about 1 year ago • 1 min
It’s been a painful year in crypto. But those who bought in at the start of the third quarter might be feeling a bit better now – depending on which investments they bought into.
The chart compares the returns of different digital assets for the second half of this year. Bitcoin (black) is down around 15%, while the Total Crypto Market index (gray) is down about 10%. But some other projects are in much better shape, and are showing relative strength in a down market: Uniswap’s decentralized exchange token UNI (yellow) is up 15%, ether (green) is up 18%, and Binance’s BNB (red) is up 36%. And while those are decent returns over a five-month period, Dogecoin (orange) and Polygon’s MATIC (blue) are miles ahead, clocking up about 58% and 80%, respectively.
Playing relative strength is a strategy used by momentum investors. The basic idea is to buy investments that are performing better than the general market over a period of time. The strategy works on two assumptions: first, investments that are beating the rest of the market are beating them for a reason, and they’ll keep beating them for a while. And second, it’s better to buy assets that are trending up than ones that are trending down. In other words, it aims to buy high and sell higher, instead of buying low and selling lower.
Still, if you’re going to try picking the strongest runners in crypto, you’ll want a few on your team in case any of them runs out of steam. It’s a marathon, not a sprint, after all, and diversification usually wins the race.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.