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5 Ways to Handle a Crypto Crash

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The cryptocurrency market has been in decline over the past few weeks. Bitcoin (BTC), lost more than 30% since Nov. 10, when it was at its highest. Despite a sharp drop this weekend, Bitcoin is still up around 55% over the year. This volatility isn’t less nerve-wracking, especially for new investors of cryptocurrency.

You’re not the only one watching in horror as your cryptocurrency exchange account assets fall in value. These are some ways you can handle the crypto rollercoaster ride.


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1 . Keep a long-term perspective.

Investments in cryptocurrency are highly volatile. The chart for 2021 shows that there have been several price drops. The crypto price eventually rose after each dip and reached new highs.

Do not focus on the 24-hour charts. Instead, look at the year so far. Market cycles are bound to have ups and downs. However, they can be more severe for a relatively new investment like cryptocurrency. You can wait for the drops as long as you don’t invest money that you won’t need shortly.


2. Don’t panic-sell

It’s normal to feel the need to reduce your losses and sell your crypto assets when you see your investments fall in value. This can lead to you selling at a loss and not reaping the benefits of any recovery.

Let’s suppose that the Bitcoin price falls by 20%. You decide to sell your Bitcoin holdings. What happens if Bitcoin suddenly rises in value? You may not want to purchase it back after losing 20% of your investment.

It is impossible to predict the prices soon. They could continue to fall but also rise quickly. Trust your investment thesis and original research. Be confident in the value of your cryptocurrency investments over the long term.


3. Buy the dip

Although people talk a lot about selling highs and buying lows, it is almost impossible to time the market accurately. The Ascent recommends a long-term investment strategy. If you only purchase assets that you believe will perform well over the next five to 10 years, you can reduce your risk of short-term price fluctuations.

You may be able to get more of your favorite tokens for a lower price during significant dips. You may have permits you’ve been keeping an eye on for a while and are now waiting to purchase them. You may also want to buy more tokens you already own if you believe they have strong long-term prospects.

Don’t let panic buying get you down. It’s not good to buy an asset you haven’t researched or don’t want just because it’s cheap. It’s not wise to spend money that you don’t need (or borrow money) to purchase the dip. The risks associated with crypto investments are still high, and there are many unknowns, especially since the possibility of regulation increases. It is possible to try to buy the dip, only to see the prices drop further.


4. Learn why the market is declining

Understanding why prices are falling is a wise idea if it affects your investment plan. If you still believe your investment reason is valid, the above points will hold. If something is fundamentally different, such as a security breach or a lack of trust in a project, it’s a different story.

Let’s take, for example, the case where you purchased a cryptocurrency because of your belief that the underlying Blockchain technology can revolutionize a particular industry. Rumors that quantum computing has rendered obsolete technology cause the price to drop. These rumors could be true, and it may be time to reconsider your investment. Your rationale might not hold water.

There are two main reasons why the market plunged in the wake of the crash. Investors retreated from riskier assets due to fear about the new omicron COVID version. The Fed has warned that it could raise interest rates, and there are still concerns about stricter regulation.


5. Crypto should not be a large part of your overall portfolio.

These sudden drops in price remind us that cryptocurrency investment can be hazardous. It can be easy to make money when prices rise. However, any investment requires time and effort. Prices don’t always rise.

A small amount of your portfolio should be invested in crypto to reduce the risk. There are many safer investment options. You can balance your risk exposure by investing in stocks, ETFs, and real estate. Even if the current dip starts a more significant crash, financial ruin won’t occur.


Bottom line

This type of investment is not without risk. Cryptocurrency crashes are a part of the deal. It is best to wait for prices to rebound if this is your first dip. You may decide crypto investing is too stressful. Don’t rush to make decisions. Before you sell, give yourself and the market some time to recover.


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