In recent years, the cryptocurrency industry has offered one of the most lucrative investment opportunities anywhere. And small business owners have noticed. Many of them now rely on cryptocurrency investments to form a significant portion of their personal portfolios. But since the beginning of this year, investment markets — crypto included — have entered bear territory. And that’s putting a significant financial strain on business owners who now have to balance their own financial well-being with that of their businesses. As a result, many have started to divest from crypto to try and stave off further losses. But just as is the case in the stock market, it’s the people who stay the course who will eventually come out ahead. And instead of divesting from crypto assets, business owners should instead reconfigure their portfolios to limit risk while taking advantage of the market’s volatility. Here are the three crypto investment strategies business owners should consider to ride out the downturn.
Automated GRID Trading
One of the biggest challenges of investing in a volatile market is that it’s impossible to stick with any strategy for very long. Wild price swings can make what seemed like a solid investment choice today look like a bad idea tomorrow. But there is a way for investors to profit from volatility — if they’re willing to turn their accounts over to a crypto trading bot. By doing so, they can design and execute an automated GRID strategy that can earn high returns in a volatile market. A GRID strategy allows an investor to preselect multiple price entry and exit points and relies on automation to place the correct orders when the opportunities arise. The benefit of this strategy is that it allows the investor to custom-tune their approach to suit their individual risk tolerance. And because it’s a strategy that relies on market fluctuations, it can work to the investor’s advantage no matter how the overall market performs. When the market’s performing well, it earns through buying low and selling high. And when the market shows weakness, it does the reverse, profiting on short and cover orders. In other words, it’s a perfect long-term solution for crypto investors.
Yield Farming
Another excellent strategy for crypto investors to turn to that will earn steady returns through the current market downturn is yield farming. It’s an investment type that’s fairly unique, having no real analog in the world of traditional finance, other than instruments like bank-issued CDs. But in the case of crypto, there’s no centralized institution generating the returns to distribute to investors. Instead, yield farming allows investors to leverage their crypto assets to earn high-APY returns by providing them as funding for market operations. And with the Fed’s recent base rate increases, yield farming is more attractive than ever. That makes now the perfect time for investors to give it a try. The most widespread type of yield farming is called staking, where investors agree to lock their assets — or stake — in a crypto account for a set period of time. Those assets then become a part of the operations of that currency’s blockchain, which uses those stakes to validate transactions on its network. In exchange, the investor earns a cut of the profits generated by the blockchain itself. And beyond that, crypto-asset owners can also engage in yield farming by joining a crypto lending platform. Such platforms offer loans using investor assets and reward those investors with a significant portion of the interest those loans generate. And better still, many include functions to stabilize interest rates for predictable investor returns. Or investors can also earn solid returns by locking their assets in liquidity pools, which provide the currency needed for the millions of transactions that take place daily. In exchange, the investors earn a cut of the processing fees earned by the pool itself.
Invest According to Elliott Wave Theory
One of the things that made crypto such an attractive investment in the first place is that it’s unmoored from the control of traditional financial institutions. That made it — in the minds of investors — less likely to favor bigger investors at the expense of the little guy. It was a natural match for small business owners, who themselves often end up punching up to compete with bigger market competitors. But even though crypto markets offer a fairer playing field than some traditional investment markets, they still move at the whims of investors. That means deteriorating conditions can cause precipitous price drops as panicked investors try to avoid losses. And those movements aren’t always connected with any real financial fundamentals and are more a reflection of the investors’ mood of the day. It turns out, though, that there’s an investment strategy that takes advantage of that tendency. It’s called the Elliott Wave Theory, and it relies on crowd psychology principles to predict where the crypto markets are headed. By applying the theory to their crypto portfolios, investors can profit from the price swings that happen as market speculation feeds volatility. In that way, it’s possible to create downturn-proof investment income in crypto — which is an option that doesn’t exist with other investment types.
The Bottom Line
As any smart business owner can tell you, one of the keys to running a successful business lies in finding ways to capitalize on the mistakes of competitors. And they’d also know that some of the best times to capitalize occur when economic headwinds cause the competition to commit unforced errors. Right now, the same logic applies to the crypto markets. As conditions deteriorate, smart investors can adjust their strategies to earn significant profits as their competitors flee. It’s more than possible using one or more of the strategies above. And as the old saying goes, fortune favors the bold — and now is the perfect time to strike.
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This article, “3 Crypto Investment Strategies for Business Owners Navigating the Downturn” was first published on Small Business Trends