As interest rates rise in the United States and the world begins to emerge from COVID, financial conditions around the world have tightened. Bitcoin and Ethereum are both down more than 50% from their all-time highs.
The season for “up only”, #cryptotwitter’s preferred term for the bull market, is over.
So what can you do when things go wrong or slow down a bit?
Here are five ideas that can help 👇
1. Forget your maximum net worth
Even though it’s hard, try to avoid obsessing over the loan you could have paid off, the house you could have bought, or the riches you could have been swimming in.
Chasing that number will likely lead to poor decision making.
Instead, try keeping a diary of what happened to your investment and what you might change in the future.
- Didn’t you take profits as you expected?
- Haven’t you left enough money aside for unexpected life events?
- Did you listen to bad influencers?
- Have you focused on the hype of a project rather than its fundamentals?
- You didn’t have a plan at the start?
Identifying these decisions can help you make better ones in the future. The first step is to recognize the problem.
2. Avoid Revenge Trading and FOMO
If you’re down substantially from your portfolio highs, you’re probably not going to roll back a trade.
Yet that doesn’t stop people from taking revenge on trading, trying to recoup a loss on previous trades in a very short time – and often acting irrationally in the process.
The key to avoiding this is position sizing, adjusting your trade size based on your account balance. You will always risk a set percentage of your account on each trade, regardless of your account size.
For example, if you can risk 2% of your portfolio per trade and have a $10,000 account, you would take a $200 position on each trade. If your account doubles or decreases, so does your trade size.
Position size is critical as it helps you stay in the game, even if you encounter a series of losing trades.
3. Consider a dynamic buying average
Macro-investor Darius Dale tells his audience not only the average cost in dollars – investing a fixed amount weekly or monthly – but of dynamically average cost in dollars.
What does it mean?
When the financial outlook is negative, you reduce your purchases in favor of holding more cash. When the financial outlook improves, you increase the size of your purchase.
To make the strategy even better, you can direct part of your monthly investment to a dollar pegged stablecoin like USDC, USDT or USDP and move them to a Blockchain.com rewards account to earn an APY competitive.
4. Don’t take chances if you can’t sleep at night
Yes, that’s the whole tip. ☝️
The predictable thing about crypto is that it is unpredictable. If it makes you lose sleep, you may be at too much risk.
5. Keep an open mind
We are still in the early stages of this technology.
When the internet went mainstream, it was hard to imagine companies like Facebook, Google, and Amazon would emerge.
The same goes for Ethereum and Bitcoin today. We don’t know what amazing use cases will emerge or what projects will thrive.
We know it hasn’t been easy there. But the good news is that crypto has already been through tough times.
And that’s often when the best construction happens. 🏗️
Did we miss any tips? Let us know in the “Comments” section.