There are several opportunities that a crypto downtrend presents, with the obvious one being the chance to purchase cryptocurrency at a price lower than ever before. This is caused by the panic of losing money that some investors develop, making them dispose their investments at through-away prices. As supply increases and demand declines, you now have the best opportunity to buy the dip.
Experienced traders might already be aware of opportunities for shorting digital currencies. Most exchanges, including the Tokenizer DEX, provide opportunities to short crypto. However, this strategy also comes with its own risks.
As a reminder, shorting in crypto means selling a certain amount of your investment and buying back the same amount of coins at a hopefully lower price. Therefore, when buying crypto or going long, your loss is limited to the amount you invest.
On the other side, when you short crypto, the price could continue to rise. Because there is no maximum as to how high the price could go, you have a much higher opportunity to lose.
The HODLT Strategy
Have you ever heard of the saying that you should buy when people are crying? Instead of worrying about quitting before things worsen, there is a simple strategy you can leverage to avoid being on the crying side. You might have come across the HODL acronym in various crypto communities. It means when things take a turn for the worse, hold on for dear life. In doing so, you will significantly benefit when prices regain an upward trend.
When evaluating your progress, you might become slightly fearful while observing continuous declines. It might make you guess and second guess your investment choices. Do not allow this to be the reason for making uncalculated moves. Follow your research and, as the experts say, hold on for dear life (HODL)!
Making Profits during a Crypto Downtrend
If you ask any expert trader, they will tell you that even downtrends present good trading opportunities. If you watch the crypto market well, you will make some correct projections about the imminent waves. This offers you a unique opportunity to trade during a corrective wave. You might short-sell your investment, hoping that following a corrective wave, a bigger impulse wave will follow.
Another opportunity for expert traders is swing trading. If you understand the price changes in a coin’s chart, you can trade on the small price fluctuations. You can use this strategy even in a downtrend movement, despite the price decline. However, we recommend this strategy to experienced traders who can leverage various patterns to make informed choices.
You should hold coins that make passive earnings regardless of the market trend for those with lower risk tolerance. Such coins are commonly known as staking or exchange coins. They are a bit more consistent, and they can be likened to dividends. Exchange coins can generate more income but remember you are betting on an exchange’s success, which may not take place.
NB: Although we have talked about strategies that you can implement during a crypto downtrend, this article does not in any way constitute financial advice. Before investing in any cryptocurrency, kindly conduct your own research and remember not to invest more than what you can afford to lose. The Tokenizer team wishes you safe trading!
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