Cryptocurrency is on the rise. And if you are someone who has invested in it, you might feel like there is no way out of this downward spiral of crashing prices. But fear not! This article will tell you everything you need to know about when cryptocurrency hits and how to protect yourself from these unfortunate events.
Stay calm and don’t panic.
The cryptocurrency market is volatile, so it’s normal to see the prices go up and down. However, what you should never do is panic or jump onto any narratives that might be trying to convince you otherwise. Instead, keep in mind why you got into crypto in the first place and stay true to your principles even during these difficult times.
If you’re someone who is really into crypto and has invested a lot of money in it, then the chances are that you might already be feeling some regret about doing so right now. But this doesn’t mean that your investment was wrong! So instead of beating yourself up over what happened, prepare yourself to weather any storms ahead by having an exit plan ready before they arrive.
You won’t become bankrupt overnight because of cryptocurrency crashing prices. And if things go well enough on their own without having to use your emergency fund or even invest more money than planned, consider it a positive outcome too! It’s better late than never, after all.
Market crashes are just a part of investing, markets, and market cycles. The housing market crashes, the stock market crashes (sometimes at the same time, like in 2008), all markets crash at some point. It can be terrifying to wonder about what a crash means – and what to do.
Fortunately, the traditional stock market can provide some context and help decide what to do with your crypto investments if the market takes a downturn.
Hold On For Dear Life.
One way to weather a crash in digital currencies is to Hold On For Dear Life, a strategy that many in the industry refer to simply as HODL. It is investment advice that a lot of people on Reddit and other online forums will give to newbies, and it works like this:
When prices are crashing, and you’re starting to feel worried, hold onto your assets and don’t sell them! This way, you won’t lose any money from selling low, and you can wait until the market recovers before cashing out. Seasoned bitcoin investors have used this strategy many times before, and it has worked out quite well for them in the long run.
Of course, this isn’t to say that HODLing is the only way to go about things. If you need the money, you’ve invested right away or feel anxious about the whole situation, then.
This means buying cryptocurrencies and holding on to them for a substantial period, regardless of how much the digital assets fluctuate in value. Barghouti described this approach as a “classic,” stating that “plenty of investors will probably use” it if the market crashes, said Barghouti.
What happens to crypto prices when markets crash, and how does it affect your income stream?
The crypto market has been going through a challenging period over the last few days. The bitcoin price crashed from $14,000 to less than $12,500 in hours on Tuesday morning (UTC). This is quite an unusual move for bitcoin, which saw its value rise by more than thirteen percent during the previous 24 hours.
When crypto is crashing, someone who’s been intrigued from the sideline might think this is the time to get in and “buy low.” Instead, consider whether an 80% to 90% down move in your crypto holdings would cause you to lose sleep at night or sell.
The federal reserve has an “inflation target” of around two percent. This means that prices can increase by up to two percent annually. So, a ten percent decline in the value of assets isn’t considered a crash but rather a healthy and necessary market correction.
On the other hand, if you’re already invested in crypto, then a market crash can be a very stressful event. After all, you’ve seen your portfolio value decline by a substantial amount in a brief period.
As the price of bitcoin fell, so did other cryptocurrencies. Ethereum dropped by more than 12% on Tuesday, while Ripple declined around 11%. Litecoin also saw its value drop by nearly 13 percent during the same period. This news comes when many lenders seek to provide mortgages for property buyers who want to use cryptocurrency to fund the purchase.
What happens in financial institutions when crypto markets crash?
Cryptocurrencies were all the rage earlier this year, with the prices of several coins surging to record highs and crypto exchange coinbase making its public offering everywhere, rushing to invest in it. However, with the market undergoing a significant correction since then, many people wonder how they can cope with these fluctuations and protect themselves from losing money.
People panic, and the crypto market crashes. Suppose we were to look at historical data. In that case, it is quite possible that people were selling their coins when prices fall leads to a further drop in price, which then causes more people to sell off even more of their coins, leading to a vicious cycle until all reasonable value has been wiped out from cryptocurrency crashing prices.
It would be best if you held on to your coins and only sold them when the price went up. This way, even if cryptocurrency crashes in value, you can still make some money back from it since most cryptos are created with a deflationary system built into them where more of their tokens will be mined over time, which means that the supply is lowering. Therefore, the value should go up over time.
Do your independent research on the cryptocurrency that you’re interested in.
You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with cryptocurrency involves significant risks. Therefore, we strongly advise our readers to conduct independent research before engaging in such activities.
Instead, the aim of writing these kinds of articles is to inform people about what they can do with their money and help them make better decisions for themselves by providing more information on topics which are entirely new to most readers so don’t be quick to take anything written here as gospel truth.
There’s no such thing when it comes to investing your own money, especially if you’re doing so based on random strangers online telling you everything you have been told before but never knew how or why things worked out the way they did.
Use a stop-loss strategy to limit risk exposure.
Because cryptocurrency is still a very new concept for most people, there are no set rules regarding how much money you should invest in any given one. However, some cryptocurrencies have become incredibly valuable over time, and the next few years will tell which ones those might be if they haven’t been discovered already!
So what that means is that even though some of these coins may seem like a fantastic deal right now, there’s no telling where their prices will end up later this year or sometime next year after doing your research about them.
Because of this unpredictable factor involved with investing in crypto today, using a stop-loss strategy can help protect you against losing all of your investment overnight by capping off risk exposure if their prices drop unexpectedly.
Look for other cryptocurrencies with potential.
Just because one cryptocurrency may crash in value doesn’t mean you should completely write them off. The idea behind investing in crypto is to make your money grow, after all, not to lose it!
And because the market’s still very new and there are many different cryptocurrencies out there competing against each other for investors’ attention, some of them will inevitably drop in price as others rise. So even though you might have lost a lot of money from one coin crashing, if other coins offer similar opportunities, it may be worth going after those instead!
Investing is not easy, and the best thing about investing your own money is that you can make all the wrong decisions that you want to, but at the end of it all, you’re still responsible for making your own choices!
Get out of all cryptocurrencies if it’s too risky for you.
Even though some people might say that cryptocurrency is too risky to invest in, it’s really up to you whether or not you want to put your money where your mouth is and take the plunge.
And if cryptocurrencies start crashing in price, stop investing in them altogether since there are plenty of other opportunities out there when it comes to investing to make your money grow instead.
With this being said, it’s also essential to research when looking for new opportunities. Like with any market out there, not everyone will be worth paying attention to, no matter how good their initial coin offering sounds! So make sure that you check them all out before deciding what kinds of cryptos are right for you and which aren’t.
Diversify your portfolio with stocks, bonds, or gold.
Cryptocurrency is a high-risk, medium to long-term investment. Many financial experts recommend diversifying your portfolio with stock markets, bonds, and gold as the best way to invest in cryptocurrency. This helps mitigate risk because if something happens with one of those investments or currencies – for example, if you lose your job – then some of your money is safe.
Personal finance experts often say that any single asset, be it a specific coin or company’s stock or something else, should only be the sprinkling atop the parfait of an otherwise vanilla portfolio of stocks, bonds, index funds, and mutual funds that mean to help you achieve your long-term financial goals.
An index fund owns stocks or other assets and is designed to track a specific collection of stocks (such as the S&P 500 ). For example, REITs. If you’re looking for a healthy cash payout, REITs are another alternative to dividend stocks. REITs own and operate real estate and have an excellent long-term track record of returns.
Single investments should flavor, not dominate. Your portfolio crypto experts suggest refraining from “all in” moves when deciding to invest.
For example, if you have invested $100,000 in cryptocurrency and the market crashes by 50%, your investment will be worth only half. With a diversified portfolio, however, that same crash would decrease the value of other assets, too – so it is less likely to cause a significant problem for your finances over time.
Cryptocurrency investing is a high-risk, long-term investment. As a result, many financial experts recommend diversifying your portfolio with stocks, bonds, and gold as the best way to invest in cryptocurrency.
During these times, the best thing you can do is keep your head down and hold on tight while doing everything suitable for maximum gains. You might not be making huge profits during this period but what matters most, after all, isn’t how much money you have made so far but rather if you will still have anything left over by the time things go back up again, so good luck.