In the decade since the introduction of bitcoin, it has been a rollercoaster of a ride for cryptocurrency investors – especially after the start of the bull run late in 2017. There have been thrills and spills, and more ups than downs across the 10 years. Certainly, those who were clever – or lucky – enough to invest in the early days will be very pleased with their yield.
Much like a rollercoaster, following a steep ascent comes an exhilarating – sometimes scary – drop, and that has been the case for bitcoin and the other major cryptos in 2018.
There is talk of another bull run on the horizon, though whether it will happen is anyone’s guess. So what strategies do crypto investors employ in a bear market? Basically, you have four options – as listed below. Choose wisely.
- Short sell
“Shorting” is when a trader backs a certain market to decline. If their hunch is correct, then they will benefit. Arguably the most famous example of short selling happened in September 1992, when Hungarian-American investor George Soros netted approximately $1 billion after correctly predicting the British pound would drop when it was forced out of the European Exchange Rate Mechanism.
Shorting is made possible through Contracts For Difference (CFDs), or derivatives, as they allow the trader to sell assets he or she doesn’t actually own. Simply put, a short trade is executed when a borrowed asset, or instrument, is sold at the current market price. If the market moves the trader’s way thereafter, and the price of the asset declines, the value of their position increases. From there the trader can choose to buy back the now-cheaper asset and make a tidy profit.
The 1,200 instruments offered by leading global social trading and investing platform eToro to its 10 million+ members have the option to short, including within the cryptocurrency and stock markets. Never has the adage “one man’s loss is another man’s gain” been so apt.
The first time you see “HODL” when someone is discussing cryptocurrencies the word causes you to stop reading. You think: “Is it a misspelling?” Well, yes it is – at least it was mistyped originally. Now, rather amusingly, HODL has spawned a life of its own. It has evolved to represent a long-term trading strategy and philosophy for crypto investors.
HODL has become an acronym (or even backronym) for “hold on for dear life”, meaning that even when investors are in the deep red with their cryptos they should not buckle under pressure and sell, driven by the belief that they will, ultimately, reap great rewards, once mass adoption has been achieved.
Quartz heralded HODL as one of the most important terms in crypto culture in 2017, describing it as a determination to “stay invested in bitcoin and not to capitulate in the face of plunging prices”.
There is certainly great potential of HODLing as an investment strategy, and not selling while under pressure, as history shows us – and not just in the cryptocurrency world.
One of the most notorious examples of failing to HODL happened in the mid 1970s when Ronald Wayne, Apple’s third co-founder – alongside Steve Jobs and Steve Wozniak – sold his 10 per cent stake in the then-start-up back to the other two co-founders for $800.
In August 2018, Apple achieved the historic milestone of reaching a market capitalisation of $1 trillion. Had Wayne adopted a HODL mentality his Apple stake would be worth around $100 billion today.
It is impossible to predict the future, but Jay Smith, one of eToro’s most recognisable Popular Investors (whose trades can be copied by others – as can anyone’s on the platform), believes staying strong will reap the biggest rewards. Full-time trader Smith – a.k.a. jaynemesis on eToro– describes his trading style as “fundamentals, future and HODLing”.
“I firmly believe that cryptos will change the world, replacing stock markets, most currencies and powering everything from machine-to-machine payments and the Internet of Things through to streaming media, prediction markets, governance systems, voting systems, even potentially the internet,” he continues. “That being said, there is a long way to go, we are in the very early stages for most of these areas.”
- Keep investing
When the value of cryptos falls, many investors double down – effectively strengthening their commitment to a course of action that is potentially risky – because the prices are so low. As with HODLers, those who keep investing see the long-term benefits of cryptos.
Despite the bear market of 2018, many eToro users have invested more in bitcoin, XRP, and a range of other cryptos available on the platform – just see the market sentiment (image taken on November 30, 2018).
This is not investment advice or an investment recommendation.
If you have gone all in on cryptos and are waiting for the arrows to turn green, rather than red, it might be a good idea, during a bear market, to consider investing in other asset classes. By diversifying your portfolio this approach will spread your overall risk.
On eToro there are over 1,200 financial instruments, across six asset classes, on offer: cryptocurrencies; exchange-traded funds (ETFs); stocks; indices; commodities; and currencies. There are other ways for users to invest with eToro, in addition to manual trading. The innovative CopyTrader tool allows clients to copy the trades of top investors automatically. Users can view and copy anyone with a profile in a straightforward way, and expand their portfolio using CopyTrader while still using an individual strategy.
Another option is CopyPortfolios™: eToro offer various portfolios including in cryptos, technology, and the best-performing traders. These allow users to invest in multiple markets or traders based on predetermined investment strategies.
The award-winning platform truly is a one-stop shop for all your trading needs in a crypto bear market.
eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Cryptoassets are unregulated and can fluctuate widely in price and are, therefore, not appropriate for all investors. Trading cryptoassets is not supervised by any EU regulatory framework. Past performance is not an indication of future results. Your capital is at risk.
This content is intended for information and educational purposes only and should not be considered investment advice or investment recommendation.
From successful entrepreneur to successful CopyPortfolio investor: Meet Chris Hyland
Chris (@ChrisHyland) from the UK is a successful entrepreneur who founded one marketing agency that went global and is now the head of another company he founded, The Happiness Index. He is an active investor on eToro and a fan of the platform’s CopyPortfolio investment strategies. We asked him to answer a few questions about himself and his trading habits:
65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. This is not investment advice.
- Tell us a little bit about yourself?
I grew up in the UK in Sussex. I am an entrepreneur – at the age of 26, I started a digital marketing agency called 4Ps Marketing with a friend/ business partner. The agency eventually went global and was sold to a larger company, NetBooster.
- How did you end up building The Happiness Index?
Through experience at 4Ps Marketing, and having to deal with a lot of people, you kind of learn how important it is for people to be happy and motivated in their jobs. This is what our new business, The Happiness Index, focuses on. The mission is to change the world and redefine work/life…
5 copy trends: The cringe, the funny and the awesome
Copying other people’s mistakes can lead to ground-breaking innovations and even aid the human ability to adapt research shows. Even animals and birds acquire some of their vital life skills and knowledge through low-cost copying. That’s because the individuals we tend to copy are typically top performers in their field, so we automatically skip the time-consuming trial and error stage.
Copying is such a huge part of today’s society that we had to draw a list of the top 5 hottest copy trends that shaped 2018 and we expect to see in 2019.
1: Second-hand speeches from the first lady
Remember the unveiling of Melania Trump’s ‘Be Best’ plan back in May 2018? If you thought the ‘Be Best’ slogan sounded familiar, it’s probably because you were thinking of Michelle Obama’s ‘Be Better’ response to Oprah Winfrey’s question at a White House Summit back in 2016. And that’s not the only issue eagle-eyed critics noticed in the grand plan – the companion pamphlet appeared to be copied almost in its entirety from the one the Federal Trade Commission released in 2014 when Obama was running the show. What’s worse, this wasn’t the first time the first lady came under fire for alleged plagiarism. At the Republican National Convention in 2016, FLOTUS borrowed a sizeable portion of her…
Crisis Breeds Opportunity
It’s been a heckuva year for the markets in 2018. A year of uncertainty. A year of volatility. From cryptocurrencies to precious metals and crude oil, and at the very end of the year even stocks, it was a year of massive declines. A year of anti-globalization. A year of monetary tightening. 2018 saw massive shifts in prices across a range of asset classes catching many investors off guard.
With crisis comes opportunity.
From 2009 to 2017 traders grew accustomed to steadily rising markets and modest but continuous gains. However, it’s important to remember that the economy moves in boom and bust cycles that usually last about four to six years and it seems that the last bull run was a double whammy.
As we move into 2019, many assets are officially in a bear market, which is something that most young investors have never experienced before. So, it’s going to take a lot more creativity to build a solid portfolio.
My name is Mati Greenspan and I’m the Senior Market Analyst at eToro. Though I may not have all the answers, I’ll be very glad to fill you in on exactly why the markets are acting the way they are at the moment and what to look out for in the year ahead.
On Tuesday, January 8th, we’ll be…
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