Having liquidity is key in a volatile market like that of cryptocurrencies.
1. Quick action in moments of opportunity: Having liquidity allows you to act quickly when the market presents an opportunity, such as a price drop to buy at the low.
If you are fully invested, you will not be able to react efficiently because you would need to sell assets to obtain cash.
2. Risk mitigation: In highly volatile markets, liquidity provides a cushion in times of uncertainty.
The possibility of having available funds allows you to protect your portfolio during sharp declines without having to sell assets at unfavorable prices.
3. Flexibility in the face of unforeseen events: Cryptocurrencies can be affected by unexpected events (such as regulatory changes, hacks, or technological issues).
Liquidity offers the ability to react to these risks without losing value by being fully invested.
4. Not missing opportunities: If the market shows a recovery or an upward trend, having liquidity gives you the advantage of investing at the right moment, without having to wait to sell previously held assets.
This also gives you flexibility in a rapidly changing market.
Being fully invested can be more beneficial in the long run.
1. Long-term profitability: Being fully invested gives you the opportunity to benefit from a prolonged upward trend.
In the case of cryptocurrencies, if you believe in their long-term potential, having your money invested can generate greater returns than keeping it in liquidity without earning interest.
2. The opportunity cost of liquidity: Having cash or liquid assets could be losing value due to inflation or the opportunity cost of not being invested in high-yield projects.
In many cases, especially with high-potential cryptocurrencies, the value of being invested outweighs the benefit of having liquidity.
3. Less uncertainty about the entry timing: If you are fully invested, you do not have to worry about the 'perfect timing' to buy.
The cryptocurrency market is unpredictable, and it is difficult to identify the exact point to enter or exit without falling into analysis paralysis.
4. Diversification within investment: Even if you are fully invested, you can diversify your assets within the cryptocurrency market to mitigate risks.
This allows you to take advantage of growth without having to maintain liquidity in your portfolio.
How much capital should one keep in liquidity in a market like cryptocurrencies?
How to balance the safety of liquidity with the need for long-term growth?
Is it riskier to be fully invested, knowing how unpredictable the market can be?
How to manage the anxiety of missing opportunities when maintaining liquidity instead of being fully invested?
This is a debate that many investors have to face in markets as volatile as cryptocurrencies.
What is your stance on the issue?
