Investing in crypto can cause a feeling of instability because of the market volatility that comes with it. Your investment is booming one minute, and the next, it’s crashing. It’s frustrating and stressful, but there are ways to protect your money and reduce losses during these unpredictable times.
Below are 3 ways you can protect your crypto investment from market volatility:
1. Buying a Put Option
A put option allows a trader to hedge against the risk of price decline in their crypto holdings. For instance, a trader hedges the risk against the decline in prices that his crypto holdings might experience. If the market price falls below the option strike price, an investor can just decide to use the option and sell their holding at the higher strike price to limit the decline in losses.
2. Set a Stop-Loss Order
A stop-loss order helps manage risk in crypto trading by automatically selling an asset when its price reaches a certain level. For example, a trader who buys an asset at $5,000 can set a stop-loss order at $3,800, capping the loss at $1,200. This strategy acts as a safety net during periods of high market volatility.
3. Control Your Emotions
The crypto market is driven by hype and fear. Many people buy when prices are high due to the Fear of Missing Out and sell when prices crash out of panic. Stay calm and make decisions based on research and logic, not emotions.
Final Thoughts
At the end of the day, the key to surviving crypto market volatility is being smart, patient, and prepared. With these strategies, you can protect your portfolio and keep moving forward, no matter what the market throws at you.
