Tag: investments
Popularity of Crypto Investments Makes Case for Regulations, Australian Securities Watchdog Says
Risk vs. reward: should you gamble on crypto investments?
If you are an investor, you would know that there are no investments without risks. It’s just that while the risks outweigh the rewards of some investment options, the rewards outweigh the risks of other investment options. Crypto is one of those investments with risks and rewards, and this begs the question, is it profitable? Is it worth the risk to dabble in cryptocurrency?
To answer your question, we will use bitcoin as the yardstick since it is the most popular cryptocurrency. When Bitcoin was first launched, it was worth less than a dollar. Over the years, Bitcoin has grown exponentially to hit $60,000 in 2020. Presently, one bitcoin is equivalent to $23,000, mostly because the crypto exchange market is volatile. However, bitcoin has risen to $60,000, which indicates its potential as a good investment vehicle.
Apart from Bitcoin, several other cryptocurrencies like Ethereum and Solana are doing very well. Their value might not be as high as Bitcoin’s, but they have great potential.
How to use the risk-reward ratio for cryptocurrency
The risk-reward ratio helps you calculate the number of risks you are willing to take as a trader for potential rewards. In other words, through this calculation, you will know the potential rewards for every $1 you risk on an investment.
The calculation involved is very simple. All you have to do is divide your maximum risk by your net target profit. To do that, you look at where you would want to enter the trade. Then, you decide where you would take profits (if the trade is successful), and where you would put your stop-loss (if it’s a losing trade). This is crucial if you want to manage your risk properly. As a good crypto trader, setting your profit targets and stop-loss before entering a trade is important.
Now that you have both your entry and exit targets, you can calculate your risk/reward ratio by dividing your potential risk by your potential reward. The lower the ratio is, the more potential reward you’re getting per unit of risk.
How to invest in crypto
You can start investing in cryptocurrency by following these five easy steps.
- Choose a crypto exchange platform like Binance or crypto.com.
- Create an account on the platform.
- Deposit cash to invest.
- Place your cryptocurrency order.
- Select a storage method. You can decide to leave the crypto on the exchange, use a hot wallet or cold wallet.
What crypto to invest in 2022
Bitcoin: Bitcoin has been around for the longest of any cryptocurrency. It’s easy to see why it’s the leader, with a price and market cap that’s much higher than any other crypto investment options.
Ethereum: Ethereum is a network that allows developers to create their cryptocurrency and deploy smart contracts utilizing the network. While Ethereum is far behind bitcoin in value, it’s also far ahead of the other competitors.
Binance coin: Binance coin took off at the beginning of 2021, increasing from about $38 on Jan. 1 to an all-time high of $683 in May. Because of its performance over time, the Binance coin has proven to be one of the more stable investment options.
Cryptocurrencies are a relatively new investment option, and one that is still in its infancy. For those who want to invest in cryptocurrencies but don’t know where to start, there are a few different options available. One good option is to have a portfolio with an investment firm. These firms will help you build a diversified crypto portfolio that will provide steady returns.
One good recommendation for investing in cryptocurrencies is Reliq Holdings. User reviews for Reliq Holdings are very good, with many investors citing it as a reliable option for investing in cryptocurrencies. This way, you can make sure that your money is safe while you invest in cryptocurrencies.
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Also, Read
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- How to Create a DApp on Ethereum using Solidity?
- Crypto Trading bots | OKEx vs Binance
- Binance vs FTX | Best (SOL) Solana Wallets
- How to Swap Crypto on Uniswap? | A-Ads Review
Risk vs. reward: should you gamble on crypto investments? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
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How SmithBot Protected my Crypto Investments during the Market Crash
The last two years in the crypto market were just a crazy roller coaster ride. The prices skyrocketed to new all-time highs until May 2021 just to crash down by ~50+%. Then, a rapid recovery followed and some of the major cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH) saw even higher all-time highs around November. A sharp correction and a deep crash followed with about 2/3 of the crypto market cap wiped out.
Many crypto investors lost large amounts of money with more than 50% of all Bitcoin addresses being in the red, something that hasn’t happened for years. Since middle of June 2022 the market is stabilizing and seems to recover slowly, although it remains to be seen how sustainable this upturn will be. It is encouraging, however, that the crypto market cap is still about 4 times higher than 2 years ago, even after the latest crash.
Trading vs. HODLing
If you just held on to your crypto assets for the last 2 years you still made profits in average. Some examples:
- Ripple (XRP) is up almost 2 times
- Bitcoin (BTC) is up 2.4 times
- Ethereum (ETH) is up about 6 times
if quoted in US-Dollar. However, HODLers massively lost since the price peaks within this period. The losses for the symbols above are:
- Ripple (XRP) lost 81 %
- Bitcoin (BTC) is down by ~65 %
- Ethereum (ETH) lost also ~65 %
Certainly, if you sold your assets around the market peak you could have cashed in the massive profits from the 2021 rally. A few skilled and lucky traders avoided suffering big losses, but the majority of crypto holders took a huge hit. And this included many professional and institutional investors such as crypto hedge fund Three Arrows Capital and crypto lender Celsius who went bankrupt.
If even many experienced professionals didn’t get the timing for the exit right, how can everyday investors protect their gains? When the big FUD starts and everyone panics, you usually already missed the chance for selling with minimal damage. Emotions aren’t a good guidance in trading, but nevertheless most crypto investors base their decisions on non-rational triggers.
Trading Bots
Automated cryptocurrency trading bots strictly execute a predefined strategy based on data. They eliminate emotions completely. However, not all trading bots beat the market and it is difficult to find the ones that really work.
I am using SmithBot for my trading since about one year now. SmithBot provides fully automatic trading bots utilizing proprietary AI algorithms. It trades on the spot market without margin trading, so it is on the lower end of the risk scale within the trading bots on the market. On the other hand, as it opens only long trades it cannot profit from falling markets. They have perpetual futures trading on their public roadmap, so they might offer a solution for short and long trading at some point. Anyways, let me share the experience with the current spot market bots during the recent market crash.
My three bots are trading Ripple (XRP) quoted in Euro (Bot-ID 2), Ethereum (ETH) also quoted in Euro (Bot-ID 35) and Bitcoin (BTC) quoted in US-Dollar (Bot-ID 75). The performance plots showing the last 2 years extracted from the SmithBot platform are shown below. Please note that the period before live trading start is simulated according to SmithBot’s support.
All bots sold the crypto assets close to the major peaks thus avoiding larger losses. Although they did not always perfectly hit the optimal timing, they were usually quite close. The green curves show the base symbol gains which are a metric for the performance relative to the market: a falling curve indicates profits worse than buy&hold, whereas a rising curve mean the bot is beating the market. Overall, the bots largely outperformed the markets and delivered nice profits as seen in the yellow curves.
Given the bots trade without margin on the spot market, the best possible result in falling markets is preserving the quoted assets. This corresponds to a zero drawdown. Actually, the bots performed close to this ideal result.
- Bot-ID 2 was down 13 % since the peak (vs. -80 % buy&hold XRP/EUR performance)
- Bot-ID 35 was down 18 % since the peak (vs. -65 % buy&hold ETH/EUR performance)
- Bot-ID 75 was down less than 5 % since the peak (vs. -65 % buy&hold BTC/USD performance)
Overall, the massive profits until the peak end of last year were almost conserved and at the same time base assets accumulated. This sets the stage for further large profits in the next bull market. Importantly, all bots still delivered nice positive returns since I started about a year ago despite the market crash.
Conclusion
It is difficult to find an optimal strategy in times of market crashes. HODLing causes large losses, but finding the right timings for exiting and re-entering the crypto positions isn’t easy, even for pro investors. For the majority of crypto investors, a properly designed trading bot might be the best strategy. At least for me it worked out well and fortunately my crypto assets managed by SmithBot suffered only minimal losses during the massive market crash.
Also read,
- Trends in cryptocurrency trading bots: AI algorithms
- Crypto Trading Bot — Best AI Crypto Trading Bots 2022
- Crypto Trading Bot — 18 Best FREE Crypto Trading Bots [2022]
- SmithBot AI Crypto Trading Bots — Live Trading Test
- Crypto Trading 2021 in Review: 17 Advanced + 15 Neural Net strategies tested [Part 7]
New to trading? Try crypto trading bots or copy trading
How SmithBot Protected my Crypto Investments during the Market Crash was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.
FCA Impose Restrictions for Marketing High-Risk Investments
The British Financial Conduct Authority is yet to make a decision about crypto asset marketing rules.