Smart strategies, risk management, and the role of margin mode
The cryptocurrency market is known for its high potential for appreciation, but also for extreme volatility. Drops of 20%, 30%, or even more can occur within just a few days—or hours. For investors aiming to survive in the long term, protection is just as important as profitability.
In this article, you'll learn how to protect yourself during downturns, which strategies can reduce risks, and how margin mode can be used as a protective tool when applied with discipline and knowledge.
The nature of downturns in the crypto market
Unlike traditional markets, cryptocurrencies:
Do not have circuit breakers
Operate 24/7
Are highly sensitive to news, liquidity, and market cycles
This makes rapid drops normal, not exceptions. The mistake of most investors is trying to predict the bottom, when the focus should be on controlling risk.
Classic protection strategies during downturns
1. Risk management and position sizing
Never be 100% allocated to a single asset or strategy.
Distribute capital among:
Bitcoin
Selected altcoins
Stablecoins (opportunity reserve)
This reduces the emotional and financial impact of downturns.
2. Conscious use of stop loss
Stops should not be random. They need to respect:
Market structure
Relevant supports
Asset volatility
Very short stops generate overtrading; nonexistent stops generate large losses.
3. Having cash (stablecoins) is protection
Liquidity is power.
Keeping part of the capital in stablecoins allows:
Taking advantage of downturns with strategy
Reducing exposure in times of uncertainty
Avoid selling assets in desperation
Margin mode as a protection tool (not speculation)
The margin mode is often associated with excessive risk, but when well used, it can act as a hedge (protection) instrument.
What is trading in margin mode?
In margin mode, the investor uses borrowed capital from the broker to:
Expand positions
Short selling
Protect existing positions
The key point lies in the operation's objective.
How to use margin to protect against downturns
1. Portfolio hedge
If you have a spot portfolio (bought) in Bitcoin or altcoins, you can use margin mode to:
Open a short position
Offset losses from the spot portfolio during the downturn
Simplified example:
Spot portfolio drops 10%
Short on margin rises 10%
➡️ The total impact is partially or totally neutralized
2. Reducing portfolio volatility
Hedging with margin helps to:
Reduce extreme fluctuations
Protect wealth during correction periods
Buy time for strategic decisions
It is not about earning more, but losing less.
3. Use of low leverage
Protection does not go well with high leverage.
Good practices:
Low leverage (1x to 3x)
Isolated margin (to limit risk)
Well-defined stops
The lower the leverage, the lower the liquidation risk.
Attention: margin requires discipline
Margin mode is not recommended for unprepared beginners.
The main mistakes are:
Using high leverage
Trading without a stop
Confusing hedge with directional betting
Leaving a position open without monitoring
Poorly used margin amplifies losses. Well used, it protects wealth.
Conclusion
Downturns are part of the cryptocurrency market. The investor who survives and grows in the long run is one who understands that protection comes before profit.
Strategies such as:
Risk management
Diversification
Maintaining liquidity
Intelligent use of margin mode
do not eliminate risk, but transform the investor from a hostage of volatility into a manager of their own capital.
In the crypto market, it is not the one who always hits the top and bottom that wins, but the one who stays in the game.
