If there’s ever a pattern that we can determine about cryptos from the way Bitcoin has risen and fallen over the many years it’s been around, is that after a huge pump there’s an even bigger crypto crash. And do you know why? That’s right, nobody knows why. I invest in the stock market so I’m not a crypto expert but if we were to imagine all cryptos as hyper-inflated penny stocks, then in my opinion it’s probably because there’s a big sell-off happening.
Investing is usually a long-term activity that rings very true for the stock market, especially if you want to build real wealth over years. The crypto market is different since it’s so volatile, it’s very tempting to get in and get out just as fast. But during this crash, there are 4 things you need to do and that’s – buy, hodl, earn passively and just have patience.
In this post, we’ll look at 4 things you should do as the crypto market crashes to protect yourself from huge losses. We’ll also explore where the price of coins such as Bitcoin could go on the next bull run and whether or not you should get out while you’re ahead.
Buy, Buy , Buy
It might be logical to sell to cut your losses or if you’re still in profit from buying early or via dollar cost averaging your way into buying cryptos but that’s completely the wrong way to go especially since we’ve seen crypto crashes before, only for it to return even stronger.
The best time to buy is when prices are crashing because this is when the prices will be at their lowest point and if you buy using the dollar-cost averaging method – which is to buy the same amount, at the same time, every month no matter if the price is high or if the price is low – then you’ll never pay the highest price as your average cost will be much lower. For example, if you buy 1 bitcoin at $30,000 and then you buy another coin at $20,000, the average cost per coin is not the highest value. It’s $25,000 per coin.
The drawback, however, is that you’ll also never pay the lowest price which in the above example is $20,000. You can start buying cryptos using my Coinbase referral link. It’s a great platform for beginners as it’s very easy to use and get started with. You (and me) will also get a small amount of Bitcoin as a reward once you buy $100 worth of cryptos.
Complimentary Reading: How To Buy Cryptocurrency: A Guide For Beginners
As well as buying more, it’s essential to hold onto the cryptos you already have. The reason for this is because if decide to sell now you’ll probably sell for a loss or when you decide to buy cryptos again after the crypto crash, you might end up buying the same coins for money than you originally bought them for. That means less profit even if you do still make a profit.
Holding onto the coins you’ve already got in your wallet and then adding to them will only increase the amount you have once you buy more. When I first started trading cryptos, I treated it as if I was day trading and made the mistake of sell rather than holding. I learned that more profit is achievable if only I held onto my original investment.
A coin you should watch out for that I’ve written about is Cardano ADA. Read this post to find out why.
Earn passive crypto income
I use to simply hold onto my coins but although holding is better than selling you can actually earn from the coins that you’ve already got by staking them. Staking means that you give the network permission to use your coins to act as a validating node for the network.
Most platforms will allow you to stake your coins and in return, you’ll receive a small percentage back in cryptos. For example, I staked 300 Cardano ADA on Binance for a period of 60 days and by the end of the staking period, I had approximately 4 more Cardano’s which I then staked again. And I didn’t have to do anything so it was passive income.
The crypto market is very volatile, so it usually flows in an up and down motion regularly. A lot of the time, it’s dictated by the trends set by the most popular coins e.g. if Bitcoin declines we’ll often see other coins such as Ethereum, Litecoin, etc also decline. And we’ve seen both bear and bull markets trends i.e. by the end of 2020 in December and January 2021, Bitcoin broke all records by reaching a new all-time, but right now, most cryptos are declining, indicating that a crypto crash is either coming or already here. The price of Bitcoin has now fallen more than 30% which is huge from over $50,000 to just over $20,000 per coin.
The key is to have patience. As with the stock market, a little secret that I’ve learned is that the market always recovers however in the case of cryptocurrency, the market won’t recover but it’ll go on a massive bull run which could last a while (the last bull run lasted between Dec 2020 to May 2021 which is 6 months) and then the next time could be when Bitcoin breaks another record.
That could be when to sell. Or should you keep on holding? It depends on who you believe as to what price cryptos such as Bitcoin and Ethereum can reach. I’ve read some crazy amounts such as $500,000 per coin which I believe is unlikely. But – full disclosure – I’m holding just in case.
Recommended Reading: How To Read Stock Charts For Beginners
The crypto market has been unpredictable over the years but as it starts to settle into a pattern, it’s easy to tell to a crypto crash is coming. How low will it go? nobody knows but will it recover? Yes, most likely. And this process will probably repeat itself until cryptocurrency becomes a widely accepted form of payment in major companies as well as at government level.
I’ll leave you with the following two key points:
- I’m not a crypto expert but using the candlesticks and wick method of readin charts its can be possible. totell the direction of the market. Cryptocurrency, as opposed to the stock market, works in a short term manner so no predication can be accurate. But it does feel like a crypto crash is coming so its better to be prepared.
- The crypto market can crash and it may stay at low levels for a long time. Nobody knows when it will become bullish again. Be careful when listening to some YouTubers who rave on about certain cryptos about to explode. Yes, even Dogecoin unfortunately.
Hopefully, you liked what I had to share. If so, pay it forward by sharing it with others.