5 ways to protect digital currency traders from severe price fluctuations

Over the past few weeks, digital currency investors have seen large fluctuations in the market. World economic problems and Russia’s invasion of Ukraine have shaken international financial markets, and digital currencies are no exception.

Read more based on that Report According to the Crypto News website, we will look at five ways that digital currency market investors can use to avoid sharp price fluctuations.

1. Invest in secure assets

If you are afraid of market fluctuations, the easiest way for you is definitely to invest your capital in “safe assets”. Secure assets are those digital currencies that have experienced little price fluctuations in the past and experience has shown that they can usually recover after a while.

However, you should also keep in mind that investing in secure assets can only reduce your risk to some extent and not eliminate it completely. In the digital currency market, stable coins (for people who want to minimize their risk), gold-backed tokens (such as Teter Gold and Pax Gold) as well as bitcoins are considered safe assets.

While digital currency investors are not usually in favor of Fiat currencies, investing in stable currencies such as Tetra and USC (USDC) means that you do not lose much due to the sharp correction of the digital currency market. As you know, inflation in America is growing. However, if you invest in stable dollar coins for a few weeks, this inflation will probably not have much effect on the value of your assets.

Also keep in mind that maintaining stable digital currencies such as Tetra is an investment for Iranian traders, and since the value of the Rial is constantly fluctuating in world markets, the Rial profit or loss of capital must also be considered. .

On the other hand, you can invest all or part of your capital on gold-backed tokens. Since the beginning of 2022, gold has performed well and has proven that it can withstand inflation and be a safe haven in times of political crisis.

In addition, you can invest in bitcoin. It is true that bitcoin acts as a risky asset, but since the start of the war in Ukraine, it has performed better than many of the digital assets on the market. Even now, after a few volatile weeks, its price is higher than when the war started.

۲. Look for the right opportunity to shop on the price floor

If you believe that the digital currency market will continue to grow after this volatile period, you can collect some stable coins and be a bugger to buy digital currencies at low prices. By doing so, you are actually building your investment portfolio from scratch.

When it is said that you have to buy on the price floor, that is, every time the price of a digital currency falls to lower levels, you can make your purchase gradually and in a few steps. The purpose of doing this is to enter the market when a particular asset is cheaper, instead of investing in a particular asset all at once.

This way you can reshape your portfolio with relatively good entry points. Finally, when the price of digital currencies rises, you make a good profit. Of course, you have to keep in mind that as it has been proven many times, the price of the currencies you have bought may be lower than you think, so this method can not completely prevent you from losing.

Also read: How to reduce the risk of your portfolio?

3. Use the “dollar cost averaging” method

Of course, when the market is volatile, one of the best ways to invest in Bitcoin or any other asset whose price you think will grow later is to use the “dollar cost averaging” strategy.

In this method, for example, you buy a fixed amount of bitcoin at any given time, regardless of its price. The goal of this strategy is to avoid market fluctuations by making small purchases in different time periods and to be able to invest in bitcoin at an average price.

To implement this strategy, you can set a specific day in each month or week and then manually purchase your desired digital currency from digital currency exchanges with the capital you have already specified.

We recommend that you watch the video below to learn more and better understand how to average dollars.

4. Take a look at derivatives markets (for professionals)

If you are interested in derivatives trading and have enough experience and skills to enter these markets, you can use a variety of futures trading and digital currency exchange options options to cover your previous losses. Note, however, that operating in these markets is more risky than previous methods.

Derivatives markets act like a kind of insurance. As a result, traders can use them to protect their portfolio when prices fall.

For example, consider a time when the market and the value of your portfolio have fallen significantly. By using short positions (in order to reduce the price), you can make a profit in your future trades and compensate your losses. Of course, in this form of trading, leverage is an important issue, and the more trading leverage you have, the greater your investment risk.

Access to futures contracts is possible in almost all major exchanges, just make sure you calculate the risk-to-equity ratio of your portfolio to make sure you can cover your losses in volatile markets.

On the other hand, you can also protect your portfolio with Bitcoin or Atrium trading options. However, these types of transactions are more complex than futures contracts and more challenging for inexperienced investors.

People who want to operate in these markets can now buy a bitcoin sale option contract that comes in handy at a certain price. In this case, if the value of your portfolio decreases significantly, this option deal, which acts in the opposite direction of the market, will compensate your losses. Again, keep in mind that when calculating option contracts or any other derivative transaction, it is absolutely necessary to calculate the risk coverage ratio.

5. Hold on

As many Bitcoin proponents say, holding can be a good advice in times of market volatility; This can be especially effective if you are holding high quality digital assets such as Bitcoin.

If you believe that digital currencies and tokens in your portfolio are growing, you can hold them and wait for this volatile period to end and then change your portfolio.

Also read: Long-term investment in digital currencies; How to hoodle more easily?

If bitcoin is a big part of your portfolio, this is probably the best way to invest.

Whatever decision you make, you should also keep in mind that volatility is part of the digital currency market. Your portfolio value may rise or fall 10% (or more) in just one day; This is quite common in this market.