Not All Alts Respond The Same
The understanding that Altcoins suffer significant losses when Bitcoin trends down is a widely understood concept and yet there are varying degrees of damage. There are different reasons as to why a particular altcoin may experience more severe losses in a downtrend compared to the rest of the altcoin market. Firstly, smaller projects and especially micro-caps will usually endure the most pain. The most obvious reason here is liquidity. If tokens worth millions of dollars are sold of a project only worth $10 million in market cap, you will obviously witness a bloodbath.
Looking to larger projects is however a different scenario, as millions of dollars being sold off from a market cap in the billions is marginal in comparison. This is what makes investing in micro-caps so risky. This type of activity can go on for extended periods in a bearish, or even typically sideways market.
The Rule Breakers
This is however not always the case, as a larger cap project could have just experienced a tremendous upside surge. In a scenario like this traders will be looking to lock in gains accumulated over the past few months. You now have additional sellers that are not present in other alts selling in order to benefit from recent price action.
Similarly, a micro-cap can experience bullish support due to a recent partnership or other news positively interpreted by the market. This is when staying in touch with the market is a tremendous benefit. However, at the end of the day, the Top 20 alts are for the most part going to have the most resilience.
Utilize Two Passive Income Streams
Firstly, if you are not taking advantage of all the passive income opportunities within the Crypto space then you really need to begin researching. This is the dynamic that makes Crypto so attractive outside of the insane gains. Utilizing a stream that earns BTC, as well as another earning some or other stablecoin is a great way to go. Currently, we are experiencing constant drops of 6% to 12% on an ongoing basis. This has happened numerous times over the past while and is when you want to utilize earnings from your BTC income stream. Alts drop harder than BTC, which means that when prices recover, you have an advantage.
Buying these dips beats simply buying when funds are available. Waiting for opportune moments can make quite a difference down the line. Essentially, the more dips that you experience, the greater the profit once the particular altcoin hits previous levels or higher.
When To Utilize The Stablecoin Earnings
The second passive income stream is producing profits in one or other stablecoin. This particular stream is to be thought of as more of an emergency fund. Rather hold these stablecoins during the typical price drops and keep using BTC to buy alts, as this way accumulation continues but you also have a hedge. In the event prices drop 20% to 30% from where you began investing, you can begin allocating stables. This is where you will obviously experience the greatest gains down the line.
You can always use the majority of these funds, as there are more being generated, or hold some for another aftershock. As I mentioned, simply buying as funds are available is not the best approach. Waiting for opportune moments and then strategically responding is the better way to maximize your capital allocation.
Why Top Altcoins
So, why have I assigned this strategy to larger and more stable Altcoins? Applying this strategy to new and potential projects may actually see your capital disappear over time. The fact that these coins are in the Top 10 or even Top 30 shows that they are most likely here to stay. If that then is true then they will at some point in time rise and most likely go on to form new all-time highs. This is the type of strategy that I would apply to Solana, ETH, or even Fantom.
I usually tend to go for coins that are POS, ultimately increasing my returns by compounding staking rewards. Ensuring that there are as many “multiplication” aspects to your strategy as possible is key in attaining a truly rewarding end result.
Final Thoughts On Stablecoins
I am currently earning some modest stablecoin income that I am not yet allocating. I also advocate the idea of having a permanent stablecoin allocation. The percentage of total portfolio value is up to each investor and will largely depend on their risk profile. The Hive Backed Dollars that I earn on Hive are also retained as HBD. It is another way of hedging my portfolio at zero cost.
Hive will continue to grow significantly over time, so holding onto your HIVE is also a pretty smart play in my opinion. Ignore the noise and remain focused on projects you believe have a future.
Personal conviction is very important in the investment world, which is why I get concerned when people ask me what they should invest in. Without personal conviction, what will keep you committed to executing your strategy when times are bleak? Ensure you have the right fuel in your tank because times can get really tough in this market. Thanks for the visit and see you soon!