This is a very good question and the answer to this question differentiates two kinds of investors. The ones that profit and the ones that lose, common sense right? Not really, this statement, of course, is very surface one, if the price is falling in the short term that doesn’t mean that it will fall forever and in this regard people who just hold on to their assets can benefit as well on the long term.
Firstly we need to distinguish between short term trading or a long term investor. In this article, we will focus on general ideas and advice in this regard as there are many opinions and ways you can protect yourself from losing the value of your investments.
There are many ways you can prevent loss when the price of a given asset in this regard Bitcoin is falling. The three most common mechanisms that can help you are that you learn how to short the market or set stop loss (which is very risky and advised only for the experienced traders) the second thing that you can do is that you move your gains into another asset like fiat or gold. Meaning that you don’t hold to the position for too long, especially if it’s falling. The third thing that can help you is that you employ someone to take care of your assets and manage them for you.
3 ways you can protect your portfolio and even profit when the price is falling :
- You can ‘’short’’ or ‘’stop loss’’ the market (this is only advised for experienced traders)
- You can sell Bitcoin and move the value to another asset like fiat($,€), gold,…
- You can have someone manage your assets
Above we have shown the three ways you can profit or at least protect your portfolio when the price is falling. Now let’s touch upon the risks and benefits they involve if you decide for one or all of them.
‘’Short’’ or ‘’stop loss’’ the market :
Some exchanges allow you to short the market, meaning that you can bet by using a specific instrument that the price will continue to fall and if that proves correct and the price keeps falling you will gain profit. This is a risky endeavor and we advise only the most experienced traders to use it. Shorting the markets usually also comes in pair with leverage which is another instrument provided by some exchanges and it can mean loss of a lot of funds if not understood properly and mitigated when needed.
Stop-loss is the term that refers to setting a price where your asset will be sold. For example, you bought Bitcoin at 9100$ and if the price drops below 8900$ it will automatically sell the position for you. You set the buy value at 9100$ and you also set up a sell position at 8900$. This is how you protect your portfolio by lossing a lot of it’s value.
We will go more in-depth about the exchange options and the tools that they provide in future articles.
Sell Bitcoin and invest in other assets:
One of the most important things that you can do is that you have a strategy as to when and at what levels you will realize your gains and move them to another asset or at least realize some of the gains by selling some of your Bitcoin gains and investing into gold or another less risky or stable asset.
Have someone manage your Bitcoin :
The most elegant and quick way to ensure the safety of your assets is for you to find a trustworthy asset manager. Like any other type of protecting your profits, this one comes with benefits and risks. If your funds are not protected well they can be stolen, that’s why you want an asset manager that can prove to you that your assets will be safe and in good hands. You also want to be careful as to what entity you thrust your assets, as most of the asset managers are not regulated by the government yet. You need to make sure that your asset manager will not lock your assets for some period of time and that you can move your assets to your bank account at any time.
There are many ways you can make gains or at least mitigate the loss when the price is falling as mentioned above. But one of the most important things that you can do as an investor as we are always pointing out is that you educate yourself and this is exactly what we are trying to do with our blogs here at Highwater. We are long term thinkers that’s why we invite everyone to see the long time horizon as most of the assets grow in the long term if managed correctly, especially new technology that has a disruptive nature like Bitcoin. If you will keep below advice in mind, we are sure you will make gains in the long term.
- Never thrust promises and gains that look too good to be true. They most likely are too good to be true!
- Everything that goes up goes down too and vise versa!
- Keep your head calm and don’t sell in panic.
- Use tools that you are familiar with.
- Educate yourself!