In today’s cryptocurrency market massive volatility is something that just seems to go along with it. It’s to be expected, as crypto is up and down sometimes by the day, swinging in both directions, within the span of a single week. Crypto is the newest developing asset class, and with the low amounts of the liquid as compared to other longer existing markets like stocks, the bond market, and of course the most fluid market in the world – Forex, crypto can be moved much easier in any direction.
With all of the volatility, the opportunity for profitable investing still draws and keeps many in the crypto market in search of returns, and why not? It makes sense, as risk is associated with reward to some degree, even if just a little. So if we’re going to be active in the crypto industry maybe we should look a bit deeper, educate ourselves and find out exactly how we should invest most efficiently for our individual goals and circumstances. One of those things to look deeper into would almost certainly be strategies to minimize risk. The risks involved with crypto investing are what we’re looking to address, so maybe in approaching with a mindset to find ways to minimize that risk, we would come up with solutions that arise from all ends of cryptocurrency trading and investing.
Different Strategies to Minimize Volatility in any Crypto Investment
Before identifying specific strategies, it’s worth first taking a look at different types of techniques to consider. That way, we may be able to identify more strategies within each style or investment technique discovered. So what are the larger, more general methods one might deploy in order to minimize volatility, or at least the effect thereof, experienced when investing in crypto?
One way to think would be to hedge, or shelter active crypto investments. While there may be several different strategies one may utilize to actively hedge crypto investments, hedging is the overall strategy in mind. Hedging active investments works to secure the individual investment strategies by backing them up with additional strategies in place which counteract loss and other potential adverse results when engaged in trading and investing.
Another general volatility minimization method to consider is diversification, as to spread the risk and profit potential across multiple assets or digital ecosystems. Just as with hedging, diversification is the general, overall method, while there are various strategies which one could implement to help achieve the goal of diversification as a method to minimize the risks of investing.
An additional strategy to minimize cryptocurrency volatility is to peg cryptocurrencies, or pair cryptocurrencies together with other cryptos in liquidity platforms or other ecosystems which support paired diversification crypto trading and investment mechanisms. Platforms like Spookyswap and other DeFi protocols on the Fantom network, have farming and other investment strategies built in which include tokens like $MIDAS, the Midas crypto investments platform network token, which offer APY with pegged assets. Staking the $MIDAS token with a cryptocurrency or stablecoin pair, and farming is an investment strategy that uses this paired, pegged approach and also works automatically in a sense, in this way, as a hedge as well.
Now that we’ve looked at a few of the overall methods to minimize the effects of volatility when crypto trading and investing, we can take a closer look at each of them to identify specific methods within them. These specific strategies within each general strategy will help us to take a look at several available methods to earning passive income and crypto in any market condition.
Single Asset Lending to Hedge and Minimize Effects of Volatility
Crypto lending has been an active mechanism in the cryptocurrency industry for several years now. Since the early expansion of CeFi, dating back to about 2016, the crypto lending model has helped generate passive income for lenders, while extending trade and investment options for borrowers. Crypto lending has been present on modernized CeFi platforms like Nexo and Celsius and Crypto.com, but have since begun to become modernized according to the current shifts occurring in the hybrid investment strategies presented with CeDeFi trading and investing.
Individuals can dedicate their single digital assets in crypto lending platforms. Most platforms streamline the process for the lenders and borrowers, removing the need for the parties to come to terms themselves. This automation naturally makes the process a more pleasant user experience for parties on both ends of the borrowing process. While the percent offered on lended assets can vary, all in all, crypto lending is a safe dependable way to hedge and minimize crypto volatility experienced by all investors in the market. Midas Investments gives investors on the uniquely evolving platform, the opportunity to gain impressive yields on single fixed assets, but not with crypto lending as a direct mechanism. Instead, Midas presents solutions to hedge against Bitcoin volatility with between 9% – 12.1% APY with another popular model – crypto staking.
Bitcoin and Other Crypto Staking Minimizes the Effect of Volatility
Single asset staking is an active investing model used on many CeFi and newer CeDeFi investment platforms. Single asset crypto staking is a strategy which allows individual traders and institutional investors to stake crypto assets onto a platform such as Midas Investments. At times, APY tends to slightly fluctuate as genuine market conditions adjust and change.
APYs tend to fluctuate on platforms that accurately respond according to the massive crypto volatility typically experienced in the market. Still, oftentimes APY adjustments on such platforms are not significant enough to alter the impact of the strategy as not only an effective hedge method but also one which grants investors the potential to capitalize on appreciation in price and value of single crypto assets, while also receiving a percent for staking over time. Lock times are another variable that should be considered closely when determining which CeDeFi platform to invest in. Midas Investments has no lockout periods or minimum staking agreements where investors can be penalized for early withdrawals or other such limiting factors.
Staking Stablecoin Minimizes Risk and Generates Returns, While Keeping Price Stable
Stablecoin staking is extremely popular and attractive on platforms like Midas Investments. A stablecoin is named for its function as a stabilizing mechanism, and is tied or pegged to fiat currency like USD. The fiat peg helps keep the stablecoin value at the same level while other digital assets move with the volatile nature of the market. For this reason, many crypto investors frequently use stablecoins, like USD Coin (USDC) and USD Tether (USDT), to park or secure funds and protect them from volatility while in between, and not engaged in active trade positions. Additionally, stablecoin is often a preferred way for cryptocurrency users to send and receive global digital payments.
Investors can earn interest on Tether and other heavily traded fiat-pegged stablecoins when engaging in staking on Midas Investments. The most current Annual Percentage Yields on stablecoin staking reaches beyond 17%, to almost 18% APY when Midas Boost is selected. This extra incentive, Midas Boost, is an example of how some platforms like Midas Investments, are moving the CeDeFi model even further ahead.
Midas incentivizes investors on the platform with this additional mechanism, making payouts in its native crypto token, $MIDAS, and offering an impressive 27.4% APY as well when individuals choose to stake their payouts received through Midas Boost. Staking crypto, and stablecoins specifically, is another method to minimize volatility, hedge and position for potential profit in the volatile cryptocurrency market.
Dollar Cost Average Across Chosen Ecosystems to Diversify Against Volatility
Another practice used in crypto investing, and investing in general, is the DCA method – Dollar Cost Average. Dollar Cost Average is a simple method of investing which removes much of the anxiety and concern over the price of individual digital assets. An individual is able to accomplish this when using the DCA method because the average of all buy positions is used to calculate the average cost of the overall market position. In other words, the DCA method enables individuals to purchase a digital asset at a normal rate and simply average the cost of the position based on what was invested over time per coin/token.
For example if you, or someone you know was investing in BTC using the Dollar Cost Average method, and invests the same amount of fiat currency into Bitcoin at the beginning of every month, the average cost of the position will be the DCA amount. To present a relatively simple example, let’s say after investing for two months, the price of BTC was $30,000 one month and $40,000 another month. Regardless of how much is purchased, if the same amount of currency is invested monthly, for example $250, the average cost of BTC is $35,000 over the first two months of using the DCA method. In this scenario a total investment of $500 was made for Bitcoin in two trades, one at $40k and the other at $30k, for the average dollar cost of $35,000 per Bitcoin.
Over time DCA allows an investor to position for potential long-term growth and gains, while simultaneously working as a hedge against volatility. DCA assists the individual by guarding against the almost natural inclination to attempt to time the market, and engaging in other inadvisable investment strategies. As is the case with many effective trading strategies, Dollar Cost Average is not isolated to the crypto industry, but has been used for many years in other financial markets, as an effective strategy to accumulate and protect against almost certain volatility inherent in any trading environment.
Automated or Prepackaged Investment Strategies with Diversification Built in
Some emerging cryptocurrency staking and investment platforms offer pre-built, prepackaged grouped yield strategies which offer automatic hedging by natural design. Think of this category of risk minimization as one which includes strategies closely related to ETFs or Mutual Funds in the traditional stock market. Strategies which offer creative solutions are often favorable for many of today’s crypto investors. One of the main reasons for this is the time, energy and expertise required to effectively engage in trade within the crypto market. Cryptocurrency is considered by most, to be the most volatile asset class hands down, for a number of reasons.
Innovative strategies which offer investors yield through automation are highly attractive largely because of the extensive research and attention to the market required to trade crypto with confidence and a good deal of what many would consider success. Midas Investments offers an innovative strategy that brings together different cryptocurrencies in a single investment strategy. YAPs, or Yield Automated Portfolios, are exactly that – portfolios, or baskets of cryptocurrencies which are hand-picked and grouped together to offer investors an alternative to single, or even two or three cryptocurrencies liquidity farming, amongst other DeFi protocol strategies available in the market today. For one, the chance of impermanent loss is something that has to be assumed in all liquidity farming and similar protocols. Choosing strategies such as the Midas YAP, gives investors the power and ability to automate and hedge within the same market.
At this time Midas offers two specific types of YAPs on the crypto investments platform. The Midas DeFi YAP is made up of Decentralized Finance projects, and grouped together in this single grouped strategy, for investors to benefit from the automatic APY associated. Specifically eight DeFi projects come together to create the DeFi YAP offered by Midas Investments. The other YAP offered on the Midas platform is referred to as the Stable YAP. The Midas Stable YAP is a Yield Automated Portfolio which groups together BTC and ETH, the two most traded digital currencies in the world, with USDC, the second most trade stablecoin behind only Tether, and $MIDAS, which is active throughout the entire Midas ecosystem and digital investment platform.
YAPs also offer automation in the form of monthly rebalancing which is designed to maximize profits, by spreading yields to other cryptocurrencies in the YAP to increase as gains and profits are made. YAPs are an effective model to earn passive income with DeFi all while minimizing the volatility experienced in crypto investing.
Remembering the Basics
We’ve covered a good amount of information that should hopefully be useful as potential strategies to hedge and fuel investments for growth, all while minimizing the devastating effects which volatility can have on the trading experience. While we have covered specific strategies, there are also fundamental practices for any and everyone to consider when investing in crypto or any market in fact. The following points are just a few things to remember beyond the strategies already covered.
These things are always good to keep in mind when investing in crypto specifically, due to the extraordinarily fast and volatile nature of the market. The crypto market has to be followed constantly, which is why joining a platform with an asset management system in place like that of Midas Investments could be hugely beneficial to any retail or institutional investor to consider.
- Stay calm and have a strategy in place, especially in times of heightened emotional vulnerability.
- Work to set parameters and identify when to sell and when to HODL.
- Dollar Cost Average to manage buying price and establish a long-term outlook.
- Don’t attempt to time the market.
- Do your research and stay up to date with the latest market news, especially in fast-paced crypto.
- Invest in the project, not the price.
These things, and all that has been covered, can and should be used to limit emotions, and keep calm at all times in order to make the most sound decisions and guard against certain volatility which will be experienced when investing in the cryptocurrency market. It is important to approach and treat investing as a science, and to develop methods of handling circumstances prior to their visitation in order to be well versed in responses to the market. Because after all, at some point all market conditions will be experienced if an investor is involved for long enough.
Evolving hybrid CeDeFi platform, Midas Investments is one of the leading brands in the crypto asset management space that’s helping people to use methods like these in order to generate yields daily, year round.