How to Take Advantage of Volatility in the Markets

Dollar-cost averaging, diversifying, and staying liquid can all help to maximize returns and reduce risks in the crazy crypto markets.

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Source: sHUTTERSTOCK

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key takeaways

  • Some investors dislike volatility so much that they refuse to even enter the markets
  • There are ways to take advantage of price variance without trying to time the market, but it is a losing proposition for most who do try

Traders love volatility. Wild price swings provide opportunities for profit. Other than using advanced options trading strategies, there’s no way to make money in sideways markets.

Investors, on the other hand, might feel differently. Volatility can be a leading cause of panic selling. Some investors dislike volatility so much that they refuse to even enter the markets.

But there are ways to take advantage of price variance without trying to time the market, which is a losing proposition for most who do try.   

Dollar-cost averaging

Sometimes the best way to take advantage of volatility is not to deal with it at all.

For those who average-in to the investments of their choice, volatility becomes a non-issue. If prices go down, great. Your next buy order will purchase more shares or coins. If prices go up, that’s fine, too! Your dollar cost will be the same, you just won’t get any more shares or coins.

Vauld’s automated investment programs (AIPs) make it easy for investors to average-in to the asset of their choice. The buy-the-dip feature makes it possible to average-in at the most favorable price levels, ensuring that the average buy price will be a lower one.

Diversification

Diversifying also provides protection from the potential ravages of volatility. The goal of a well-diversified portfolio is to have a variety of assets that aim to balance each other out. If certain sectors are underperforming, others should be outperforming — or at least remaining stable.

Not only has Vauld made it easier for people to choose how to invest in crypto — they’ve also made it easier to decide what crypto assets to invest in. In fact, Vauld users don’t have to make a specific choice if they don’t want to. They can select one of several structured products that provide exposure to specific crypto categories instead. CEO and co-founder of Vauld, Darshan Bathija explains:

“Say you’re bullish on a certain industry in the crypto space. Folks have to do research on which project will be the winner in a space and allocate capital accordingly. We’ve removed that aspect by creating baskets of tokens based on what the token does. We have a DeFi category, an AMM exposure category, centralized exchange pool, governance tokens of NFTs, governance tokens of DeFi, and so on. Depending on what aspect of crypto you’re bullish on, you can just average into the space [of your choice].”

Forget about waiting for bitcoin or crypto exchange-traded funds (ETFs) to be listed on stock exchanges. Similar investment vehicles have already been created. And these products have been established by people who know crypto.

Maintaining liquidity

While dollar-cost averaging is great, it never hurts to have some extra cash on the side (or dry powder, as traders like to call it), ready to scoop up assets on the cheap in the event of a crash. Of course, this requires liquidity. If all your money is tied up in investments, you can’t make moves in the market without selling something first.

Oftentimes, investors lock up money with the intention of making more money, i.e., earning a yield. Vauld users have the luxury of earning a yield on crypto deposits while still staying liquid. As opposed to some platforms that require lockups for interest earners, on Vauld such lockups are optional.

Taking advantage of asymmetric upside

It’s often said that there’s an “asymmetric upside” to bitcoin and cryptocurrencies. Even a small allocation could lead to outsized gains with minimal risk if past and current trends were to continue. More and more investors, both individual and institutional, have begun to realize this.

The tools provided by Vauld make it easier for investors to gain exposure to the large potential upside in crypto while minimizing the risks stemming from massive volatility. Dollar-cost averaging, diversifying, and staying liquid can all help to maximize returns and reduce risks in the crazy crypto markets.

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