Charles H. Miller
Volatility comes as given with digital assets, and there’s little you can do about it. As they say it, that’s just the “nature of the beast.”
What you could do is be mentally prepared for the potential rollercoaster ride cryptocurrency folks are experiencing on a regular basis.
We want to help and have prepared this list with 5 common-sense advice on how to handle Ethereum volatility. It could also be applied to just about any cryptocurrency out there, as well as other assets which prices tend to fluctuate. Here’s what we’ve got…
1. Volatility is what makes cryptocurrencies great investments
Volatility comes as given with all cryptocurrencies. As of 2014, Bitcoin — which is deemed a “digital gold” — had volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the U.S. dollar, according to risk management expert and faculty member in the Finance Department at Boston University, Mark T. Williams.
The fact that cryptocurrencies are more volatile than other commodities also makes them great investments. It is up to you to learn how to “handle” this volatility — it is a mental exercise with you knowing that at the end of the day, any bump in the price is just temporary.
2. A flash crash is also normal
We are still in the early days of cryptocurrencies, and every now and then a flash crash will hit. That was also true with the stock market — you may not remember the great crash of stock market in 1987, but you most certainly remember the flash crash of 2010.
A flash crash can be a good thing as it removes speculation in markets. And after a few days, sometimes even weeks or months, things get back to normal.
The important thing is not to panic, but to have the big picture in your mind at all times — long-term, major cryptocurrencies are poised for growth.
3. You’re in this for the long run
This article presumes that you are not a trader, but someone looking to invest in cryptocurrencies. With that in mind, you should look for the big picture and wait for Ethereum (or any other crypto token) to grow over time. From what we know, that will happen with mainstream consumers and big corporations jumping on board.
When looking at your cryptocurrency investment as a long-term hold position, you won’t mind the temporary market crashes and rather frequent fluctuations in the price. Again, prospects are great for many players in the digital asset market.
4. Buy when it’s down
This applies to just about any cryptocurrency as well as any stock. Smart investors like Warren Buffet are most active when market is down. They know that it is the time when most people are looking to sell their assets, making it the best time to be on the demand side.
You should copy that and use flash crashes to your advantage. When Ethereum loses a big chunk of its value, try your best to expand your crypto portfolio. Also, that could be the time to experiment with other digital assets. There’s an idea…
5. Manage your portfolio
Cryptocurrencies should be looked like any other asset. Therefore, you should do your best to manage it like it’s a stock or a bond. That being said, we don’t think you should buy and sell cryptocurrencies frequently — especially not sell them — but have a balanced portfolio that includes more than one cryptocurrency.
If you already have bitcoins, get some ether. And if you already have both, try some of the newer cryptocurrencies. Some of them promise great returns while offering cool real-world use cases.
At the end of the day, you should be aware that investing in digital assets is like any other investment — it comes with a risk, and it is up to you to determine how much risk you can take, and potentially reap rewards. It’s your call.
