Within two weeks, Bitcoin has plummeted from $58,000 per coin to a low $30,000 per coin, and Ethereum has fallen from just over $4,200 per coin to just under $2,100 per coin. That is basically a 50% correction for the two largest trading volume market caps in the cryptocurrency market. Unlike previous corrections that were just driven by market forces, this correction was caused by one man with United States government-subsidized absolute power, a Saturday Night Live host no less.
What was supposed to be a bull-market summer with the release of Ethereum 2.0 and solutions from Cardano and Polkadot has turned into the winter of our discontent. Fear and uncertainty are creeping through the crypto space. Is this crash just a bull-trap that will rebound in a couple of months, or is this the beginning of a years-long bear market? Will Elon Musk and other whales allow the crypto space to grow naturally, or will they continue manipulating the market? Should I concern myself with cryptocurrency exchange platforms like Bittrex vs. Binance, or should I not be in the cryptocurrency market at all? If I was “all in” before the crash, what should I do? Sell, buy, or HODL (Hold On for Dear Life))?
In a climate so gripped with fear, it is natural to want some income protection for peace of mind. A growing army of retail investors has made alternative finance part of their asset allocation strategy. A lot of these people, not the type of people you would expect to buy cryptocurrencies. However, these people, often beginners, have moved from more traditional asset allocation to alternative finance because historical events like the 2008 housing crisis and the COVID-19 pandemic have made them feel that security is just an illusion anyway and that a certain amount of risk tolerance is necessary to remain in the middle class. To help beginner investors survive in this volatile market known as the crypto space, here are three alternative finance tips and tricks.
1. Never be all-in.
Analysts with prophet status like Megan Kaspar have predicted that Ethereum will reach $8,000 to $10,000 per coin by January 1, 2022. She had been previously proven right by predicting Ethereum’s rise from $1800 to coin over $4,000 per coin back in late 2020. With those numbers, it might have been tempting to buy Ethereum at its ATH (all-time high) in early May to double one’s money in six months. Buying some Ethereum at that price might have been a risk worth taking, but putting all of your money in with nothing in reserve would have left you unable to “buy on the dip” during a correction, a crash, or even worse, a bear market.
A better solution would be to always have some cash in reserve for investing. However, exchanges like Binance, Bittrex, Kraken, and Coinbase will not let you buy most cryptocurrencies with fiat currency. Instead, it would be best if you had some cryptocurrency stable coin, like Tether (USDT), on reserve so that you may quickly buy when a limited window of opportunity presents itself. If you wait until a crash or a bull-run to convert your fiat currency to Tether, your trading platform may be overloaded with traffic, and you might not be able to obtain your Tether in time.
2. Be cautious about margin trading.
“A fool and his money are soon parted.” A margin trader and his money have parted a hell of a lot sooner. Don’t do it. Maybe if you are a genius and an experienced trader, you can disregard this tip, but please listen if you are a beginner. One of the reasons why Bitcoin went as low as it did was because of the margin traders. They did not sell for a loss because they wanted to; they had to because they had bought Bitcoin with money that they did not truly have. When a cryptocurrency exchange lets you buy on margin, you are buying crypto on credit. Depending on how leveraged your position is, your whole position is automatically liquidated and returned to the exchange once your digital asset lowers to a certain price.
✋ Warning
3. Invest in the long-term.
If you invest money that you need for food and rent or money that you will need in the year or even five years, you have no business in the cryptocurrency space. In the relatively short history of the cryptocurrency market of a little over a decade, high trading volume market caps like Bitcoin, ETH, and Litecoin have seen huge spikes and huge drops, as well as bear markets, some lasting as long as three years. Regardless, those who chose hold, depending on when they first entered, have made 1000x or more on their initial investment.
