5 ways to protect traders in digital currency from serious price fluctuations



Over the past few weeks, investors in the digital currency have fluctuated widely. Global economic problems and Russia’s invasion of Ukraine have shaken international financial markets, and digital currencies are no exception.

In this article, based on a report from the Crypto News website, we will look at five ways that investors in the digital currency market 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 had small price fluctuations in the past, and experience has shown that they can usually recover after some time.

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

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

Keep in mind that maintaining stable digital currencies like Tetra is an investment for Iranian traders, and as the value of the rial is constantly fluctuating on world markets, the profit or loss of capital must also be taken into account.

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

You can also invest in bitcoins. It is true that bitcoin acts as a risky asset, but since the beginning of the war in Ukraine it has performed better than many digital assets on the market. Even now, after several volatile weeks, its price is higher than when the war began.

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

5 ways to protect traders in digital currency from serious price fluctuations

If you think that the digital currency market will continue to grow after this volatile period, you can collect some stable coins and be a scammer to buy digital currencies at low prices. In this way, you are actually building your portfolio from scratch.

When it is said that you need to buy at the bottom of the price, 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 this is to enter the market when an asset is cheaper, instead of investing in a specific asset at once.

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

Read also: How to reduce the risk of your portfolio?

3. Use the “averaging costs in dollars” method.

Of course, when the market is volatile, one of the best ways to invest in bitcoin or another asset that you think will rise later is to use a dollar-averaging strategy.

With this method, for example, you buy a fixed amount of bitcoins at any time, regardless of its price. The aim of this strategy is to avoid market fluctuations by making small purchases over different periods of time 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 the digital currency you want from digital currency exchanges with the capital you have already specified.

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

4. Explore derivatives markets (for professionals)

If you are interested in derivatives trading and have enough experience and skills to enter these markets, you can use various options for futures trading and digital currency exchange to cover your previous losses. Keep in mind, however, that working in these markets is more risky than previous methods.

Derivatives markets act as a type of insurance. As a result, traders can use them to protect their portfolios when prices fall.

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

Access to futures contracts is possible in almost all major exchanges, just keep in mind that you need to calculate the risk coverage 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 trades are more complex than futures contracts and are more challenging for inexperienced investors.

People who want to work in these markets can now buy a contract for the sale of bitcoins, which is useful at a certain price. In this case, if the value of your wallet decreases significantly, this option trade, which works in the opposite direction of the market, will compensate for your losses. Again, keep in mind that when using option contracts or other derivative transactions, it is necessary to calculate a very high risk coverage ratio.

5. hold on

5 ways to protect traders in digital currency from serious price fluctuations

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

If you feel that the digital currencies and tokens in your portfolio are increasing, you can keep them and wait for this variable period to end and then move on to changing your portfolio.

Read also: Long-term investments in digital currencies; How to get out easier?

If you compile a large part of your bitcoin portfolio, this is probably the best way to use it.

Whatever decision you make, you must also keep in mind that volatility is part of the digital currency market. The value of your portfolio can increase or decrease by 10 percent (or more) in just one day; This is quite common in this market.

The publication 5 ways to save traders in digital currency from extreme price fluctuations appeared for the first time in digital currency.

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