Ethereum trading is one of the most challenging activities for traders considering the cryptocurrency’s high volatility. Therefore, whether you’re a beginner or a professional, it’s easy to be discouraged when extreme volatility periods hinder your trading strategies or become overconfident when your trading method is successful. The truth is that uncertainty rules the crypto sector, and if you’re not ready to face the risks of being a trader or an investor, it’s hard to keep up or yield consistent returns.
However, considering that you can buy Ethereum p2p or through debit and credit cards, it’s accessible for anyone to start investing. This year, along with the multiple updates Ethereum plans on applying to its ecosystem, the ether price is also expected to have promising results for investors. We’ll get into three strategies to ensure positive trading results in 2023.
Leaning patterns on what affects ETH price
Despite being volatile, some patterns have been observed in cryptocurrencies over time. For example, the bearish and bullish markets are indicators of the market going up or down, and some signs help users determine which strategy they should approach in due time. Learning what makes the eth price go a certain way can help you quickly adapt and choose whether to sell or hold your coins.
For example, the bearish market cycle tends to encourage investors to believe the prices will fall, while bullish ones are expected to increase costs. Therefore, you must act accordingly and not fall into the trap of FOMO, which is common among crypto users.
During a bullish market, it’s advisable to have a higher allocation of stocks as the opportunity for higher returns increases. This is when you should try buying stocks early on and selling them to make a profit. On the other hand, during a bearish market, the risks of loss increase, which means that investing should be done carefully and with preparation.
Of course, many other factors influence the price of cryptocurrencies. Although they’re not tied to official institutions, the crypto industry is somewhat influenced by the governments, which directly affect fiscal policies and interest rates.
Supply and demand might be the most influential factors of cryptocurrency prices because their price will immediately increase when coins are in demand. In contrast, if supply increases and exceeds demand, the prices will fall.
Anticipating the seasonality of cryptocurrency performance
Every year, experts analyze the crypto market and release statements on the months when specific cryptocurrencies will perform well or not. Ethereum is also included in these evaluations, the second most known and used digital currency. The best way to understand this topic is to look at historical data and analyze patterns to decide if you should develop a unique strategy during certain months of the year.
Traders believe the winter season is the most thriving and best time to invest. At the same time, the summer season seems to be the slowest and less productive period for the crypto market. Some factors influence seasonality, such as market sentiment and technological advancements that usually occur during the beginning of the year or towards the end. However, summer is usually a slower period for many other industries, which is something you might want to consider when starting to trade. In previous periods, it seems like Ethereum is at its peak during February, April and May, while it tends to perform poorly in September, June and March.
Some investors consider it necessary even the hour of the day of the week when it comes to productivity rates. Although this might be the case for day trading and swing trading, there’s not much evidence on the hour or the day of investment for providing stable income. Of course, it might be the perfect time to invest during special events. For example, during Twitter’s controversy, crypto prices were boosted, especially for Doge, the favorite coin of Elon Musk. These situations must also be considered essential for trading.
Relying on dollar-cost averaging is always a good idea
Dollar-cost-averaging (DCA) is a tested and research-backed strategy implemented by Benjamin Graham. The method involves investing smaller amounts of coins at specific intervals in an effort to minimize the consequences of volatility. For example, you could invest a certain amount of ether at each start of the month to get all highs and lows and smooth out price changes.
DCA is the best method for beginners who don’t have all the knowledge on investing. Of course, it’s best to learn more about the industry while trading cryptocurrencies, but this strategy doesn’t require conducting thorough research or analyzing statistical models. DCA ensures a stable foundation of a well-developed portfolio.
Diversifying your crypto portfolio means investing in different types of coins. Such as the following:
- Payment tokens, like Bitcoin and Ethereum;
- Security tokens, which are based on underlying security;
- Utility tokens that have a specific purpose within their blockchains;
- Governance tokens, such as Uniswap;
- Gaming tokens, such as Axie Infinity’s AXS;
- NFTs;
Of course, diversifying can be done at the next level, so you might want to focus on industries. For example, the healthcare sector, supply and chain and entertainment are the most common ecosystems where cryptocurrencies have been introduced for improvement. You can also develop your portfolio by asset class; you’ve got stocks, bonds and real estate as reliable options.
Diversifying allows you to lower price volatility, which can sometimes be the killer of your digital assets. At the same time, you’re able to rebalance your crypto holdings. However, there are possible tax consequences considering the increasing number of governments that issue taxes on cryptocurrencies. Moreover, this method requires research and is time-consuming, so you must devote a lot of your time to leading your investments to success.
Bottom line
Ethereum trading might be challenging, especially when the crypto market undergoes extensive volatility due to certain price influences. Although it’s best to stay low and invest for the long term, using some strategies and tips to maximize your return on investment is helpful.
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