The last few days there was a rise in bitcoin and a drop in altcoins. This has happened before and will happen again.
It's another reason to have a balanced portfolio.
If your portfolio is balanced enough, it will stay stable or grow if bitcoin gains value at the cost altcoins. But it will also stay stable if BTC goes down in favour of altcoin.
Here are some tips on how to deal with these fluctuations:
- Keep your eye on the 30-day trend before panicking about dips.
- Buy when coins go down, whether it is BTC or altcoins
- Avoid FOMO by defining your portfolio upfront
- Rebalance your portfolio after big surges
- redraw initial capital once it goes over 250%
Two ways to rebalance
There are 2 simple ways to rebalance your portfolio.
Let's assume your portfolio consists of 50% BTC, 25% ETH and 25% XMR.
When the price of Bitcoin goes up and ETH and XMR go down, your new weight might be 60% BTC, 20% ETH and 20% XMR.
Now you have 2 options:
- sell enough BTC to buy ETH and XMR so that your ratio goes back to 50/25/25.
- buy more ETH and XMR using new funds (fiat currency) so that your ratio goes back to 50/25/25.
I know this is not rocket science. It's very simple. But a lot of people let emotions get in the way of smart trading. That's why you need to set some simple rules for you to follow.
For myself, I have determined how much coins I want to keep for long-term and how much coins I'm willing to trade to take advantage of dips.
Redraw your initial capital
Coins go up and down and it's tempting to see only the growth without thinking about potential losses.
If you are lucky enough to get beyond 250% profit on a specific asset, the wisest thing to do is to sell part of your coin to get your initial investment back. Once you have done that, whatever happens to this coin in the long term, you already made your money back.
In case you don't need the money you could still reinvest it in another asset, you still risk losing the money but now the risk is spread over multiple assets. This could be another cryptocurrency, but it could also be stock, bonds, gold or whatever you like to invest in.