Mitigating Risk Associated With Cryptocurrency Investment II

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The cryptocurrency market is one rightly rift with it's own risk just like any other financial market just that it seems cryptocurrency is more volatile making it a more riskier asset class and heavily speculative which means that risk management is important to stay profitable consistently in the long run on this market without which we would merely be wasting our time here.

Cryptocurrency market is filled with it's up and downs and true if one is experienced enough with the right skill set they would be able to mitigate the risk that comes from investing in cryptocurrency, but some may not know some of this risk and hence suffer for lack of knowledge.

Today I will be sharing some healthy practical steps to be able to mitigate the risk that comes with investing in the cryptocurrency market.

Practical ways to do this

Always Stay Informed About Regulations
The regulatory framework around cryptocurrency differ from country to country and is constantly envolving and depending on the regulation or rather the regulatory rules at a place at the time the cryptocurrency price could either be impacted positively or negatively, the market doesn't respond favourable to tight regulations infact when the regulation on cryptocurrency is unfavorable it usually affects cryptocurrency price making it depreciate rather rapidly.

So one way I believe we can properly manage risk in this market is depending on the jurisdiction we find ourselves know what is their regulatory framework regarding cryptocurrency, if it's favourable then it would be wise to invest but if it's unfavorable then the investment comes with great risk as cryptocurrency price are impacted negatively with a tight regulations so it's left for us to think if it's a risk we are willing to shoulder, personally for me it's best to leave an asset that is under tight legal scrutiny that is a proper risk mitigation strategy.

Try Avoiding Investments That Are High Risk

Every day new projects keeps coming out, rolling out in tens hundreds and thousands even more scams than good project so it's especially important to take care and note the kind of project we are putting our money as some project are mere scams and the teams are only there for their own selfish interesting and and do not care about the community hence investing in such project carries great risk.

This calls for research on our part, some project here are merely highly speculative, unproven and scams at best and no good will come from investing in it much like attracting great risk to ourself for no just cause, so proper risk mitigation or management calls for watching out for this high risk project and avoiding them because most times in our attempt to play smart we get burnt at the end of the day and end up losing our funds.

Proper risk management calls for avoiding cryptocurrency asset that carries great risk without real value and whose price is based on pure speculation, avoid them for your own safety and peace of mind.

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Try To Consider Holding For Long-term

For many who come into the cryptocurrency space they come here with the wrong mindset and some sees cryptocurrency as a quick to get rich scheme, they view it as a ponzi scheme something that will make them rich overnight so they plan to put their money today and tomorrow take it out, investing with the mindset of getting rich overnight.

Now that mindset is wrong and won't get one far here in the cryptocurrency business, infact it's a wrong business move here because cryptocurrency is volatile and we may not be sure of how event may play out in the short term we want to invest in and leave but one thing is sure that investing with a long term mindset ensures that one is profitable overtime certainly especially if one is invested in good project and hold for a long period of time they are able to make good returns and good risk management strategy and a fine way to mitigate the risk associated with this volatile market.

So yest long term mindset is the way to go and it's a strategy that surely plays out well in the long run if you invested in good project like Bitcoin or Ethereum for example.

Use Stop-Loss Orders

This is surely the way to go, I still don't understand while some would not want to put stop-loss orders in their trades which exposes the trader to great risk in an event things turn against him.

Stop loss orders are important to protect you and your asset in bad market conditions and when our analysis fails which is bound to happen at a point no matter how good one is so this is a fine way to cutdown on our loss and preserve our capital so this is a fine risk mitigation strategy.

Stay Calm and Rational

At all times ensure you are not making decisions based on your emotions but rather decision should be based on logical and rational mind so as not to make silly mistakes because the market won't forgive and will deal with you accordingly so it's important to stay calm and rational at all times even though the market may want to drive one crazy sometimes don't panic😁

Emotional discipline is an important risk management strategy, it's a fine way to mitigate risk ifnot we end up destroying our financial health based on irrational and emotional decision.

Conclusion

I find these advise to be sound and logical and to a great extent for ardent readers who apply their hearts to it, then it is indeed a nice way of mitigating risk associated with investing in the cryptocurrency market.