Struggling With Crypto Volatility? Do These 3 Things Right Now.

Key Points

• Volatility is a fact of life in crypto.

• There is a good solution available for some of the problems that volatility poses.

• Adjusting your expectations is helpful too.

• 10 stocks we like better than Bitcoin ›

As your time horizon for an investment gets shorter, your stress level nearly always increases. Cryptocurrency investments aggravate that dynamic a lot more than most assets thanks to their chronically high volatility.

So if the past few weeks in the crypto sector had you checking Bitcoin (CRYPTO: BTC), Solana (CRYPTO: SOL), or Ethereum (CRYPTO: ETH) prices five times before lunch, it's a sign that your investing process needs some adjusting, if only to preserve your sanity. With that in mind, here are three moves you can make today to feel calmer tomorrow while still giving yourself a fair shot at long-term upside in key crypto assets.

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1. Look at the multiyear charts

Everyone gets a thrill out of seeing their investments up on the day, or potentially, on the hour.

But focusing on short windows magnifies noise and often muffles the underlying investment thesis that had you buying the asset in the first place. Using longer timeframes on your charts, like the three-year or five-year views, forces you to evaluate whether the asset is compounding value or whether it's just spiking due to a couple of headlines that live larger in your head than in your portfolio.

For Bitcoin specifically, the five-year view captures the impact of multiple macro regimes and still lets you see the asset's longer-term trend, even if it's punctuated by sharp declines. That's a better reflection of its utility to your wealth-building efforts than any given week's drama.

For Ethereum and Solana, longer windows remind you that platform demand tends to arrive in waves as new applications find product-market fit. Experiencing the weekly chop is the cost of admission, but getting exposure to the multiyear adoption curve is the point.

2. Recalibrate what normal crypto volatility looks like

Large-cap cryptos frequently see daily moves that would be extraordinary in blue chip stocks. On any given day, it is common to see Solana or Ethereum up or down by mid-single to low double-digit percentages. Bitcoin, while significantly less volatile with an intraday swing of about 1% during the past 60 days ended Sept. 29, is still prone to bigger moves than many major stocks. In the bull market of 2021, for instance, daily swings on the order of 5.5% were the norm.

This means that the more sensitive you are to seeing your portfolio's value jump around, the more difficult it will be for you to hold crypto and not lose sleep -- at least until you can mentally reframe such price swings as normal.

In practice, you should resolve in advance that a 10% intraday move in Ethereum or Solana is not an emergency. The same goes for smaller swings with Bitcoin. The point is not to try to believe that a large intraday percentage decline is a good thing, because it isn't. The point is to adjust your expectations to be more realistic given the asset class you're investing in, letting you focus on the trends that matter most over the long term.

3. Automate your discipline

If you make a large lump sum investment in a coin on a day when it's up by 10%, it is written indelibly in the book of fate that your investment will lose value the next day, leaving you underwater and in dismay. At the same time, when you buy a deep dip in one of your high-conviction cryptocurrencies, that same book of fate dictates that the asset will continue to fall even more in the days after your purchase.

Sure, I'm exaggerating a little bit here because there's no law of the universe that actually guarantees such outcomes, but this is just how these things tend to work. Trying to time the market is a highly reliable way to experience financial punishment. So don't try to do it.

Dollar-cost averaging (DCA) means investing a fixed dollar amount at regular intervals, regardless of price, and it's the ultimate defense against volatility in cryptocurrencies as well as in other asset classes. By automating your purchasing process and spreading out your buying over time, the price on any given day matters very little because it's the direction of the trend that will ensure that you get a profitable return (assuming there's one to get, which there isn't in many cryptos).

Behaviorally, DCA especially shines in volatile assets like crypto because it automates buying when prices are temporarily lower and throttles back buying when prices are temporarily higher. It helps investors stick with their plan when anxiety is the real enemy.

There is a trade-off to be aware of. Historically, lump-sum investing has outperformed DCA a majority of the time because markets tend to rise over time.

But only DCAing reduces the regret and timing risk, which is often the difference between staying the course and capitulating at a loss -- lump sums offer no safety for the hazardous emotional experience of holding your investment during days of disappointment.

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Alex Carchidi has positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Solana. The Motley Fool has a disclosure policy.