How to avoid volatility and focus on investing in cryptocurrency

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How to avoid volatility and focus on investing in cryptocurrency

Investing in the ever-evolving digital assets market can be a challenging decision. People were typically hesitant to invest in digital assets - namely cryptocurrency - because of their inherent volatility and associated risk. However, the tides are changing, particularly as the global cryptocurrency market has grown into athriving multi-sector ecosystem since bitcoin's debut in 2009.

However, the term 'volatility' often comes with a negative connotation, which is not always the case. Investors can experience swings up or down, remember that there's also upside potential, too.

Bitcoin has been a best-performing asset of the decade, yet its price is heavily influenced by factors like supply and demand, investor sentiment, and the media hype cycle. Even the most well-known and well-respected cryptocurrency experiences fluctuations, resulting in positive returns and, at times, losses.

When investing portfolios are constructed in a professional manner, volatility can be a portfolio enhancement rather than a disadvantage. The consultants have the expertise to assist by setting frequent rebalancings and buying and selling orders at certain thresholds. We've seen this play out time and time as the adoption curve for digital assets has steepened over the years.

Investors should aim for a balanced portfolio, meaning one that is not dominated by a certain asset class. To avoid concentration risk, using alternatives to a portfolio can not only help reduce inflationary conditions but also hedge against inflationary conditions.

In investment portfolios, a 2% allocation to digital assets is often performed within an investment portfolio. To some, that may seem an insignificant percentage. However, in practice, that often means the downside risk is minimized and the potential upside is tremendous, as a 2% bitcoin allocation would have driven a significant share of the portfolio's growth over the last five years.

An allocation that small - regardless of how powerful it can be - shouldn't take up the vast majority of an investor's time or energy. Financial advisors can assist in ensuring portfolio construction is purposeful, rather than ad hoc. Advisers take on management responsibility by keeping an eye on market conditions and recommending a rebalance schedule that works for the individual investor and their specific financial objectives.

Investors who are risk-averse may have access to the digital assets industry without realizing it, according to some risk-averse investors. In addition to established, highly regarded brands that are historically slower to embrace disruptive technologies, it also includes established, highly regarded brands. Visa, a global payment giant, recently announced an extensive expansion of its stablecoin settlement capabilities, becoming one of the first major payment institutions to do so.

Although the industry is still new, the potential use cases are vast. The investment opportunity is exciting - despite volatility and risk.