Can You Protect Your Portfolio From Crashes?
This yeas is everything but usual when it comes to crypto. We knew it's not going to be boring from the start but I guess this is not what we've been expecting. But then again, what can you expect from volatile crypto and a market manipulated at times.
However, this is the market, there's no other one, this is what we have to deal with and have to do our best to protect out assets.
Looking For The Next Bitcoin
I see many are looking for undiscovered jams, hoping to buy early, then see their asset rally, shoot to the moon, then sell at all time high. Obviously it's the best situation, this is how you can make a fortune. Buy at a few cents or under a cent and sell when the price 100x or more. Who wouldn't want that?
However, this is a gamble, no matter how you look at it. If the fundamentals are good and the project is good, you have the chance to see your investment 10x, 50x, maybe. But the question is when?
The other question you should ask yourself is if you're ready to take a loss and lose it all.
When a crash happens, usually small cap alts are the ones that take a bigger hit. Some may recover in a short time, others may never recover. If you have stop loss in place, you may get stopped out with profit or minimal loss, depending on when the crash happens. If not, you may lose 50-, 70% of value.
New investors usually have the habit of marrying their coins, which means they get attached to their assets emotionally. This leads to holding the coin after a crash in hope of seeing a recovery, which may or may not happen.
How Can You Protect Your Portfolio From Crashes
The ugly truth is, you can't protect your portfolio from crashes as crashes happen no matter what you do. Look at what's happened this year. Just when everyone was super happy about BTC reaching ATH, looking for the next level, hoping to reach $70k, maybe more, all hell broke lose and we ended up hitting $30k, which was more that 50% crash.
However, there are a lot of things you can do to minimize risks.
Structuring your portfolio is one of them. Major, large cap alts are usually not hit so hard and are known to recover quicker from a crash.
Last time I got stopped out due to another crash, that happened a few days ago, I ended up with some cash. This was actually good as I made some profit and also got liquidity to invest. Since then I've been watching different assets to see how they behave when BTC is not behaving.
This is also a good occasion to restructure my portfolio and decide how much I am willing to risk.
My strategy is to invest in those alts that held strong when BTC was falling and leave a small portion for high risk alts, that I can afford to hold longer in case they will not have the evolution I am hoping for.
When you're at a level at which you don't have to worry about your portfolio, you can do what you want, risk more. I'm not at that level and even if I'd be, I don't think I would make hazardous decisions.
What about you? How do you structure your portfolio? How much are you willing to risk?
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