6 Trading Strategies to Profit From The Turbulence in Crypto-Markets
Blockchain enthusiast developer and writer. My telegram: ksshilov
Sure, many lose a lot of money during the panic of a cryptocurrency crash or sell off. But, those that know what they are doing have the range of tools needed to make big profits during this time. Here are five of the best ways to turn a profit during cryptocurrency market turbulence, and how you can easily leverage all of them at once in order to make the most out of the current market opportunities
Strategy 1: Scalping
Scalping is a strategy of taking advantage of small market movements, quickly entering and exiting positions during a day, or maybe even an hour. The key is making as many successful small trades as possible while avoiding losses - you don’t need high returns per trade, you should be rather aiming to maintain a higher win/loss ratio. Usually, the size of winning and losing trades is nearly the same, a very small percentage of the whole portfolio, thus you have to win more often to be in profit. Some strategies allow to lose the majority of trades, but still make money by winning only a couple of big trades. Scalping is totally opposite.
Scalper traders usually try to avoid high volatility, because for them, it’s unpredictable. The best situation for a scalper is a thin calm market with little to no volume. A thin market also has huge spreads between bids and asks, which allows scalpers to profit easily on those gaps, buying on one side, and selling on the other.
Advantages: Scalping is considered relatively safe. It employs very small time frames, thus it’s possible to exit the trade anytime, if something goes wrong. Also if you have a series of bad trades, you can always stop and make a break to relax and chill. You always control how much you win and lose.
Downsides: Requires some experience in reading indicators, requires patience and discipline. The scalper trader has to watch charts closely, staying near the trading terminal, to be able to react quickly to market changes. Also, scalpers have to compete with trading bots that also try to use scalp opportunities, and they can be more efficient, because they don’t ever get tired.
Strategy 2: Buy the Dips and Hold
To new investors it might seem counterintuitive, but a drop in any asset’s price is a great opportunity to buy. Especially big drops. Assuming it is a strong asset, the price will go back up when the market regains confidence. This strategy even has its own abbreviation (BTFD
) in the cryptocommunity.
A quick look at the Bitcoin price over the last few years reveals a strong upward trend, but also times where the price was over and undervalued. Since most buyers and sellers are regular people and not professional traders, the cryptocurrency market is extremely sensitive to media hype and news stories. When the news is good, people rush to buy overvalued cryptocurrencies. When something bad happens, they panic and sell their coins at below their true value.
This is the perfect opportunity for investors with the available funds to buy the undervalued cryptocurrencies. As a trader, you use your expertise to assess the market conditions and fundamentals to predict when the market is most undervalued and likely to make a recovery soon. Then, just make your trades and hold out during the period of fear and uncertainty, all while making a nice profit when the market returns to sanity.
Advantages: It doesn’t require any specialized high-frequency trading software. You only need to make a single trade and you don’t need to-the-millisecond accuracy. When done correctly, you’ll profit from the upward trajectory of the cryptocurrency plus the amount it was undervalued.
Downsides: This is a fundamentally long term approach, so you probably won’t see quick profits. Timing is everything, and this strategy requires an excellent understanding of market conditions as well as a cool head in times of chaos.
Strategy 3: Follow the Trend
If you think a trend will continue for a while, or if it’s too hard to predict when the price will change direction, following the trend is a more risk averse strategy. With this strategy, you trade with the trend rather than with the swings. If the market is trending up, only open long trades. If the market is falling, you only open short trades. Trend followers start trading after a trend has been established, and they exit when the trend changes. This is also called “Position Trading
Advantages: It’s a more risk averse strategy that works if the market is going up or down, and when the top or bottom of a market isn’t in sight.
Downsides: Crypto markets are unpredictable. You need good mechanisms in place to protect against sudden changes in price direction.
Strategy 4: Invest in Staking Coins
To employ this strategy, you have to do some serious research. “Investment portfolios are changing," explains Christine Menedis, co-Founder and CEO of Lucky Shepherd's portfolio
of companies. "We're seeing diversification beyond stocks. Many investors' portfolios today contain alternative investments like gold, cryptocurrencies, and commercial real estate. People are taking the time to seek out investments that align with their personal values - all without sacrificing returns."
coins and tokens are the crypto assets that perfectly align with the diversification goal, as they generate staking profits over time. You have to buy them, lock them and stake, becoming a validator node in their respective network. For generating new blocks and securing blockchain networks these validator nodes receive rewards. It’s similar to mining, but instead of buying an expensive hardware you buy crypto assets which are easier to get rid of if you decide to cash out. There are many staking coins and tokens, such as DASH, NEO, Lisk, COSMOS, Qtum, Waves, and Ethereum will also join the list in a few years. We don’t recommend anything specific, you can choose those assets that you like.
Advantages: It doesn’t require any additional maintenance from you. After buying and locking the staking tokens, you can forget about them until the next staking cycle. You can always sell them at any moment, and they don’t depreciate unlike the mining hardware.
Downsides: You’re still exposed to some degree to the ups and downs of the market. If the staking asset loses 50% in a bear market, 7% staking rewards won’t be enough to compensate it.
Strategy 5: Invest in a Tokenized Crypto Fund
If you want to profit from all of the strategies above without having to actively manage a portfolio, there is a fifth option: tokenized crypto funds.
You might be familiar with traditional investment funds. These are pools of investor capital managed by a team of professional investors. These specialists use a range of strategies, including the ones we’ve talked about, to earn returns on all of the capital within the fund. Investors in the pool benefit from having access to the skills of the professional traders, while the traders benefit from having much more capital to trade with. It’s a win-win.
Up until now however, these types of funds haven’t been available to cryptocurrency investors. Due to taxes, legal compliance, impracticality, fear, and other reasons
, most investment and hedge funds have limited or no exposure to the big profits that can be found in the cryptocurrency market. Investors have had to manage their blockchain assets manually. But that’s all about to change.
Tokenized crypto funds examples
There are other examples of tokenized crypto funds available. Crypto20
is an autonomously organized fund that functions like an index fund for cryptocurrencies. Token-as-a-service (TAAS)
is an actively managed fund for the blockchain ecosystem. An overview of the Top-5 crypto funds can be found below:
Strategy 6: Lending your crypto via lending platforms
One of the most interesting strategies for people who don’t feel like they are the greatest traders. It requires building a crypto portfolio, but doesn’t require sitting near a trading terminal, looking for patterns and risking money. The only thing you have to do is lending your funds to other people, earning some interest. It’s like a bank deposit, but in crypto.
Do you think that using your money to make more money instead of just holding it is better? Two-three years ago crypto was something very distant from the world of fiat money, and earning interest on crypto funds seemed like an impossible idea. Now it’s real, and anyone can lend crypto on such platforms as Nexo
(8% interest), Celsius
(up to 10% interest) and Cryptolend
(around of 10% interest). Some of these platforms accept only stablecoins, some of them allow to lend the most popular coins and tokens. The majority of lending platforms insure their funds, so it’s pretty safe to use to this strategy. Just beware of scammy platforms.
Advantages: You don’t need any experience with financial markets and investments, it doesn’t require trading skills. It’s like a passive income, you don’t have to worry about anything, simply earning interest over time.
Downsides: If it’s not in your wallet, it’s not your crypto. Even while it’s relatively safe, you still lose control of your funds, sending them to someone and hoping to get it back someday. It some cases you get it back, but in some cases you don’t.
In times of panic, experienced investors usually come out on top. With the right strategies and a cool head, it’s possible to turn a profit during all market conditions. Scalping, buying the bottom, following the trend, and buying staking assets are all proven tools in a trader’s arsenal.
Tokenized crypto funds are a way to benefit from all of these and more, without the legwork. Simply buying a token is enough to gain exposure to the awesome gains of the blockchain industry with the guidance and protection from the pros. Tokenized funds are one of the key products that will bring cryptocurrency into the mainstream, and the best time to get in is right now.
The author is not associated with any of the projects mentioned.
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