10 Things to Know About Bitcoin
- Facts about Bitcoin
- What is it?
- How does it work?
- Where did it come from?
- Why does BTC have value?
What can be done in a downturned market to avoid losses with bitcoin holdings? Panic sell and exit the market!? No. This is not the answer, because the next opportunities will be missed. If you leave the arena, you will never be the next champion. Should we battle through, day trading for small profits and chart our lives away in the late hours of the morning? No. This isn’t the answer either. One thing that we learn as investors early on is that some days, there is no sense in trading at all. There are days when it is more effective to sit on our hands than to force the desire to make profits onto our wallets.
With proper trading signals, it is possible to follow the pumps and crashes of any investments. So where should we HODL our crypto when we think, calculate or guess that a crash is going to happen, on daily, weekly or monthly timeframes? The answer is that you can “Park” your crypto in a few different ways so that it’s value doesn’t decline. You can exchange your bitcoin and alt-coins into CAD, USD, or other financial harbours called “stable-coins”.
Wipe those crypto tears from your face and let’s break down the details! You have options to limit risk to enable methods so you can buy low and sell high!
“Parking” in an exchange
The most secure place to HODL, is not on a digital exchange. If you didn’t know this already, you should keep researching the security of your investments. Cryptocurrencies have never been hacked, but the exchanges they can be stored on, have been. This is due to hackers manipulating the infrastructure of the IT networks which the exchanges exist on and withdrawing investors funds. If you want to do a short-term hold or parking of your investments on an exchange, you will trade your BTC, ETH or another crypto into your local FIAT currency. (FIAT refers to Canadian, US or other dollars). When you do this, your funds will sit at the rate you sell them at. In years to come, this may change if crypto has a place replacing local FIAT currency, but we need more adoption before this happens. For now, these currencies are stable, and even though throughout the year, inflation causes a loss of 3-5% in our economy, it’s better than some losses you may have experienced with bitcoin and alt-coins. In one sense, many have determined that inflation is “designed theft”, but that topic can be covered another day. www.Coinsquare.com is one exchange that allows trading crypto for CAD and USD with a simple trade process.
“Parking” in Trezor / Ledger / Cold Wallets
As long as the stable-coin that you are using exists is traded and has the value you intend on using it for (USD 1.00 for example), then this would be a secure way to HODL your investments during a dip, crash or bear market. Many cold wallet devices, allow the storage in these stable-coins. The fact that your investments are offline, and on your hardware device increases your security exponentially.
What you can do for this is send the crypto to your Trezor, Ledger or another device, and within the software, trade it for one of the stable-coins offered. Once that is complete, take care of your cold wallet device!
The important step here though is to make sure your hardware wallet is never lost, or destroyed due to water, fire or your dog using it as a new chew toy. A hardware or cold wallet should always be stored in a safe or a security deposit box. If you keep a hardware wallet in a drawer at home, you can expect to lose your investments at some point.
Keep in mind, that if there is any change to these stable-coins where they become unstable, or if they are based on the US dollar, and that FIAT currency becomes unstable in itself, then you may need to take quick action to trade out of this currency.
What you will pay for these services is a transaction or trading fee, the same as you pay to send crypto. Typical rates are 1-2%. Be careful with exchanges that don’t break down the price but instead calculate your totals that you will receive in FIAT. Depending on the volume you are exchanging, the fees can end up being high, but it may be worth it to be able to save losses.
When to Park Crypto
It can be easy to be emotional about pumps, crashes, or estimating when these things will happen. The fact is that you and I may never know every time when these events will occur in a trading market. What you can do though is make rational decisions based on trading signals and calculations. Develop a trading strategy that continually reduces your risk and increases your opportunity. Dan Lok, a successful businessman from Vancouver, BC said: “A million dollar idea has no value, it’s the execution that is worth the million dollars.” The same can be applied to your investments with your ability to make decisions by moving funds around intelligently and reducing your risk of loss.
If you have any significant funds being held in crypto, a stable-coin, or on an exchange, you must take extra steps to keep your wealth safe. Consult with a security professional and take precautions so you can enter a liquid state with your funds quickly when needed. Do your research, have backups of your passwords and recovery phrases. Then make redundant backups of this information and put it into a safe. A strong piece of advice is for you to take the time to set up Google Alerts. You can list a google alert for the stable-coin or the exchange where you are HODLing. You will get email alerts if there is any news about that coin or exchange, which may allow you to make financial decisions promptly and save your bacon, instead of missing the news and having potential losses.
Whatever you decide with your investments, keep studying our industry, test out trading patterns and develop your trading style so you can be a part of coming bull markets and opportunities when they come your way. Some find that the simplest thing to do is to simply HODL and then they won’t ever have to sell back into FIAT and bitcoin or crypto becomes the standard currency we all use.
What do you find are your most reliable tools as a trader? Charts? News? Social Media?Comment below, share your ideas and help us grow the conversation with our articles.