For many weeks now, countries have been put on lockdown to combat the spread of the novel coronavirus, which causes fatal disease CoViD-19. With strict social distancing measures in place as well as other restrictions, markets across the globe have noted severe drops in stock value as investors were on a selling spree.
Even as these restrictions relaxed, experts still say that the full economic impact of the COVID-19 pandemic has yet to be determined. There is a recession in the making that will likely affect modern life. The new normal will definitely see new trends arise, but what does this current health situation hold for cryptocurrency markets?
It's difficult to tell since a vaccine for Coronavirus is still in the works. Until then, investors should know what to do in the midst of all this uncertainty.
1. Take heed of risks
Crypto investors may find opportunities in a high-volatility market, but as these opportunities grow, so does risk. During uncertain times, it is important to keep a level head and analyze the situation as much as you can.
Do not dive in because everyone's rushing to profit from whatever trend comes. That said, never let your impulses get the better of you. Stay on the sidelines and see how the market is going to perform in the long run.
2. Diversify your portfolio
The best way to insulate yourself from a possible devaluation of the crypto market is by diversifying your portfolio across BitCoin and Ethereum. This is an important strategy to consider so you can reduce your risk profile and ensure steady returns when things aren't looking up for one asset class.
That said, you might want to diversify your portfolio by allocating capital equally across different cryptocurrencies to level out risks. You can also try investing in countries like Canada where buying cryptocurrencies is becoming easier. You can check out Crypto Head for a quick guide on how you can start buying Bitcoins in Canada.
3. Maintain liquidity
Crypto investors seem to believe that the cryptocurrency market will be insulated from a recession if it does happen. The truth is, cryptocurrencies are still backed by physical assets and investors may need to determine if it’s the best time to hold on to their assets. Some experts would agree that it’s best to stay liquid by holding on to other asset types such as hard currency and gold.
Indeed, the coronavirus pandemic is causing what appears to be a liquidity crunch as the Fed cut interest rates last March. This, in turn, sent crypto markets free-falling as traditional markets are taking a nosedive. So, the best advice you can get is to hold on to other assets and wait it out.
In the midst of uncertainty, the best we can do is to stay calm and wait for developments as they unfold. Cryptocurrencies are, after all, a relatively new thing and the Coronavirus is acting as a stress test on how stable the crypto market can be during an ongoing crisis.