Cryptocurrency; 5 Ways to Make Money From the Market Crash.
Anyone who has been paying half an attention to the cryptocurrency world would have noticed the current bearish trend. This hasn’t always been the case. Just last year, the market capitalization of these digital assets experienced a price surge from $18 Billion to $180 Billion within a year.
Here is a problem, this trend has made some investors lose a lot of money. However, there are other investors that haven’t lost a dime. In fact, they have made money steadily from the current drop in price. How is this possible, you ask?
There are several ways to make money from the market crash. But the approach taken depends on factors such as;
- The Investor’s Tolerance Risk
- The Investor’s Belief in the Future Direction of the Market
- Pin-Point Timing
Before I go any further, let me state that investing in cryptocurrency is highly speculative. So, invest at your own risk.
That said, let’s discuss the ways to make money from the current market crash.
5 Ways to Make Profit from the Cryptocurrency Market Crash
Outlined below are five specific methods that will help you make money from the bearish trend in the cryptocurrency market.
Buying the Dip
This is the most obvious way of taking advantage of the low prices. What does it mean to buy the dip, you ask? It is a slang that refers to the act of purchasing a cryptocurrency after a significant decline in price.
The concept is based on an understanding of market fluctuations and is usually done to capitalize on a future upswing.
For example, I can purchase Bitcoin at the current price of about $7,000, knowing that it would increase to about $25,000 before the end of the year. As I said earlier; stomach for risk and investor’s belief.
There is just one problem with using this strategy to make money from the market crash. To be able to pull it off successfully, an investor needs to be able to time the purchase and sale perfectly. Many cryptocurrency experts have described this as challenging.
You have to be able to figure out when a digital asset has hit rock bottom. For example, after hitting a peak in 2013, the price of Bitcoin gradually dropped for almost two years before hitting a new peak.
Another problem with buying the dip is that, is that investors will have to assume that the digital coin of interest will always rise. That assumption could cost you a lot of money,
Identify Strong Opportunities
Yes, there is a general crash in price. However, as an investor, you must understand that there are always digital assets that can hold up well through the current trend.
According to Marshall Swatt, the founder of Coinsetter, a company acquired by Kraken, there will always be companies and tokens that will eventually be successful. He described such a token as a possible future Amazon and compared it to the NASDAQ bubble.
The question is, how can you find such a coin?
Well, it all goes back to the project team you can trust to get things done and survive the tough times. You are interested in tokens that have a very solid foundation and compelling business models.
An example of such is the much-anticipated Token from the popular messaging platform, Telegram. Described as one of the biggest token sales in 2018, it fits into the criteria.
Utilize the HODL Strategy
In case you were wondering, HODL simply means Hold On For Dear Life. This is a strategy that is used to weather market crashes in the digital currencies and stocks too. What does it mean, you ask?
It refers to investing in some cryptocurrencies and holding on to them for a long period of time. The constant price fluctuations or crash in price won’t matter. You intend to hold on for a significant period, and that’s what you’ll do.
This is the strategy most investors are probably employing for the current market crash. It’s a classic strategy that works most of the time. However, HODL is more effective if you’re holding on to the top five cryptocurrencies.
Of course, like buying the dip, this strategy is based on the assumption that the price of digital assets will rise again.
Exiting to Fiat Currencies
One strategy employed by some traders for the current market crash is exiting to fiat. One of such traders is the managing director of Crypto Asset Management, who revealed that his company frequently employed this approach when there is a decline in the price of digital assets.
Exiting to Fiat currencies is not as easy as it sounds. Like buying the dip, it also requires the right timing. An investor must be able to know when to exit and when to return. Yes, you wouldn’t be making much profit, but no losses either.
Other investors combine this strategy with HODL, pulling out a larger amount and retaining what they are willing to risk. This is far more profitable than simply exiting to Fiat.
Traders can easily make a lot of profit from the market crash by shorting Bitcoin. However, it must be done correctly. What does it mean to “short Bitcoin”, you ask?
This involves trying to make some money from a drop in the value of Bitcoin. You have to sell all your Bitcoins at a rate you’re comfortable with right now, hope that the price will drop further and you simply buy again when it does.
Sounds simple, right? Hell, no!
It’s a risky approach that is reserved for the most sophisticated investors. You have to be fairly sure of the bearish trend before short selling your cryptocurrencies. Furthermore, you have to know exactly when to enter the market back to make some profit. The most astute investors short-sell only to buy the dip.
Many exchanges such as Poloniex, Bitfinex and Kraken offer this functionality.
You don’t have to stick with one strategy, a combination of any of the strategies outlined above can help you make money from the market crash. However, ensure you perform due diligence before employing any approach.
Who says you can’t make money when the market is down?