Apart from dangling the opportunity to get rich quickly, one of the biggest attractions for crypto traders was the ability to profit from wild price swings. Now with volatility all but gone — at least for now — both professionals and amateurs are altering their strategies as the crypto winter drags on.
A volatility gauge for Bitcoin has dropped in recent days to its lowest level since April, reaching 61 on Friday. That’s a far cry from the 140 it hit in May amid the collapse of the Terra stablecoin ecosystem. After surging to an all-time high of almost $69,000 in November, the largest digital asset by market value has been trading in a narrow range of around $20,000 since June.
So how should someone getting started in crypto put together a successful portfolio?
“The top two cryptocurrencies by market cap — BTC and ETH — are essentially indices of the broader crypto market, and an investor can get decent exposure by merely holding one or both of these assets,” Ben Zhou, co-founder and CEO of cryptocurrency exchange Bybit says.
If recent crypto trading has proven anything, it’s the veracity of the adage: “A day in crypto is a month in normal trading.”
That is the view of Ben Zhou, co-founder and CEO of cryptocurrency exchange Bybit – which of course means the past year of crypto trading has been an especially long time in the alternate universe of the conventional share market.
“The speed of innovation in crypto is blistering with so many young talented people moving into the space,” says Zhou.
“And, as crypto trades 24/7 and across borders, it’s no wonder we often joke about how a month in crypto is like a year in traditional markets.”
But this is how it feels to be at the cutting edge of financial and technological innovation, “and we thrive on that,” he says.
“While the speed and amount of information can seem overwhelming, it’s a journey worth taking, as this is a historical opportunity to invest in a brand-new asset class,” says Zhou.
“Recently, it has been correlated with tech stock-driven indices like the Nasdaq due to speculation from risk-on investors, but it will decouple eventually as its core features become better understood — namely, as a scarce, desirable asset with a hard-capped supply of 21 million coins.
“Increasing numbers of retail and institutional investors are realising this, and that is why BTC and Ether (ETH) are holding up remarkably well given the macro headwinds that have hit many assets this year.”
So how should someone getting started in crypto put together a successful portfolio?
“The top two cryptocurrencies by market cap — BTC and ETH — are essentially indices of the broader crypto market, and an investor can get decent exposure by merely holding one or both of these assets,” he says.
“Bitcoin is the original and largest cryptocurrency, while Ethereum is like a business that sells space on its blockchain, earning a revenue last year of over $10 billion — it issues ETH to power its network.
“These two assets account for roughly 60 percent of crypto’s $1 trillion (roughly) market cap, so understanding and investing in these two will be the first port of call for new investors.”
“ETH has recently grown its market dominance compared to other assets, and has even been stealing market cap from Bitcoin due to The Merge — a much anticipated upgrade that will make the network many times more efficient,” says Zhou. “This has led many to speculate that ETH may outperform, and one day even overtake BTC as the largest crypto asset.”
“Therefore, a conservative crypto portfolio, given current market conditions, would be heavy on both BTC and ETH,” says Zhou.
“You could also hedge against your Ether and Bitcoin exposure by using derivatives, especially options contracts,” Zhou says. “Our first-in-market USDC options have proven very popular because users can buy and sell options for BTC, ETH and SOL using the stablecoin USDC, which is pegged to USD. This helps the more cautious investors navigate the volatility associated with crypto assets.”
Cody Harmon, director at financial planners Cruz Money, says people at the beginning of their crypto journey and veteran traders have one thing in common – they are both overweight on the big two in their portfolios.
It’s only people in the middle who “think they’re experts” who stray into the no-man’s-land of “fertiliser” coins.
“The hall of fame for timing the market is empty – and there’s a reason for that – it’s because no one knows,” says Harmon.
“It doesn’t matter how good you are and what you get right, eventually, you’re not going to get the call right. So from that point of view, people should have a long-term view.”
Zhou agrees that time in the market is more important than picking winners.
“Patience is key for long-term wealth creation,” says Zhou.
“Invest in high-quality assets with a long-term time frame. Once you have that sorted, sure, take a proportion of your net worth and set it aside for trading and new product launches.”
Zhou also issued a stark warning about cowboys in the industry, and about the need to glean information from credible sources.
“Cryptocurrencies and blockchain technology are complex subjects, and much of the mainstream reporting lacks a deeper understanding of the subtleties of the technology and what builders in the space are trying to achieve,” says Zhou. “Present company excepted, of course.”
Also Read: When To Buy Crypto According To Billionaire Investor & Crypto Trader.
However, going to alternative media sources is also “dangerous” because of the plethora of scammers who put out fake news to pump the price of a crypto.
“Seek trustworthy sources. Ask friends with expertise in the space. I like to think of Bybit as such a friend,” says Zhou.
“We have an extensive library of articles and videos covering beginning to advanced subjects, and we have world-class customer support staff online 24/7. We also vet all of the tokens and projects we allow onto our platform before offering them to our users.
“New users can buy BTC, ETH and these assets can be stored in your Bybit account or elsewhere. Experienced traders have access to advanced trading and hedging instruments on Bybit to manage their portfolios in a way that best suits their needs, given the current market uncertainty and volatility, including options and other derivatives contracts.”
The exchange is currently seeing a lot of sideways price action from BTC and other leading cryptocurrencies, says Zhou.
“So this is a great opportunity to use our revamped grid trading bots that offer automated trading, and programmable dollar-cost-average strategies. At times of uncertainty, new and experienced traders will need luck, resilience, and a powerful trading toolkit at their disposal.”
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