How to navigate crypto volatility and make the best investment decisions

Investing in crypto is a hot trend nowadays, but it poses its own set of challenges and can feel overwhelming for those joining the hype for the first time. Cryptocurrency investments can be successful, but at the same time, they are risky because of their volatile nature. Put simply, volatility refers to the fluctuations in the crypto market and can include things like crypto prices and trading volume. These sudden changes cause investors to make irrational decisions in an attempt to protect themselves from potential losses. However, fearing volatility won’t get you anywhere – instead, you must learn how to withstand it and make better decisions based on logical facts.

How to navigate crypto volatility and make the best investment decisions 1

Appealing crypto opportunities always come with risks

The sooner you understand this, the better it is. For those who can’t make friends with uncertainty, it can be hard to survive crypto market volatility. If you believe every opportunity will make you rich, that’s a wrong mindset that will only leave you feeling disappointed. Some features that make cryptocurrency investment appealing come with significant levels of volatility. For instance, Ethereum has attracted many investors due to its huge potential. But the eth price isn’t constant – it fluctuates, just as it happens with all other cryptocurrencies. 

From the limited supply to the unpredictable sentiment changes, different factors require strong stomachs from those who enter the crypto market. Volatility will not likely go away until cryptocurrencies are fully adopted with specific use cases. Hence, the best way to handle it is to accept that it’s there first. In other words, anyone who considers becoming an investor should be prepared to deal with this volatility. Internet stocks which have become worldwide leaders also faced volatility in their early days, so it’s not something to avoid but rather a part of the ride.

Mitigate volatility and make crypto work in your favor

People tend to see things in black and white, which also applies to cryptocurrencies. But volatility can be good and bad at the same time – it all depends on what you do in the crypto space and what kind of decisions you make. For instance, those using a scalping strategy see volatility as their friend; on the other hand, volatility can be a total nightmare for those seeking capital gains. The good news is that you can learn how to navigate volatility and get the most out of your crypto investments.

Invest in crypto for the long run

When investing in stocks, it’s best to have a long-term strategy. The same is true for crypto, and that’s because market movements can lead to fluctuations in asset value over various periods. So, instead of selling your asset right after it falls, consider holding onto it until you can reap the rewards when it booms again. 

You can ride out the dip by staying up-to-date with what’s going on in the crypto industry. Check the news and pay attention to what experts say. Read as much information as possible, create an efficient plan, and, most importantly, stay calm and monitor your investments carefully.  

Establish your goals and diversify

Setting goals is paramount for investors. You need to develop a strategy and establish your entry and exit points. Even if a crypto asset seems to perform well, it’s impossible to predict when it will plummet. This is why you should seek to diversify your portfolio with different crypto assets, such as stablecoins – which are useful in dealing with volatility. Put simply, they are crypto that hold their value.

Let’s say that the market rises by 10%. In that case, you can sell a part of your holdings to ensure you hold onto the profits regardless of what happens. If the market goes lower than your sell point, you can buy again, but you’ll pay less this time. And if the opposite happens and the market goes up, you’ll make a profit. Even if stablecoins can’t bring huge gains, they may be a safer alternative for some investors. Make sure to do your research and decide which options work best for you.

Manage your emotions

You see all those headlines filled with enticing news about how crypto is at all-time highs, and it happens: you start experiencing FOMO or the fear of missing out. But it’s important to do your best not to give in to it. Fear is a natural emotion, but when it takes over, it can quickly cloud your judgment, leading to irrational decisions. So don’t overlook fundamentals; take a step back and research your crypto asset to understand its longevity and whether it can ride out the volatility in the market. 

Also, beware of panic investing! Humans generally have emotional connections to their cash, so on a subconscious level, they let these emotions influence their investments. And this can’t happen only to crypto newbies – experienced investors fall into this trap too! They invest emotionally in times of high volatility that bring excitement once the market goes up and fear if it crashes. You can’t talk yourself out of panic investing; the key is to take the necessary steps to avoid it. This involves keeping your emotions in check at all times, understanding your risk tolerance, and sticking to your plan.

Are you prepared for the volatility in the crypto market?

You need to be honest with yourself when answering this question. Crypto isn’t for the faint-hearted ones, so if you know you can’t deal with the volatility it involves, perhaps it’s better not to join the hype. Cryptocurrency has been associated with the wild west, and there’s a reason for it. But if you can’t accept losses, it’s impossible to see any significant gains. No one can tell whether crypto will ever gain the stability of traditional stock markets. However, one thing is sure: Bitcoin, Ethereum, and all the other digital coins are here to stay, and they have massive potential for profit. 

Losses are only a part of the story, so if you’re able to thrive on volatility, you can make gains as you play the market. However, there’s also the other scenario where you can’t make peace with the uncertainty and end up falling victim to panic investing and then regret your decisions as soon as you realize what you did. To avoid this, follow the basic rules of investing in crypto, develop an efficient strategy, invest only as much as you can afford to lose, and be in the game for the long run.