Long-term crypto investors become extremely frustrated when prices remain within a tight range for a long period. During that time, many choose to sit on the fence and monitor the markets for potential breakouts. However, there are numerous strategies long-term investors can apply to continue earning from crypto amid price stagnation.
Stick around! We will discuss these strategies in this guide.
Defining Price Stagnation in Crypto
Simply put, price stagnation is a period when crypto prices make minimal movements for weeks or even months. It usually indicates a balance between market players (buyers and sellers) resulting from market uncertainty.
Although the price stagnation period offers limited profit-making opportunities, you can still make money if you apply the following strategies properly.
Range Trading
As mentioned, cryptocurrencies trade within tight ranges during price stagnation. You can make money by engaging in range trading, where you buy at support areas and sell at resistance points within a particular range.
While this strategy doesn’t require extensive experience in using technical indicators, you must know how to carry out proper technical analysis. To do this, identify the trading range of a particular crypto asset and draw trend lines. The lower trend line should touch support levels, while the upper one should mark resistance levels.
After that, open sell orders when the price hits resistance points and buy when the price touches support areas.
It is worth mentioning that the range trading strategy carries risks. Therefore, applying effective risk management is advised.
Using Grid Trading Bots
Do emotions play a part in your decision-making? If so, you can use grid trading bots, which open trades at predefined prices automatically. Before defining your buy and sell points in a grid bot, you must identify a trading range of the traded cryptocurrency.
While grid trading bots do not guarantee profits, they ensure you don’t miss any profitable opportunities by executing trades 24/7.
Earning Through Yield Farming
Several decentralized finance (DeFi) protocols offer crypto users ways to earn money passively. For instance, there are platforms that provide interest-bearing savings for users to receive an annual yield on their deposits, which typically ranges between 4% and 9%.
So, instead of your Bitcoin lying idle in a wallet, you can look for reliable protocols that let users deposit their crypto in exchange for yield.
Lending Your Crypto
Did you know you can lend your digital currency to other crypto users and earn interest? Protocols like Cake DeFi, Compound, and Aave have made this possible. However, before participating in crypto lending, familiarize yourself with the risks involved. For example, considering most lending platforms are unregulated, you could lose money if their developers run away.
Investing in Shares of Crypto-Focused Companies or ETFs
You don’t have to hold a digital currency to profit from the crypto markets. Instead, you can buy shares of companies involved in the blockchain space. Also, consider purchasing shares of crypto-related exchange-traded funds. This is an ideal investment method, especially for traditional investors who do not want to be responsible for keeping cryptocurrencies.
Arbitrage Trading
Are you struggling with conducting a proper technical analysis? Then, consider arbitrage trading, which involves acquiring a crypto asset from one exchange at a lower price and quickly selling it at a higher price on another platform.
While this type of trading is considered low risk, it does have its challenges. For example, the gas fees can be higher than the potential profits, thus putting you at a loss.
Final Thoughts
You now understand the various ways to make money during the price stagnation period. However, before using any of the mentioned strategies, consider your risk tolerance and invest money that you are willing to lose.
Furthermore, if you want to engage in range trading, we recommend using exchanges that support demo trading, which allows you to test your strategy risk-free. Binance and BingX are two popular exchanges with a demo trading feature.
