Cryptocurrency Trading Cycle
We have all recently experienced the cryptocurrency trading cycle, which many of us were not prepared to handle. This might not be a bear market, or it might. But are we prepared? The market capitulated suddenly, and as we woke up, we saw a collapse as we had never seen. Something none of us could have predicted.
The Story of Ant
One beautiful summer day, a lazy young grasshopper was chirping and fooling around just as he did every day. He would often observe ants passing by carrying foods and leaves to their nest.
The grasshopper was always curious about why they would work so hard on a beautiful summer day and not enjoy the day. The food was plentiful. They could eat all they want and never run out of food, then why store the foods at all. The grasshopper asked the ants, “Why do all you ants work all day, is your queen so ruthless? Why carry food when it is available in abundance? You should enjoy your life and play like me.”
The ants could not reply as it was their habit that was passed down the generation. It was something they did as was required by the colony. The ant kept working through the summer, and the monsoon, while the grasshopper, kept playing and enjoying the beautiful weather. And then came the winter.
The ant had prepared for the winter. They had sufficient food for themself and some more. Now in winter, when snow fell, the grass and trees all got covered and were unedible. As hard as the grasshopper tried, he couldn’t find any food and soon became very hungry. He finally remembered the hard-working ant he had made fun of during the summer. The grasshopper went to the ant’s nest and requested help. The Ants knew and expected the grasshopper to come and request and share their food. And made the grasshopper realise that always prepare for you winter in your summer. Cause a Winter will always follow a summer.
Always think ahead and plan for the future. Yes, the winter will eventually come, and it’ll be bad, dark and long. Hopes will be lost, and it’ll discouraging. But if you have prepared for it. It’ll be much easier and might even be profitable.
Here is a simple list of points we should follow to prepare ourselves as we undertake cryptocurrency trading.
1) Put a Stop Loss
A friend of ours, Ash(name changed), recently was running a multiple futures cross contract. He was doing good in all his calls. Most of them were positive and had a good profit overall till night. Morning as he got up, he found his entire portfolio got liquidated. He lost 30000$ because of one silly mistake. Ash still warns people about it.
1st thing you should do when you set up, futures contract or margin deal is put a STOP LOSS every time. Even when you are in profit. Set a stop loss so you don’t lose the gain you made nor lose it all in case of a loss.
2) Sell At a Profit
As many of you know, March 2020 as soon as lockdowns were announced. The cryptocurrency trading market crashed. And the crash was unlike anything we had seen. A sudden crash of 80-90 % market value. Many lost life-saving in it—especially those who panicked sell.
Do you see crypto rising again? Great. Invest in it. Did your money 2x – 5x or more. Great. But don’t wait, withdraw a portion of it. Withdraw a part to USDT. Cause the market will crash again and again. For every bull cycle will follow with a bear cycle. Even in the bull cycle, there will be 30-35% corrections at a time before peaking again. You need money to invest in all those gems you were waiting to invest. To withdraw from your profit.
Be wise as there will be a crash like March 2020 or March 2018 and more. Have money so you can repurchase it. You don’t know tomorrow there might be another bad news. And the entire market crashes. Be ready.
Sometimes the only way to receive something better is to give up whatever we are currently holding on to.
3) Withdraw Some Profit to Fiat
Yes, some of you are in crypto for a long. Yes, you are here for technology. But the basic is we all are here for the money. We want to make money on crypto. So every time you make some money in crypto, Withdraw 10% – 20% to fiat(Your Local currency). Enjoy the profit. Buy something for you or Invest in another vertical. Or at least do withdraw it to USDC or any other stable coin. Over a period, you would have withdrawn a significant amount to cash. That you can even reinvest when there is a crash.
4) Diversify across Investment Asset Class
Build a diversified portfolio. Diversified means the lowest correlated assets possible. By diversifying to less risky investment classes, you will make money from the money, and the value of your assets will not fall beyond 80-90% during a crypto winter. By having a majority portfolio allocation to a single asset class, you are being exposed to cryptocurrency trading going into a slump.
Did you know “HNIs invest 15% of their Portfolio in Alternative Investments “
Choose your portfolio allocation based on your acceptable risk. Below are some excellent fintech product and asset classes you should always keep an eye on and invest in.
- Invest in Stocks, Index Funds and Mutual Funds.
- Peer to Peer Investing – Read What Peer to Peer Investment is.
- Review: Lendenclub and Faircent
- Invest in International Market – Read our Review of Vested.
- Invest in REIT
- Reviews of other Fintech Startups.
Ideally, You should risk 5 – 10% of your portfolio in high-risk assets. 20-30% safe investment where capital is protected. And rest as per your comfort.
5) Diversify Your Cryptocurrency Holding
Nice, you are in cryptocurrency trading, and you are making money. It is good that you might have made a lot of money in a single coin once it mooned. But start diversifying in currencies and assets that carry high intrinsic value (read, not dogecoin, Shibacoin), If you don’t want to lose 70% of your portfolio value.
Meanwhile, PAXG actually gained during the crash. Also, MATIC was stable during the crash (Due to its value). Even in Cryptocurrency trading: You should balance your investment. Invest 20-30% in high-risk alt-coins. 40% in big coins(BTC, ETH) and 30% in Stable coins so you can buy the dip. You can also stake your coins in.
6) YOLO Causes Losses
Only a few of the 100 people ever succeed. For every get person who got rich, we have 1000s that lost their money in bad coins. You’ll most likely live to regret it.
There was a trader from Rajasthan(India) whose story was recently circulated on Whatsapp. He invested a Million Rupees (Rs 1,000,000) in SHIB and lost all of it in a matter of minutes in WazirX when it was initially listed. Remember, emotions are your enemy in any investment sphere. If the coin you hold has little to no development and no good institutional backing. Do not hold it cause you think it will “moon” for no apparent reason.
7) Don’t Marry a Coin
As many star investors say. Never marry a coin or stock. If the fundamental has changed and you know and numbers don’t add up, its time to sell.
- 2013 (pre-ethereum era), 33 out of 37 coins did not exist in 2017.
- 70% of all top 100 Coins of 2017 are not longer in top 100 in 2021 and will never recover its all time high
If the fundamental fail. Or if the coin is no longer serving its purpose and has been replaced by something better. Please exit asap.
8) Have a Hardware Wallet
Most of our cryptocurrency trading happens in exchanges. But buy a hardware wallet and move your leading coins there. Remember, exchanges get hacked. Cryptopia got hacked and liquidated a few years back, Kucoin got hacked a few months ago. Mt. Gox was probably one of the biggest ever robbery. Of around 850,000 Bitcoins. That 40 Billion in today’s currency. And these were reputed exchanges.
Do you think hackers aren’t trying to compromise Binance? Today they may not be able to, but who knows about the future. If ledger nano is out of budget, you can move your funds to software/web-based wallets like Myetherwallet, Metamask, etc.
Note: always note down your recovery phrases and recovery seeds of all wallets and exchanges and keep them in a very safe place. Preferably in writing and laminated. Also, store it in more than one place.
9) Switch On 2FA Authentication and take a backup of QR Code
Always Use Google Or Microsoft or Other Authenticator to increase your security. Authenticator not only makes your app very secure. They also help you to pause and think if you want to cancel the transfer.
Also, if you use Google or Microsoft Authenticator for logging, take a backup of the QR code before scanning it Google Auth app. So that if you lose your phone, you can immediately scan the saved QR from your new phone and get going immediately. Take a backup of your Google Authenticator app in your wife/husband’s or parents phone. So that if you lose your phone or replace your phone, you can import the authentication from the backup device back to your new primary device
10) Follow Password Hygiene
Follow password hygiene. If you have many exchange accounts, try having different passwords for each of the exchanges. It’s challenging but well worth it. For, e.g., if your Kucoin password is in the hacker’s hand, he will try that same password and login details on Binance as well… In which case, both your accounts get compromised bcoz both have the same password.
11) Diversify Your Investment into Multiple Exchange
Divide your investment into multiple exchanges. Just today, WazirX was non-functional right at the time of the market crash. So you could not even withdraw your assets. Binance was working. So was Vauld. Trade-in multiple exchanges, because all have their advantages and disadvantages. Binance provides the best Trading. WazirX, although of late as been faulty, is one of Indias best exchange and was reliable during the 2018 ban. Vauld provides high interest if you want to buy and hold.
Most Important Bonus Point
Do teach your other half (Wife/husband) or family members how to login into exchanges and cryptocurrency trading accounts. Share your password with them. If you meet with an unfortunate accident or you’re unable to log in, but in need of funds, that one person can log in. Teach someone your entire Investing process and how to withdraw funds. Life is unpredictable. In your absence, your significant crypto gains will never reach your family. After all, we are building our reserve for them and us.
Summers are always followed by winter. But even in the harsh cold months of winter, not only does it humble you but teaches you to be patient, and there will always be the next summer.