The rapid drop of profitability of most coins and tokens on the crypto market is a result of the aggravated correction which is still present on the market. Most altcoins and Bitcoin have started to drop rapidly since the beginning of the year and the reason for it was rapid changes in the U.S. monetary policy.
But there are still options to avoid major losses during the crypto market sell-off and here they are.
While it may sound weird for beginner investors in the industry, Stablecoins can actually bring you a serious profit during the rapid change in the market sentiment and increasing volatility. But first and foremost: stablecoins allow you to properly exit all markets and stop being exposed to the correction.
By “Tethering-out” at least 50% of your portfolio, you will cut your potential losses for more than a half if the other half of your portfolio is properly diversified.
But in case you don’t want to just watch your coins gathering dust in your wallet, you could always use decentralized solutions for lending your funds and receiving a passive income from it. This way you kill two birds with one stone: you’re avoiding losses by not holding any volatile cryptocurrencies or tokens and receiving an income.
To start receiving profit from your stablecoins collateral proceed to any DeFi platform that allows stablecoins lending and borrowing and follow the instructions on a website.
Shorting the market
If stablecoins are the safe way of exiting the market and avoiding losses, shorting is a bet against the market that may give you some profit during short-term volatility spikes during a bear market.
Shorting strategies are usually considered extremely risky due to limited profitability and unlimited potential losses since assets can gain any percentage to their value but lose no more than 100%.
But if you’ve decided to short the market despite our warning, you can use perpetual futures contracts for doing so. This type of futures contract is presented on the majority of centralized cryptocurrency trading platforms like Binance.
While averaging down strategy won’t protect you from losses on the market it may maximize your profit during rebound which will, in the end, minimize your net losses from the correction period.
For properly averaging down you should have at least 30-40% of your portfolio in stablecoins or USD while the other part should be properly diversified. Choose the asset that you are willing to stack up and place buy orders after every short-term plunge. It will allow you to purchase an asset for the best price possible and amp up your profits when the rebound starts.
The main drawback of such a strategy is the risk to remain in an extreme loss if the rebound on the market happens way below your last entry to the asset. That’s why each buy order shouldn’t be greater than 2% of your portfolio.
Last in our list but not least profitable way of protecting yourself from losses on the market is a good old holding strategy. While you may treat the strategy with skepticism, the most profitable accounts on brokerages are being owned by people who have passed away a long time ago hence; no one has touched their portfolios ever since.
The same strategy is more likely applied to Bitcoin and other cryptocurrencies as the market have already dropped by almost 90% back in 2020 but has still rebounded and reached new highs, putting the majority of traders in profit.