Cryptocurrency, central bank digital currencies (CBDCs), and stablecoins are not just currencies in trend. They have given a new outlook to the conventional monetary system. With the advent of digital currency, the concept of money has transformed from merely being a medium of exchange to something that can generate and offer ‘value’ to individuals. Millennials are now gravitating towards cryptocurrency as macroeconomic uncertainty, affecting the value of fiat, continues to linger in the market.
As per the latest survey conducted by Bank of America, youngsters are 7.5 times more likely to include crypto in their portfolio. No doubt with rapid digitalisation, digital currency has become a sweet spot for the younger generation. There are several factors resulting in this inclination. Nevertheless, selecting a segment doesn’t promise value generation for your portfolio.
Here are some tips that can help you in elevating the value of your digital assets:
DeFi staking is the practice of safeguarding your cryptocurrency holdings in a smart contract in an attempt to increase its future return value. It works like a passive strategy, wherein instead of selling your assets for quick gains, you hold them for a longer period. DeFi staking has evolved into a new method of profit generation from crypto holdings. Just like when you save your fiat in your bank account instead of cashing it out, its value gradually increases over time.
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However, keep a track of the fundamental factors affecting the price of your digital assets. A comprehensive strategy will help you in determining the crashing and correction periods of the market, thus warding off potential losses.
Consistent rather than ‘all in’
Financial markets are never stable. And when it comes to decentralised finance, any minor trend not only in the market but in the webspace as well can result in rapid price fluctuations. Calculating the impact of such instances is crucial so that you can make an informed decision for your coins. Sometimes predicting the impact of demand and supply can be puzzling.
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Besides the global market scenarios you never know which meme/tweet can affect the market sentiment of the assets in your portfolio. So rather than going with an ‘all in’ attitude, shift to consistent methods.
Consistency will bring additional time to your table that will further help you in gauging the mood of the market. Put in your money wisely because timing is everything in the market. Diligence, understanding, and then determining the price movement of your asset can give you more accurate results rather than going ‘all in’ at once.
Even though many believe that price movements of different crypto coins are correlated, the level of fluctuations may alter depending on various factors. Diversifying your digital portfolio can help you in making the most of those small instances when price values differ. Besides creating day profits, this will additionally safeguard your position in the market.
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One way to escalate the value of your portfolio is to mitigate the risk involved in the same. It’s simple, if you cannot afford the risk, spread your risk. Diversify your assets in multiple Defi market segments, like crypto, NFTs, or smart contracts. However, make sure you don’t overcomplicate things by spreading your risk too much. Concentration is also an essential factor in wealth generation.
The majority of cryptocurrencies are secured by complex algorithms. This makes it impossible for economic catastrophes resulting from crisis, war, and stagnation from affecting the value of your assets. Digital currency is the future of financial markets. Nevertheless, the present ups and downs in the market give rise to uncertain scenarios at times. But the same must not stop you from leveraging the market of digital currency.
(The author is the Chief Strategy and Trading Officer at Vantage, a global multi-asset brokerage firm.)
Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal. Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.