If you wish to make wealth with cryptocurrencies, you can with specific risk management strategies. Volatility in the market is the most crucial thing you should look out for, for example, in the month of November 2021. Bitcoin reached a peak of $68,000 dollars; however, it fell to $33,000 in January 2022. In fact, the market conditions were really bad, and investors became concerned about a phenomenon known as the “crypto winter,” where the prices of the coins stay low with no future of a rise for more than one year.
Kavan Choksi– invest wisely in cryptocurrencies
Business and finance expert Kavan Choksi states that it is evident that everyone will be concerned about a crypto winter when it arises. However, there are some prudent ways via which you can invest in cryptocurrencies and reduce their risks to build wealth.
According to him, an effective way to mitigate risks when you are dealing with cryptocurrency investments is to invest in buffer money. Since you know about the threats of market volatility with cryptocurrency, it is evident that you cannot put all your funds in them. This means when you decide to invest in crypto coins, ensure you have buffer money. This money refers to the funds you do not need for meeting your basic needs. In short, it is an emergency fund that will pull you through and not put you into bankruptcy.
Again, make sure that you never take a loan to invest in cryptocurrencies, as this is not a wise thing for you to do. According to business experts in the field, you take a small amount of your funds and invest them in a certain period of time, preferably for a long-term duration, to reap the best returns. You do not need to invest a lot of money in the beginning; increase your funds with the passage of time.
Invest in companies that have crypto holdings
If you are still anxious about plunging right into cryptocurrency investments, you can invest in organizations that have crypto holdings. These companies would serve as a buffer between crypto volatility and you. The risk levels here depend upon the volume of cryptocurrencies the company holds on the balance sheet. If you want to find this out, you can check the balance sheet of the company to know more about its crypto holdings. For example, until 31st December 2021, Tesla’s holdings of Bitcoin were worth $1.99 billion. There is also a possibility that the increase in the value of Bitcoin of Tesla will also lead to a rise in its stock prices as well.
Index funds
According to business and finance expert Kavan Choksi, there is another strategy you can use for mitigating risks in cryptocurrencies. Here, you should invest in them via index funds. This fund refers to a stock portfolio that has been exclusively designed to mimic any financial index structure in the market. They are based on the concept where they believe in the long run, the market will outdo any investment.
Like many investments in the traditional finance markets, index funds can be used for cryptocurrency investments as well. For example, there are two popular index funds for cryptocurrencies, and they are Crypto20 and Crypto10, that expose investors to the top 20 and 10 cryptocurrencies, respectively, via market capitalization.