4 Tips and Tricks for Managing Crypto Volatility


No person has not heard of digital money or cryptocurrencies. These are coins that exist only in the virtual world, but they certainly have their value. It is impossible to say exactly how many different cryptocurrencies there are, but there are thought to be thousands. In any case, some are better known than others – Bitcoin, Ethereum, Altcoin, Neo, Litecoin, Ripple, and many others. Of course, bitcoin is without a doubt the best known and most valuable. Let’s just remember 2008 when a group of people under the pseudonym Satoshi Nakamoto created this currency. At the time, its value was almost insignificant, about $ 0.03. Forecasts on her issue were not optimistic and it was thought that she would succeed if she managed to equalize with the US dollar, which few believed was possible.

In any case, bitcoin managed to reach the dollar in just a few years, and after that, it continued to grow. In March 2024, one bitcoin was worth about $ 60,000, which is the highest recorded value. Today’s value is twice as low, but that still doesn’t mean the investment isn’t worth it. On the contrary, investing is more than profitable, both in bitcoin and other cryptocurrencies.

Given that cryptocurrencies are digital money over which neither banks nor the government has authority, we cannot help but wonder what it is that affects their value, and why it is prone to frequent changes. Of course, it’s about volatility.

Exchange medium and natural scarcity are the most significant characteristics of bitcoin, and critical the point, which distinguishes Bitcoin from legal tender, can be defined as follows: the scarcity of bitcoin is associated with the “key” of its creation, which is almost impossible controlled by a small group of people. When “mining” new bitcoin, production costs significantly increase, and in the process of creating bitcoin, the production limit (quantity possible created bitcoins) is placed within the very mechanism of creation. On the contrary, scarcity The legal tender follows monetary rules that can be easily changed by authority, within a variety of circumstances and thus, according to some sources, a shortage of legal means of payment, favorable precisely to the personal interests of the monetary authorities. On the other hand, there are disadvantages of the crypto-payment system: bitcoin is like the other cryptocurrencies – volatile, which means that its value changes drastically in the short-term time period. To that extent, one of the risks of investing in bitcoin will be its value potentially fall drastically, which also presupposes a monetary loss. Thus, by proclamation of the Covid-19 pandemic in early 2024, stock and cryptocurrency markets reacted and showed that the price of bitcoin and other cryptocurrencies is falling sharply in times of potential recession, which is ultimately resulting in a large cryptocurrency sell-off. On the other hand, the decentralization crypto-payment system may also be its disadvantage: the current bitcoin market is operating without major regulations. The government does not have a clear position on cryptocurrency because the market is too new. It is not taxed, which can make it tempting as an investment opportunity, however, the lack of taxation could lead to problems if bitcoin were presented as a competition to the government currency.

So, we can’t help but wonder what it is that an individual as an investor can do to protect himself from volatility. Read below for some of the steps each of us can take.

Investing in several different currencies

Source: medium.com

It may sound pointless to invest in cryptocurrencies that have far less value than bitcoin, but in the long run, this can be profitable, precisely because of the volatility, or the frequent change in the value of currencies. Experienced investors advise that it is best to invest in several different cryptocurrencies so that, in the event of a fall in the value of some of them, you do not lose all the money you have invested. Clever, right?

Investing a smaller amount

Source: Medium.com

Yes, less money invested means less profit, but also less loss if the currency starts to lose value. Smart investors say you only get in as much as you are willing to lose, without leaving much of an impact on your quality of life.

Volatility analysis

Source: TechPrevue.com

If you are more expert in this field, you can also deal with volatility analysis, which could very well be useful in your current and future investments. By observing short-term volatility, individual periods can be observed when the changes in yield are smaller or larger. Certain research suggests the possibility of estimating volatility, at least when it comes to a shorter period of time. Of course, for this, it is necessary to apply numerous econometric models. To learn more visit fydcoin.com.

Don’t forget a safe wallet

Source: Investopedia.com

While it has nothing to do with volatility, it certainly has to do with the security of your cryptocurrencies. A secure wallet is key in trading. Today there are different types, but the main division is between hot and cold. Hot wallets are very practical and popular, it is enough to have a smartphone and internet and your problem is solved. However, we are aware that there are many scams lurking on the internet, so it is better to opt for a cool, hardware wallet. Yes, it is expensive, but you will be sure that your money is exactly where you deposited it.

During the transaction process, ownership of bitcoin unit changes. In the event of loss of private and public key information, the user loses access to his units and they become irretrievably lost. Accordingly, it is important to back up your wallets and, if necessary, encrypt them further, in order to achieve an already level of protection.

Final thoughts

Volatility has become the only thing that can be counted on one hundred percent. How? And how much does it make sense to invest a lot of effort and capital if the volatility of any variable can get them back to square one – planning with brand new variables? It is not enough to plan sales growth in a market, one should descend into the lithosphere, anticipate and plan trends at lower levels of assortment in each market segment according to different categories of consumers.