The market is RED and everyone is seeing a drop in their portfolio and even if you are macro bullish, you cannot help but feel and smell the fear in others as they spiral downwards and scream “the end is nigh!”
But there are ways you can position yourself to resist against the doom and gloom and maybe also profit from this exercise. Now these are all just ideas, theories, and various points of view, it is NOT FINANCIAL ADVICE, like everyone of you has your own unique position and deposition towards your own financial situation and so, take ownership of you and yours.
Now getting straight into it - Even if the market is in a slump, there are still ways to make money. You may wish to bet on the general market trend, make micro-trend estimates, or simply keep and earn passive income, depending on your risk tolerance. There is a trade-off between risk and return in each of these strategies, and it is up to the individual to maintain his or her own particular optimum balance between the two.
To start of let’s look at Day/Swing Trading
Swing trading takes advantage of a coin’s chart’s short-term price changes rather than the larger macro trend. There will always be modest peaks and dips in the price as it moves in that general direction within a verified upward or downward channel of price movement. During a bear market, experienced traders can profit from micro trends by buying the lows and selling the highs. Market volatility during collapses is good in this scenario since it offers the most useful local optima in the chart. To swing trade, you’ll need to learn about many types of technical analysis, such as pattern creation and indicators like the RSI. Only those with a high-risk tolerance and a lot of experience utilising technical analysis to evaluate short-term moves should do this.
Specific skills like “side stepping” in and out of trades to accumulate more tokens is one such strategy I have seen employed by experienced traders – this done correctly with Dollar Cost Averaging (DCA) is a good way to strengthen your position in a crypto market crash.
Next, we will look at Staking Your Current Tokens
If you don't want to employ more complicated trading strategies because you have a low risk tolerance, the next best thing is to keep onto coins that earn passive income regardless of market activity. Staking coins and trade coins are the two major types of coins that can create passive revenue. Staking coins supply additional coins for each coin utilised in the staking procedure in exchange for regulating the network. Staking in most coins should yield a constant annual return of 5% to 10%. Some proof-of-stake variants, like as Ark's DPoS, offer better rewards than decentralised staking. Exchange currencies offer a variety of benefits on exchanges, such as lower fees, and others, like KuCoin's, offer a profit-sharing model in which a percentage of exchange fees is given to currency holders. Because the percentage return on these coins is directly linked to volume, which can change, it's difficult to estimate. Exchange coins are still speculative in that you are betting on the performance of a certain exchange, whereas staking coins are considerably more consistent and equivalent to dividends.
Please understand the difference between Centralised and De-Centralised platforms when choosing where to stake. The platform risks are different to staking risks and if not done correctly it can snowball into a much bigger problem in the future. For more information, you can reach out to me.
And finally, DeFi Yield Farming.
Yield farming is a method of generating extra cryptocurrency with your existing cryptocurrency. It entails you lending your money to others through smart contracts, which are computer programmes. You receive fees in the form of cryptocurrency in exchange for your services. Isn't it simple enough? No way mate…
Farmers that want to increase their yield will employ more complex tactics. To maximise their gains, they constantly shift their cryptos between multiple lending marketplaces. They'll also keep the top yield farming practises a closely guarded secret. Why? The more people who are aware of a technique, the less effective it is likely to be. Yield farming is the wild west of Decentralized Finance (DeFi), with farmers competing for the greatest crops to farm.
I might compile a more detailed article on “What is Yield Farming” but here is a short summary.
Yield farming, also known as liquidity mining, is a method of earning money from crypto assets. In simple terms, it entails securing cryptocurrency and reaping the benefits. In some ways, yield farming and staking are similar. However, there is a great deal of complexity going on behind the scenes. It frequently collaborates with liquidity providers (LPs), who contribute funds to liquidity pools.
What is the definition of a liquidity pool? It's essentially a smart contract with funds. LPs are compensated for supplying liquidity to the pool. This incentive could come from the underlying DeFi platform's fees or from another source.
Some liquidity pools pay out in a variety of coins. These reward tokens can then be put into other liquidity pools to receive additional prizes, and so on. You can see how extremely complicated methods might evolve very fast. However, the essential concept is that a liquidity provider puts funds into a liquidity pool in exchange for rewards.
Now what are some dangers in Yield Farming?
It is not easy, if it were, everyone would be doing it.
The most profitable yield farming tactics are quite complex and should only be attempted by experienced farmers. Furthermore, yield farming is better suited to individuals with a lot of money to invest (i.e., whales). Yield farming isn't as simple as it appears, and you'll most certainly lose money if you don't know what you're doing. Smart contracts (let me know in the comments if you would like a more detailed article on What are Smart Contracts) are an obvious risk of yield farming. Many protocols are established and developed by small teams with limited budgets due to the nature of DeFi. This raises the possibility of smart contract bugs.
Vulnerabilities and flaws are discovered all the time, even in larger protocols that are certified by respectable auditing organisations. This can result in the loss of user funds due to the unchangeable nature of blockchain. When locking your funds in a smart contract, you must keep this in mind.
There is also the risk of Rug pulls happening – this is very serious however there are some strategies I use (with quite good results) to ensure that this is controlled and mitigated to an extent – And so, please do not simple ape into any project you see and please do not FOMO or FUD without thinking deeper and asking better questions because that makes you an ass. Don't be an ass - be better!
However, with the right guidance and strategy, this is by far the best way to make money in a crypto market crash.
Thank you for reading this and have a lovely day!
J