What is the best way to benefit from the crypto downturn?

The cryptocurrency market has been declining ever since the highs of late 2017, and it doesn’t look like it’s going to recover any time soon.

Even if you aren’t planning on buying any crypto right now, though, that doesn’t mean you shouldn’t keep track of the market (because you might want to get in once the next bull run begins).

Here are some things to think about while you wait for crypto prices to stabilize or rise again.

Invest in a well-researched coin

Before you buy a new coin, make sure that you do your research. If you’re looking at an ICO (Initial Coin Offering), take a look at its website and whitepaper; these documents are important because they contain information about what the project hopes to achieve and how it will do so.

If these docs aren’t available on a company’s website, be wary of investing. A well-written whitepaper should outline why a coin is needed and lay out plans for how it will be used once launched in circulation.

Don’t buy into the hype—research every potential investment thoroughly before pulling out your wallet.

Keep investing in coins you believe in

Even if you missed a big chunk of last year’s rally, it may not be too late to get in on some nice buys. Holding coins for months or years can pay off even when prices fall; patience will allow you to snap up newly-distressed coins at discounted prices.

However, don’t expect a big payoff after investing only $1,000—that kind of money isn’t going to bring any significant profit. Instead, take your time and buy as much as you can reasonably afford over time; these are long-term investments and should be considered.

Use your fiat currency on real-world items

I’m not going to go into specifics here, because every investor/trader has a different risk tolerance level. However, when markets decline precipitously, as they have with Bitcoin and other altcoins in recent weeks, it’s smart to reduce your exposure to cryptos by converting some of them back into fiat currency (aka cash).

If your portfolio has tumbled and you still have cryptos left over after rebalancing and converting part of your portfolio into cash, that might be a sign that you need more balance between risk and reward in your trading account.

Keep in mind though: If a market is declining, there are no good days or bad days...there are only good investments/trades and bad ones.

Save some of your fiat currency

People are freaking out, thinking that bitcoin and all other cryptocurrencies are going to plummet. The next few weeks will probably be a great time to sell if you want fiat currency (dollars, euros, yen). But what if you don’t?

What if you’re a long-term investor or just want bitcoin for actual purchases (instead of holding it as an investment)? My advice: Keep your money in cryptocurrencies by moving it into stable coins.

Stable coins are cryptocurrencies that have low price volatility and haven’t fluctuated too much during these most recent drops. Examples include Dai and USD Coin.

In fact, I recommend using Coinbase as a wallet for your cryptocurrency investments so you can easily move funds between exchanges or wallets.

Cash-out slowly, but with caution

A good strategy for those who bought Bitcoin or other digital assets at its peak price, but haven’t kept up with its free fall, might be to cash out slowly over time.

Instead of all at once, you could use a cryptocurrency exchange that has low transaction fees and a good reputation and sell small amounts of your holdings over time. This will help you avoid paying capital gains taxes by allowing you to limit your taxable income as long as possible.

It may also lower your risk exposure by keeping much of your investment within cold storage. Still, remember there are many different approaches when it comes to investing so don’t invest without researching first.

Try mining yourself or buy mining shares

If you’re more of a hands-on investor, you can actually mine cryptocurrencies yourself. You’ll need expensive specialized equipment, though.

There are plenty of ways to get into mining and it’s not just for experts anymore. Companies like Kodak have even entered the fray with their own offerings, helping people do everything from mining cryptocurrency to taking pictures on their smartphones.

The point here is that there are many ways to participate in blockchain technology without buying coins directly or investing in an ICO. In fact, most people don’t buy cryptocurrency at all—they simply use its underlying technology as a platform for building innovative applications (and making money).

So if you want to invest in blockchain but aren’t sure how, go back to Step 1 above—do your research first!

If all else fails, then just hold on tight!

If you’re in it for the long term, cryptocurrencies can be a good bet. If you’re in it for the short-term, look at another investment.

Cryptocurrencies are still very new and volatile, and even those that have been around for years can quickly lose their appeal, especially when prices drop. So don’t put your life savings into bitcoin or other cryptos unless you have a very high-risk tolerance and some expertise to back up your decision.

The worst thing that can happen with most investments is that they will go down in value -- not disappear entirely. Just make sure you're keeping your portfolio diversified enough that when one asset loses out, others will gain ground instead of losing yours with them!

Conclusion

I think it’s good advice to look at every opportunity as a learning experience. Personally, I was never so invested in Bitcoin that I couldn’t handle losing some of my initial investment—in fact, it might even be beneficial for me.

But whether you’re looking at your own investments or speculating on the markets, keep things in perspective and remember that volatility will always exist.

The most important thing when looking to invest is not what you lost but what you gain: an awareness of your habits, how they might be leading you astray, and where they can take you next.