Dear ICONFi users,
In April 2021 Bitcoin’s price peaked at an all-time-high of just under US$65,000. After two months of trading between US$30,000 and US$40,000, Bitcoin (BTC) fell below US$30,000 for the first time since January 2021. With prices down as much as 54% since its peak, investors and analysts are referring to this downturn as a bear market cycle.
No individual or organization can accurately predict the price movements of BTC and the crypto market. What we can control is how we allocate our investment portfolios in an attempt and growing the size of the pie.
Let’s examine some investment strategies for dealing with volatile price movements.
Day trading is a high-risk strategy that can be highly lucrative. The issue is that most traders underperform the market, despite what you may hear from ‘trading experts’ online.
The following statistics demonstrate the underperformance of day traders1:
· Nearly 40% of traders quit within a month;
· 80% of day traders quit within two years;
· Only 13% continue to day trade after three years, 7% after five years;
· Average individual traders underperform a market index by 1.50% annually, active traders underperform by 6.50% annually;
· Traders with up to ten years of negative performance continue to trade.
The key takeaway is that most day traders are paying money to throw away their time. They would be better off parking their wealth elsewhere and investing time into more productive activities.
Crypto veterans are often immune to the mental and emotional effects of price fluctuations. Newer investors who are yet to experience downward price movements may be shaken.
If you are in it for the long haul, price fluctuations should have no effect on your investment strategy. It may be helpful to remember your original investment hypotheses and HODL.
Price goes up, wealth grows. Price falls, wealth shrinks.
Bearish investors may choose to place their funds in a stablecoin like USDT or USDC. This allows investors to avoid the fees and inconvenience of converting crypto into fiat. Bullish investors can move their funds to other digital assets to gain exposure to price movements.
HODL and Grow
HODLing is a great strategy, but portfolio value is dependent solely on asset price volatility. Through passive investment, HODLers can increase the quantity of their digital asset holdings. Regardless of digital asset pricing, investors can see their portfolios grow.
ICONFi empowers investors to earn up to 12% APR on their BTC, ETH, USDT and USDC.
Investors have the option of maintaining liquidity by placing their funds in a Flexible Earn account. ICONFi’s Flexible Earn has no restrictions on withdrawals, so investors can earn up to 3.5% and pull out their funds at any time. For longer-term HODLers, a Fixed Earn account empowers you to supercharge your earnings by locking your deposits for up to 180 days.
Let’s examine how this would impact your portfolio with BTC. For this example, we will assume a starting portfolio of 10 BTC and a holding period of one year.
By HODLing 10 BTC for a one-year period, the final BTC value of the portfolio remains at 10 BTC. The final portfolio US$ value is calculated by multiplying 10 BTC by the BTC:US$ rate.
With ICONFi, users can earn up to 8% APR on BTC Fixed Earn accounts. Because we compound interest SIX times daily, the final BTC holdings grows at a rate higher than 8%. That means that after a one-year period, the same investor would have 10.833 (rounded to three decimals) BTC instead of 10 BTC. This final US$ value of this portfolio would still be subject to the BTC:US$ rate, but the size of BTC holdings will be larger.
Alternatively, investors may opt for a USDT or USDC account to reduce their exposure to price volatility. Let’s assume a starting portfolio of 100,000 USDT and a holding period of one year.
By HODLing 100,000 USDT for a one-year period, the final USDT value would remain at 100,000 USDT. This investor would experience no portfolio growth, but they would not be exposed to the price volatility of other digital assets.
With an ICONFi USDT Fixed Earn account, one could earn 11% APR, compounded once every four hours. After a one-year period, the same investor would hold 111,627 USDT. That is 11,627 USDT more than simply HODLing.
Investors have several options for dealing with price volatility. Options like day trading are risky and not profitable for most investors. HODLing is a classic strategy that works well for long-term investors who are bullish on digital asset pricing. For investors who are looking to earn more digital assets with flexibility on term and asset type, an ICONFi Earn account may be right for you.
ICONFi is a digital asset savings platform that provides simple & intuitive earn products so that anyone can easily multiply crypto assets. ICONFi aims to simplify the complicated processes often associated with crypto assets and offers a sleek, straightforward user interface which supports saving, staking and airdrop activities at the palm of your hand.