Gate.io مدونة How to protect your portfolio in the face of market turbulence

How to protect your portfolio in the face of market turbulence

24 November 09:09

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TL;DR

-Market turbulence is when the crypto market has an extended period of a downturn with many big projects failing and general prices on the downhill.

-Several global macroeconomic and geopolitical factors, such as the increase in borrowing rate and the war in Ukraine, contributed to the ongoing turbulence in the crypto market.

-Some ways to protect your portfolio are to diversify, avoid panic selling, buy a put option, and use a stop-loss order, among others.

-If you intend to invest in crypto long-term, price fluctuations should not discourage you; instead, consider the big picture and look for ways to earn even when the market is down.

## Introduction
It is commonplace for markets to crash, recoup, and then crash again. Market turbulence happens at a close and unpredictable succession liquidating key market players as we can see currently, creating panic and anxiety. The cryptocurrency market is notoriously volatile. The extreme price swings of two of the most important cryptocurrencies, <a href="/ar/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> and <a href="/ar/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a>, demonstrate this. The former reached an all-time high of $63,729.50 but now sells for $16,416 following the market crash. The latter, which also surpassed $4,000 earlier in May, is now trading at a low of $1,225.56. Crypto investors are likely to experience periods when their crypto portfolio is in the red. With unexpected price swings, market downturns, and bearish sentiments becoming the norm in the crypto space, it is critical to understand some tips and tricks to help protect your portfolio.
## Understanding the current market turbulence
Riskier assets have had a turbulent year in 2022. To the bewilderment of investors, the dollar has risen to 20-year highs against many major currencies. The Federal Reserve began raising interest rates and had added 150 basis points to the Fed Fund borrowing rate by July 2022. Russia launched an attack on Ukraine in February 2022, igniting a conflict that is still ongoing. Following another Covid outbreak, China has once again locked down its citizens. The country's "no Covid policy" has hampered trade in the world's second-largest economy.

The borrowing rate has increased at the Bank of Canada, Bank of England, Bank of Australia, and other central banks. At the same time, China launched an easing cycle to support its economy as it emerged from the most recent lockdown. All of these factors have contributed to volatility in the cryptocurrency market. The Mighty such as 3 arrows capital and the most recent FTX, have fallen. The challenge for investors is to stay calm in the face of turbulence and carry-on trading.
## How to protect your portfolio
### 1 . Diversify your portfolio
Diversification is essential for protecting your crypto investments in market turbulence. Invest in a portfolio of crypto assets with varying risks and returns. Another option is investing in various asset classes, such as coins, NFTs, virtual real estate, etc. This diversification will protect you against volatility in any sector or asset class. Don't dare trade assets with low liquidity; keep an eye on what you're holding because it's easy to get carried away when the markets rise. If they start steamrolling, pulling back will be even more challenging. You should carefully consider each investment decision to shift out of trouble if things go wrong quickly.
### 2 . Avoid panic selling
When the market is in turbulence, it's time to be cautious with your crypto investments and not sell in a panic. You will almost certainly never recover the money you lost on an investment. So, rather than going through the hassle of selling pennies when they are still worth something, it makes sense to hold onto your investments until they are at a price where you can comfortably afford them.

If the crypto market crashes, there will undoubtedly be projects that are strong enough to withstand such a crisis. So only pull out some of your investment at a time! It simply means you must strike a balance between risk and reward.
### 3 . Buy put option
Investing in the crypto market is high-risk, but knowing what you're doing can be worthwhile. When the market rises, it must also fall. However, most investors lose sight of this fact and continue buying assets to profit quickly. Savvy investors and traders, on the other hand, resort to buying put options as protection against any impending market crashes. Put options function as portfolio insurance policies for investors. Please purchase it to protect your portfolio from a sudden or anticipated market crash.

Put options will allow those who invest now to cover losses incurred if the market falls suddenly.
### 4 . Make use of stop-loss orders.
A stop-loss order instructs the seller to sell a security at the market price if it reaches a predetermined price. Stop-loss orders are typically used when investors are concerned that the value of a security will fall after they purchase it. It is also referred to as a "stop order."

On the other hand, stop-loss orders can be costly for investors because they typically require them to pay brokerage and taxes each time the order is executed. It adds to the losses you will incur due to the market turbulence.
### 5 . Rein in your emotion
When entering the crypto markets, it's best to keep a level head and assess whether the position you're planning to take still makes sense each day or week. It would help if you refrained from making this a personal situation in which you become dissatisfied with the performance of your trading deals. It's business, and while you want to make wise decisions, the outcomes may be different than expected. Remember that when a company underperforms and cannot pay its debts, it may file for bankruptcy. As a result, you must avoid becoming emotionally involved in this decision.
### 6 . Devise a Risk Management Strategy
As with any trading business, you must have a well-coordinated risk management strategy. Your strategy should outline what you are willing to risk on each trade and how much you may be able to profit from it. Before entering any transaction, you should assess your overall risk tolerance and only consider deals within those parameters.

While each trade can offer a different reward against a risk profile, the aggregate should equal the goals you have in mind. Avoid purchasing a cryptocurrency and hoping for the best with the "fingers crossed" method.

Furthermore, you should avoid letting your losses run. Traders refer to this as "cutting your losses and letting your profits run." In this case, you want to identify a trend in the cryptocurrency market and ride it out while cutting your losses and looking for a new trade more likely to produce the desired results.
### 7 . Invest in High-Quality Projects
Consider whether your investments are in companies that can weather the storm of market turbulence. Although it may not be as simple as it may seem, there are ways to simplify it.
Investing in top-notch projects and businesses is the best way to lessen the effect of a crypto market crash. The greater their financial security and sustainability, the less likely a crypto market downturn will impact them, and the more likely you will keep your investment.
### 8 . Prioritize long-term investments.
Concentrating on long-term investing in shielding your crypto asset from a potential crash would be best. Even though you might have a chance to make some money with short-term investments, you risk taking on more if things stay unstable for an extended period.

Investing in crypto necessitates both discipline and knowledge of how the markets operate. To invest in the crypto market, you should research the best options available to meet your needs.
## Conclusion
If you're new to cryptocurrency investing, you'll quickly realize that having a negative portfolio is normal. However, if you intend to invest long-term, such price fluctuations should not discourage you. Instead, consider the big picture and look for ways to earn even when the market is down.
While diversifying your portfolio is a good idea, it is also a good practice to earn consistent returns by depositing your crypto assets in income-generating platforms. It is a simple, painless, and straightforward way to begin earning while protecting your portfolio in the long run.

<div class="blog-details-info">
<div>Author: M. Olatunji, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the observers and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
</div>

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