Reduction is a term used in cryptocurrency that describes the process of reducing an amount of coins or tokens held by a particular investor. The reduction can be done in two ways: through selling and trading, or through burning.
Selling and trading involves exchanging one form of crypto for another, such as Bitcoin (BTC) for Ethereum (ETH). This reduces the total supply of coins owned by investors who use this method to reduce their holdings.
Burning is the process of permanently destroying a certain percentage of coins from circulation. This is typically done when companies hold ICOs and want to ensure that there will only ever be a finite number available on the market. By burning some tokens, they are able to increase demand for those that remain by making them more valuable due to scarcity. Some projects also use burning to reward long-term holders with additional rewards over time as an incentive not to sell off their holdings too quickly or too cheaply.
Reducing your holdings via either selling/trading or burning can help you manage risk while keeping your portfolio diversified across different types of crypto assets; however, it’s important to remember that these techniques should never replace sound financial planning advice based on individual circumstances – always seek professional guidance if you’re unsure about any decisions related to your investments!
