The great market crash in 2018 taught us a hard lesson after the unprecedented volatility of cryptocurrencies. Within two years, the price of cryptocurrencies had wildly fluctuated. Many people began to regard cryptocurrencies as a highly volatile sector rife with confusion and speculation at the time. Based on market capitalization, Bitcoin was the first and largest cryptocurrency. In 2017, it grew dramatically, rising from $700 to nearly $20,000! In just 12 months, it produced a return rate of +1,318 percent, excluding transaction fees.
Many people jumped on the cryptocurrency bandwagon, and we can't blame them, but as the market expanded to huge sizes, it became too unpredictable. Following that, cryptocurrency experienced a massive drop for the entire year of 2018. Cryptocurrencies dropped from an all-time peak of $813 billion to a mere $100 billion in market capitalization, with all coins' general values falling by nearly 90%.
When cryptocurrencies begin to fall in value, this does not mean you can sell all of your investments. However, it's best if you stay vigilant about their movements and the losses you're able to accept. Everyone wants their assets to grow and expand, but when it comes to investing in the stock market, risk is unavoidable.
Volatility
Volatility is a statistical indicator of an asset's price dispersion, according to traditional finance. Volatility, to put it another way, is the degree to which the price of an asset fluctuates over time. The cryptocurrency market is highly volatile, with prices fluctuating dramatically on a regular basis.
After learning about cryptocurrency market fluctuations, it's natural to wonder if it's a positive thing or a bad thing. We may examine two points of view. The first is from the viewpoint of an investor, who considers uncertainty to be excellent. The level of volatility that is good will be determined by the person's risk tolerance. Some people, including risk-averse people, place a higher value on stable assets, and therefore avoid high-volatility trades. Crypto traders are notorious risk-takers who are quickly drawn into high-volatility transactions.
Volatility, on the other hand, is neither a positive nor a bad thing from the perspective of an investor. Investors are more concerned with protecting their wealth than with making a fast profit. Here are a few ways to keep your cryptos secure from market instability.
Sell calls
Selling calls on the current cryptocurrencies may be used to protect against losses while still increasing profits. Being the seller of a call option allows you to offer the buyer of your preference the opportunity to purchase your cryptocurrencies at a specific price on a specific date, in return for an immediate premium.
Let's say you sold a call option on BTC/USDT for a premium of $100 at an above-market price of (BTC=$100) $250 for 14 days and prices fell to $120 at the expiration date. You will make a profit of $100 as a result of this. You'll get a premium for selling the coin option, essentially recouping some of your losses from the BTC price drop.
The premium is paid to the option seller and may be used for additional portfolio security or treated as a form of payment.
Invest in Puts to Safeguard Your Assets
Puts may be purchased for speculative purposes or to secure an established position or portfolio. When you buy puts, you benefit when the value of one cryptocurrency falls in relation to another. Puts give the buyer the option to sell his cryptocurrencies at a set price and on a set date.
Let's say you purchased a put option on BTC/USDT for $10 with a strike price of $180 (BTC= $200) for 28 days, and the price fell to $120 at the expiration date. You'll have made a return of $50 ($60-$100), almost five times your initial investment.
Puts have one major benefit: losses are small, and the most you will lose is the premium you paid for the put.
It's important to keep in mind that not everyone has the ideal strike price or expiration date. Always try to set a strike price that corresponds to your risk tolerance and market bias when dealing with cryptocurrency. As a result, if the strike price locks-in a minimum value of the assets in your portfolio, you'll have dependable portfolio security at a fixed cost.
(Buy Put + Sell Call) Collar
Because of the high market volatility, cryptocurrency options are costly, and put security is sometimes more expensive than investors are willing to pay. Using a collar will help you save a lot of money.
A collar can be constructed using two methods: buying a put below market price and selling a call above market price. Let us put it another way. When you buy a put option, you are protecting your assets from downside risk in exchange for an immediate premium. After selling a call, you will receive an immediate bonus if you choose the call option. We use the instant premium from selling the call option to offset the expense of purchasing the put when we combine the two.
Setting up a collar can be done for very little money, if at all. You must determine which trade-off works for you before launching a collar because you can restrict your profit potential after selling a call while also lowering the cost of security, even though marketers are tough.
Exit Volatility Temporarily
Exchanging more volatile crypto assets like Ethereum and Bitcoin for stablecoins like Tether and True USD is one of the safest ways to fully avoid uncertainty and secure your crypto portfolio.
Furthermore, temporarily leaving volatility markets allows you to profit from the market's rebound by re-entering at a lower price than when you left. When the market recovers, the portfolio will be more diverse than it was before, with no extra expenses, and you will be in a better position than you were before.
Conclusion
These strategies will help you secure your cryptocurrency portfolio from the market's uncertainty. Pick one that is appropriate for you or your risk tolerance. The information given here, however, is solely for educational purposes. Conduct thorough research to decide what is best for your specific requirements.
