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by Aleksandre Natchkebia on October 22, 2018

I own cryptocurrency, what should I do?

Cryptocurrency holders are currently facing a huge conundrum. The prices of these assets seem to be stagnating at a certain level and even though there are moments of decline and increases, the prices aren’t exhibiting the rates of change that they did a year ago. So people who have bought cryptocurrencies when the market was extremely bullish are now holding these digital assets questioning the next steps. Although it is probably impossible not to consider cashing out and giving up on the cryptocurrency market altogether, the astounding growth that these assets showed last year can’t be forgotten that easily. The fear of missing out is a real thing and it’s very strong in the realm of cryptocurrencies. After all, it was not so long ago that people were getting rich overnight just because they had purchased cryptocurrencies at the right time. So the question remains, should I sell my cryptocurrencies or should I wait for the next price hike? While no one can give a definitive answer to this question, there are several strategies to consider and it is beneficial to look at the advantages and disadvantages of all of them.

Hodl!

One strategy that many are adhering to is to wait until the prices start increasing again. Holding these currencies for extending periods of time has been rewarding for many investors and it could prove to be profitable once again. Although the prices of these assets aren’t increasing at an astronomical rate, they aren’t falling either. This shows that there are many investors in the market waiting for more growth. Since people remember the astonishing growth of these assets, a sign of another increase of a similar kind is also bound to attract investments and further fuel the growth. In conclusion, there is a possibility that the cryptocurrencies will exhibit huge growth similar to that one year ago. If this turns out to be true, then holding is a great strategy.

In addition, there are events that could trigger a sudden increase in the prices of these assets. One of such things is an involvement of an institutional investor. Although the event itself might not be as significant when hundreds of billions of net worth are concerned, for some reason the investors look at institutional investors as the saviors of the market. If one of the significant corporations exhibited some sort of interest in a digital currency or made a direct investment in them, the investor expectations would skyrocket immediately causing a buying spree and an increase in prices. We’ve all seen what quickly increasing prices can do to the cryptocurrency market.

I own cryptocurrency, what should I do?

Another, maybe a slightly more long-term hope comes from the digital assets themselves. Although they have been used as speculative tools, cryptocurrencies have much more than that to offer. If a widespread adoption of these currencies occurs, the demand for them will increase naturally and the prices will follow. In such case as well, holding the currencies is a winning strategy.

Of course, there’s a downside to holding cryptocurrencies as well. First of all, there are alternative investment tools that carry less risk and provide considerably more reliable returns. Although these returns might not be enough to satisfy the appetite of some of the more risk-loving investors, it is still higher than what cryptocurrency holders would get had they invested in some of the most popular cryptos at the beginning of the year. By tying up funds in cryptocurrencies, the investors are missing out on these opportunities. There’s also a possibility that the cryptocurrency market won’t start going up again until the investor is forced to withdraw his/her funds for some reason. Currently, the only thing holding up the prices of these assets seems to be the expectation of more growth and that isn’t going to be able to support the cryptocurrencies in the long term.

Try your hand at daytrading

Although the prices of cryptocurrencies are stagnating at a certain level, they are in no way stable. The assets still experience large price swings in both directions and those who know how to take advantage of such price movements are able to make quite a profit in the process. A simple daytrading strategy for crypto holders is to buy on the lows and sell on the highs. Of course, there are some calculations and guessing that need to be done to get those times exactly right, but riskiness is an inevitable part of daytrading. For cryptocurrency holders that find simply waiting for long-term growth not so appealing, daytrading is definitely a viable option. Even if the period of fast growth comes once again, the investor will only have made additional profit.

The downside of this strategy is fairly obvious. As with any other short-term trading strategy, the risks of getting it wrong are extremely high. The volatility in the cryptocurrency markets is off the charts and while that provides good opportunities for the traders who get their strategy right, the chances of losing it all are high as well. One never knows when the market is going to go up and when it’s going to fall. Any news that is released affecting the prices of these digital assets is reflected almost immediately so that it’s impossible to take advantage of such price movements. As a result, daytrading becomes very difficult.

Convert to other assets

Of course, there’s always the option to simply leave the cryptocurrency market and invest in other types of assets. The advantage of this strategy is the reduced risk. While cryptocurrencies are in no way the only asset carrying risks, they have exhibited volatility that is virtually unparalleled by an asset of a similar scale. Although that might have been the appeal of the digital assets when the prices were increasing, it is no longer so in the stagnating market. To cash out now would mean avoiding the headache and worry that comes with monitoring the prices constantly not to miss even the slightest signs. Investors have seen the value of their holdings double in a matter of days and be decimated as quickly. As a result, they are always on edge waiting for large price swings. A way to avoid all of this is to simply sell the cryptocurrency holdings.

I own cryptocurrency, what should I do?

The other side of this strategy is a mistake that many people made when they didn’t believe in the growth potential of this assets a few years ago. Cryptocurrencies have proven that they aren’t a traditional asset and don’t follow the same logic as other investment tools. Even if the prices have been stagnating for a few months now, it is possible that the market finds itself on the path of astronomical growth that it showed in 2017. If this happens, those who sell their holdings now will miss out on another wave of growth. Many of the current investors have bought their currencies when the market was at its peak in late 2017. If they sell now and the market goes up again, not only will they have lost by buying the assets at the wrong time, but they’ll miss out on the opportunity to recoup their losses as well.

By Aleksandre Natchkebia

Aleksandre Natchkebia is a graduate of Cornell University with a degree in economics. He has been actively writing articles on global economic issues on various online platforms and print media since 2011. Aleksandre joined the Forexnewsnow team in 2018 as a writer on business and financial markets.

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