You are never at a loss, until you withdraw
Published: 20. 09. 2021 ·
The cryptocurrency market has a lot of growth potential, but with growth potential comes volatility, and the crypto market can experience frequent fluctuations. Although the market may sometimes fall rapidly, many experts concur on the fact, that the market should still experience substantial growth in the future. If you are a novice cryptocurrency investor experiencing a falling market for the first time, it may seem that your investment is at a loss, when in all actuality, loss is only determined by your reaction to the market's fluctuation.
Invest rather than speculate
Cryptocurrency investments behave in the same way as any other investment. All markets rise and fall, and the cryptocurrency market is no different. Where the cryptocurrency market differs is the size, time and rapidity of these fluctuations. The cryptocurrency market is volatile, which can be potentially nerve-wracking for novice investors, when it is infact exactly these fluctuations that give investors the opportunity to expand their investment portfolio.
We recommend that investors focus on long-term investing and not day-to-day speculation, with a get-rich-quick mentality. Day trading is incredibly risky, because at a small enough time-frame, predicting the market's next move is virtually impossible. On the other hand, the longterm growth of a market is much easier to predict. It generally holds true that the longer a person holds an active investment, the higher is the chance of profiting off of said investment. The fact that the cryptocurrency market is likely to grow exponentially in the longterm is exactly the pillar that all of our Fumbi products are built on.
With crypto, a loss is not a loss
When you invest your funds into cryptocurrencies, and the cryptocurrency market falls, some could interpret this as losing your invested money. This however, is not actually true, and you do not lose money until the very moment when you sell your cryptocurrencies at an inopportune time. Although fluctuations in the cryptocurrency market are not the most pleasant experience, longterm investors are aware that the market rises and falls naturally, with the cryptocurrency market being a prime example. Keeping your cryptocurrencies as the market falls is the only way for your portfolio to profit off of a resurgence in the market later on.
A resurgence in the market can easily return investments back to profitability, often experiencing even more profit than before. In stark contrast, if one sold their cryptocurrencies during a fall in the market, one cannot hope to capitalise on the market's resurgence. You are not at a loss during a fall in the market, as it may seem at first - until you sell your crypto.
Buying bitcoin today does not necessarily mean, that you will experience a profit next month. Be it a month, or half a year, you may well find yourself at a loss, without violating the prediction of longterm cryptocurrency market growth. It is important to remember that a rocky road is to be expected when investing, especially in a market that is expected to grow a hundred-fold in the span of a few years.
What to do, when the market is in the red?
A better strategy than dumping your coins is rebalancing a portfolio to reflect the environment of the market as well as any predictions, and thus keeping the required combination of cryptocurrencies to keep your portfolio well diversified.
For example, you started with an initial deposit of 1 000 €, and due to fluctuations in the market you find your investment's worth to be 500 €. You are at an unrealised loss of 50%, how do you proceed?
If you do not sell your crypto, and the market experiences a growth of a 100%, the value of your portfolio would be back to the worth of your initial investment, a 1000 €.
Lets say that during this fall in the market, you invested an additional 1000 € to your 500 € portfolio, making the value of your portfolio a total of 1500€. As in the previous example, the market grows by 100%, and your portfolio now totals 3000 €. After subtracting your deposits totalling 2000 € you gain a clean profit of 1000 €.
If, after a fall of the market by 50%, you sold all your cryptocurrencies, you would forego the chance of profitting from market resurgence later on.
This is exactly why it can actually be profitable,to invest even if a market is currently falling.
Fumbi makes investing into crypto simple, easy and hassle-free
If you are thinking of investing into crypto, Fumbi is here for you. Investing with Fumbi is safe, simple and straightforward.
The Fumbi Index Portfolio tracks crypto's market cap, and is daily rebalanced by our own intelligent Fumbi Algorithm. The algorithm closely mirrors the growth of the entire market, and does not rely on the individual cryptocurrencies.
For the pickier clients we offer Fumbi Custom, whoch gives you the ability to pick and choose what cryptocurrencies you hold. You are free to choose exactly how much, and into what crypto you invest. Fumbi Custom currently supports Bitcoin, Ethereum, PolkaDot and Cardano.
For maximum safety, we exclusive use Ledger Vault to store crypto, which is one of the safest and most trusted ways to store cryptocurrencies world-wide. Additionally, we are the only investment platform to routinely undergo independent audits of our wallets.