some cases) the manipulative actions of large-scale investors or ‘whales’.
What Are the Best Crypto Investment Strategies?
The question that remains, of course, is how can you utilize strategies to help negate the crypto market’s inherent volatility? Here are some options to keep in mind:
#1. Only Invest What You Can Afford to Lose:
We’ll start with a basic principle of all forms of investment, which is that you should never stake an amount of cash that you can’t afford to lose. This helps you to manage your capital holdings and ensure that they’re distributed as effectively as possible while ensuring that you invest within your means and can cope with the significant volatility that’s inherent to the crypto marketplace.
#2. Liaise With an Experienced Wealth Management Service:
If you’re new to cryptocurrency or the investment market as a whole, you may be unsure about where to start as a trader. This is where an experienced wealth management firm can come into play, as they’ll provide much-needed market insight and help you to make informed crypto investment decisions. We’d recommend targeting wealth managers with expertise in the crypto market, as this will ensure that you receive trusted and tailored advice.
#3. BTC Must Remain Your Priority:
While it’s important to build a diversified cryptocurrency portfolio over time, there’s no doubt that BTC must be at the heart of this asset collection. After all, BTC remains the single most liquid and valuable crypto asset and a market leader that has enjoyed considerable adoption rates across the globe. Currently, BTC commands more than 65% of the total crypto market and continues to have a direct impact on second and third-generation blockchains across the board.
Read Also:
All Comments
Lily Carter
Your blog has become a part of my daily routine Your words have a way of brightening up my day and lifting my spirits