Cryptocurrency, Central Bank Digital Currencies (CBDCs), and stablecoins are not just trendy currencies. They gave a new perspective to the conventional monetary system. With the advent of digital currency, the concept of money has evolved from a mere medium of exchange to something that can generate and deliver “value” to individuals. Millennials are now turning to cryptocurrency as macroeconomic uncertainty, affecting the value of fiat, continues to linger in the market.
According to the latest survey conducted by Bank of America, young people are 7.5 times more likely to include crypto in their portfolio. Undoubtedly, with the rapid digitization, digital currency has become a great place for the younger generation. Several factors explain this inclination. However, selecting a segment does not promise to generate value for your portfolio.
Here are some tips that can help you increase the value of your digital assets:
DeFi staking is the practice of hedging your cryptocurrency holdings in a smart contract with the aim of increasing its future return value. It works like a passive strategy, where instead of selling your assets for quick gains, you hold onto them longer. DeFi staking has become a new method of generating profits from crypto holdings. Just like when you save your fiat to your bank account instead of cashing it out, its value gradually increases over time.
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However, keep track of the fundamental factors affecting the price of your digital assets. A comprehensive strategy will help you identify periods of market crashes and corrections, thus avoiding potential losses.
Coherent rather than “all-inclusive”
Financial markets are never stable. And when it comes to decentralized finance, any minor trend not only in the market but also in the web space can lead to rapid price swings. Calculating the impact of such instances is crucial so that you can make an informed decision for your parts. It can sometimes be confusing to predict the impact of demand and supply.
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Apart from global market scenarios, you never know which meme/tweet may affect the market sentiment of your portfolio assets. So rather than adopting an “all inclusive” attitude, adopt consistent methods.
Consistency will bring more time to your table, which will help you better gauge the mood of the market. Put your money to good use, 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 the price movements of different cryptocurrencies are correlated, the level of fluctuations can vary depending on various factors. Diversifying your digital portfolio can help you make the most of those small instances where price values differ. Apart from creating daily profits, it will also protect your position in the market.
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One way to increase the value of your portfolio is to mitigate the risk associated with it. It’s simple, if you can’t afford the risk, spread your risk. Diversify your assets across multiple Defi market segments, like crypto, NFTs, or smart contracts. However, be careful not to complicate things too much by spreading your risk too thinly. Concentration is also an essential factor in wealth creation.
The majority of cryptocurrencies are secured by complex algorithms. This prevents economic disasters resulting from crisis, war and stagnation from affecting the value of your assets. Digital currency is the future of financial markets. Nevertheless, the current highs and lows of the market sometimes give rise to uncertain scenarios. But that shouldn’t stop you from taking advantage of the digital currency market.
(The author is Director of Strategy and Trading 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 very risky. There may be no regulatory recourse for any loss arising from such transactions. Cryptocurrency is not legal tender and is subject to market risk. Readers are advised to seek expert advice and carefully read the offering document(s) and related material material on the subject matter before making any type of investment. Cryptocurrency market predictions are speculative and any investment made will be at the sole cost and risk of the readers.