Be Careful With Crypto in the Short Term

2018 has real potential to be a big year for Cryptocurrency. However, in the short term, the markets are volatile and tricky to navigate. Here is some basic insight.

The crypto markets have been a little tricky to navigate recently, as Bitcoin has been very volatile and range bound and altcoins have been struggling because of it.

The result is that crypto prices are becoming increasingly more attractive for those who regretted missing the epic gains of 2017 and early 2018 and increasingly attractive for those who have been investing in the market for a while.

However, the key word there is “becoming,” at the moment the process that will determine if we go lower or start back on a path toward new heights hasn’t finished manifesting yet. That inherently makes things risky. Risky means a potential for big rewards, but also lots of pitfalls.

TIP: If you are new to the market, make sure to set up a Coinbase account (or another crypto account where you can convert dollars to crypto) ASAP. You can’t choose to invest if you don’t have access to the crypto markets, and frankly, it takes time to get the account verified and funded. The market may be undecided today here in late March 2018, but that could all change on a dime, and you’ll want to be ready to act when you are ready.

In undecided times like these there are a few moves that make sense:

• HODL what you have (risky, but simple). Be willing to see 80% losses on paper in the short term, because you believe in crypto in the long term. Assuming you won’t panic sell later, this move is valid and ensures that if we go flying toward new heights quickly, you are ready. When it works: Imagine you held since 2013 or summer of 2017, you’d be up right now. If you have the tolerance to HODL no matter what, it makes life simpler.
• Average in (conservative and simple). This is the smartest and safest move. These prices could be as low as they get, but you aren’t going to put it all on red. Instead, you are going average in (quickly if you would otherwise just go all-in, or slowly if you want to mitigate risk). The coins you buy now will either be your most costly, somewhere in the middle, or your cheapest. You don’t know, so you build an average position. I like this tactic in general because it takes the guesswork out of the often volatile and tricky crypto market. If you do this, either buy at set times or aim to buy in on the dips over the course of weeks or even months. Be careful about averaging in too quickly a lot can happen in a week. When it works: Imagine you bought .1 BTC every month since 2017, right now you would be up still. Imagine you bought .1BTC every month since December, you would be down less than you would have been if you FOMO’d into the top.
• Trade the range (highest risk/reward). Asset prices don’t move in straight lines; they move in waves. Thus, even if the trajectory is down or sideways, you can do well for yourself nimbly buying the dips and selling back when the price recovers. If you margin trade, there is more risk, but also more potential reward. Be aware that the price doesn’t always recover. You might want to set stops and ladder in and out of positions. Also though, be aware that price jumps have been quick in this market. Bitcoin’s price can go up or down by $200 or more in a matter of minutes. Thus you have to have an exit plan for mistimed trades (either revert to HODL, set stops, or have a plan for selling) and an exit plan for good trades (ladder out, take profits at specific points under the last high, take profits after a quick upward price movement, etc.). When it works: If you have the discipline, skill, or luck to buy the dips and sell the rips, then you are all that in a bag of chips, and you’ll walk away a winner. That said, trading crypto this way is harder than it looks because the volatile 24/7 market can easily erase your gains (in fiat or crypto) in moments if you aren’t careful.

In other words, any move that either employs caution or accepts that there could be more downside before we make our way back to new heights is on the sensible side of things, meanwhile ignoring the history of crypto and jumping headlong into a position at any price is risky.

Sure, these are those prices you missed back in November when you passed up crypto, but there is no rule that says we can’t see lower prices. If you accept that truth, and you invest with that in mind, then you aren’t going to be setting yourself up for panic. When you panic you open yourself up to emotional trading, emotional trading is how you lose money. So pick a strategy with risk tolerances to your tastes that lets you embrace any market type that may come, and then enjoy the ride.

TIP: It is important not to get psyched out by recoveries in this market. The price can spend half a day looking like it is going up, and another part of a day looking like it is going down. However, if you zoom out and look at the chart a little closer (and then look over at the stock market), you’ll notice that all markets are a little volatile and undecided right now. No one likes to miss out on gains, but investing (and even trading) isn’t about the gains you miss; it is about preserving your capital and investing in assets you believe in and feel comfortable with. Many of us (who might be reading or writing a site about cryptocurrency) are believers in the future of crypto, so we want to be on the ride. However, no one I know is a fan of being stressed, losing money, or missing out on buying opportunities. Let’s not set ourselves up for bad feelings, let’s be sensible and traverse the next leg of our crypto journey with caution.

NOTE: All that said, the content above is meant to be for informational and entertainment purposes; it isn’t investment advice. I’d like to remind you that being cautious, preserving their capital, and having a long-term outlook on crypto is crucial. You need to consider the historic volatility on a short-term, mid-term, and long-term scale. I say this, in part, due to the selfish reason of not wanting my audience burned by and burned out on crypto. However, ultimately we all have to make our own investment decisions. Whatever choices you make, try to ensure you are in a position where you can avoid stress and enjoy yourself.