In January 2018, the combined market capitalization of blockchain assets stood at around $620 billion. By December 2018, the value had shrunk to below $100 billion.
We are now on the verge of another crypto summer, and we are likely to see new all-time highs and significantly increased market capitalization.
All asset markets have similar cycles. Whether you are a HODLer or a day trader, you might want to know how to protect your investment from market fluctuations.
How can you do that?
Spread your risks with an eye on negative correlations.
In investment, spreading your risks involves putting your money in a variety of assets. The rule of thumb is that you should not buy assets that may seem to be different but face the same market influences at the same time.
- Assets that have the same direction in the price movement are said to be positively correlated. For example, when you look at the price movement of Bitcoin and Ethereum, they hugely mirror each other. We, therefore, say Bitcoin and Ethereum are positively correlated.
- On the other hand, the price of Bitcoin and that of crude oil do not move in the same way because the factors influencing them are different. We say they are negatively correlated.
Having assets that are negatively correlated and have different price movement patterns is an excellent way to safeguard your worth.
Buy futures and investment with time-bound returns
Another way to protect your assets from market fluctuations is to buy assets or derivatives whose returns are predetermined.
A great example of such an asset is a futures contract of another asset. A futures contract is an agreement that directs a particular entity to buy an asset at a specific price on a future date.
A closely related class of assets are those with set bottom prices. With them, you know that even if the market is bearish, you are assured that the price does not cross a certain point.
A good example of such an asset is the native token of the P2P lending platform AssetStream. While investors can buy and sell at a price determined by the market forces on exchanges, the AST token will always be sold at $0.01 on the platform.
Don’t be emotional about investment but drive on the emotions of others
The investment guru Warren Buffett has been quoted saying that you should be fearful when others are greedy and be greedy when others are fearful.
That means you shouldn’t allow yourself to be led by emotions when investing such as fear of missing out (FOMO) or fear, uncertainty and doubt (FUD). You should be very technical and logical with the way you buy and sell assets.
That’s the life of an investor!
Investing is a life-changing experience that leads to success if followed through correctly. You’ll learn more about AST token on their website, and decide your further steps.
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