The Secret to Winning With Cryptocurrency While Prices Are Tumbling

It may be difficult to look at your cryptocurrency portfolio these days — or difficult to imagine investing. That’s because some of the most popular players have seen their values tumble. The cryptocurrency market as a whole fell 74% to a low in June after peaking at $3 trillion late last year.

The situation may be beginning to brighten, however. The cryptocurrency market rebounded this week, sending its value over the $1 trillion mark. The world’s biggest players, Bitcoin (BTC 3.77%) and Ethereum (ETH 9.26%), are showing signs of recovery. They’ve climbed 14% and 44%, respectively, over the past month.

Still, it’s too early to say whether this crypto winter is over. But here’s the good news: There’s a secret to winning in the crypto market, even when prices are tumbling.

At least five years

The secret has two parts. First, it’s important to take a long-term view of your cryptocurrency investments. This means holding onto an asset for at least five years. And second, now is the time to pick up bargains.

Let’s talk about the idea of long term. It’s a lot more exciting and less stressful to see your investment rise quickly, which happened last year. It’s easy to get used to the idea of investing — and then immediately locking in a gain.

But history tells us these periods of big wins are followed by downturns. History also tells us these low points don’t last forever. The following chart illustrates both points.

Ethereum Price data by YCharts.

Even if your portfolio looks dismal right now, don’t despair. The current downturn doesn’t change the investment case for strong players. For example, Ethereum is a leader in decentralized applications (dApps). The platform hosts more than 2,900, according to State of the dApps.

Why is this important? Because dApps — including decentralized finance applications — can change the way business is done. Borrowing and lending can happen instantly and without middlemen. And that’s just one use case.

Part of a journey

All of this means that even if the price of your investment has declined, the investment story isn’t over. This is part of a journey, and you’re in the middle of it. The end still could be very bright.

It’s key, however, to put aside any feelings of panic and instead focus on opportunities. And the opportunity today is bargain prices on many promising cryptocurrencies.

This leads me to the second part of the secret to cryptocurrency success. Instead of waiting until cryptocurrencies rebound and reach highs, now is the time to identify potential future winners — and invest.

For example, Cardano (ADA 4.51%) has lost more than 60% this year and is trading for less than $1. Right now, software engineers are working on a scaling solution that could supercharge Cardano’s transaction speed. Success here could send the value of this cryptocurrency soaring.

This doesn’t mean you should go out and snap up any cryptocurrency that’s suffered over the past few months. It’s key to study its current role in the market — and future prospects. It’s also crucial to keep this in mind: Cryptocurrency remains a risky area. It’s new, and we can’t be 100% sure that it will play a major role in tomorrow’s economy. So never invest more than what you can afford to lose.

If you can accept this risk, though, cryptocurrency remains an exciting area with a lot of promise. And if you take a long-term view and bargain hunt today, you just may set yourself up for a big win down the road.

Adria Cimino has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin and Ethereum. The Motley Fool has a disclosure policy.

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