What do you do when you see your cryptocurrency losing value? What do you do when you see the numbers suddenly towing the path of a downward trend? What if your account has been showing red numbers since the beginning of this week? Is there anything you can do? Or are you already nursing the idea of selling off all your positions, taking the loss, and waiting for another, better opportunity out here on the crypto market?
Investing your money in cryptocurrencies is highly speculative, as the market is largely unregulated. So, anyone considering the option of investing their money in cryptocurrencies should prepare mentally to face the outcome. In fact, even experienced investors tread the path of crypto investing with caution. Therefore, never allow your emotions to control your actions.
Should you run away in the face of all the uncertainties?
Actually, you don’t need to worry yourself or run away. This guide will give you the tips to stay motivated and show you what you can do when the market falls.
5 Important Things to do When the Market Falls
There is still hope for you even when the crypto market is in shambles. Here are some things you can do to stay afloat.
1. Buy the Dip
Buying the dip entails buying cryptocurrencies when the price is down. This has been a winning strategy for Bitcoin (BTC) traders and investors since the emergence of Bitcoin in 2009. It is not an old concept though.
The following example will help you understand this concept perfectly well.
A cryptocoin increases from $10 to $30 when the market is stable, only to slump to $20 when the market falls.
Would you say that it is a discount from $30 or is it marked up from $10?
The reality is that it is both a discount and a markup! The cryptocoin can go either way. Though, the temporary bottom at this point in time is at $20, and it has not fallen beyond that. The coin will likely resume going up towards $30 and above. Coupled with that, your downside is $10.
Now, if you believe a cryptocurrency has value and will increase more in value in the future, then buy it. But, if you think that cryptocurrency is already overpriced, or that prevailing factors have made the value increase more than what you are willing to spend on it, then don’t buy it.
2. Study the Market
If you have already invested your cryptocoin and suddenly experience a bear market, don’t panic. If your cryptocurrency is losing value at the moment, the best bet is to take this time to learn from your mistakes.
You can also start learning about technical analysis and develop your own investment plan immediately instead of waiting till the market experiences a bearish turn. Also, you shouldn’t wait for the opportunity to buy the dip, rather invest as much you can at the Bull Run.
As a matter of fact, you can learn a lot from the market such as:
- Teaching yourself about indicators.
- Studying the market and its cycles.
- Understanding the basics of investing in the crypto market before venturing in.
- Learning about the various key players in the crypto space.
- Start studying different chart patterns
Pro Tip: You should study a chart for at least one month before you buy anything.
3. Buy Passive Income Coins
This is the next best strategy if you have a lower risk tolerance and don’t want to use more advanced trading methods. It involves buying cryptocoins that generate passive income no matter the market activities. There are many cryptocoins that can do that, but the two major ones are staking coins and exchange coins.
Staking coins provide extra coins for every cryptocoin you use in the staking process. With most cryptocoins, the annual return for staking is around 5% to 100% on a consistent basis. Some variants provide higher returns than the more decentralized types of staking. An example is Ark’s DPoS.
Exchange coins offer many advantages to exchanges including reduced fees. Some coins provide a profit-sharing model in which a percentage of exchange fees are duly returned to coin holders. An example is KuCoin.
4. Employ a Short Selling Strategy on the Crypto Market
Have you ever bought a cryptocoin and waited for the price to rise before selling? Short selling is the opposite of this method. This strategy requires you to borrow cryptocoins from the exchange and sell at the current price. As soon as you close the short position, you then have to buy back that same number of cryptocoins at the current price. This way, you return the same number of coins to the exchange.
In a short sale strategy, the best situation is when you initiate the short position at a high price and close your position at a low price. This is buying low and selling high, and that means profit! This strategy is perfect for hedging portfolios and to reduce risk. You can use a lending platform, such as ETHLend to acquire cryptocoins to short sell on the crypto market.
5. Apply Swing Trading
This the perfect scenario: swing trading involves taking advantage of the short-term price movements in a cryptocoin’s chart instead of looking at the big macro trend. Inside the approved upward or downward channel of price movement, there is bound to be small highs and lows in the price as it goes in a given direction.
Experienced investors can make money from the micro trends just by buying the lows and selling the highs when the market is in a bearish mode. Certainly, crypto market volatility during crashes is the perfect time for swing trading, as it offers the required number of useful local highs in the chart.
But, you must know the various types of technical analysis methods, including indicators and pattern formation – this option is highly recommended for experienced investors with high-risk tolerance.
One Last Word
In your effort to profit from a crashed crypto market, you should perform the due diligence before using any of the strategies described here. The truth is that you can make money even when the crypto market is going down.
This article should not be taken as, and is not intended to provide, investment advice. Users are ultimately responsible for the investment decisions he/she/it makes based on this information. It is your responsibility to review, analyze and verify any content/information before relying on them. Trading is a highly risky activity. Do consult your financial adviser before making any decision. Please conduct your thorough research before investing in any cryptocurrency and read our full disclaimer.
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