Investing in cryptocurrency is a brilliant idea, but you should always be ready for anything. By anything, we mean something that may cause losses during trading.
The crypto market is highly volatile and unregulated globally. Having existed for over ten years now, we have seen prices of some cryptocurrencies go high while others go down and vice versa. That is an excellent indicator that it is possible to experience a crypto crash any day.
Cryptocurrency is very different from buying stocks. Stocks have a long history, and their records can easily be trackable as compared to cryptocurrency. However, this does not make cryptocurrency inferior in any way. Nevertheless, investors in cryptocurrency should understand that the risk here is high. And occasionally, the market may crash.
If it does happen, what should you do? It would help if you determined how to answer this question to be on the safe side. For example, the cryptocurrency industry is experiencing some challenges now, maybe because of the covid-19; these points will also help you get on track and continue your business. This article covers the main ideas you can consider during a crypto crash and still be okay. Here we go;
Assess Strong Opportunities
In case of a cryptocurrency market crash, investors should be well conversant with some of the digital assets that could hold up very well in such an instance. As an investor, you should always keep in mind that you can still make something out of these digital assets in case of a fall.
It is expected that in the future, crypto companies and their relevant tokens will grow up to be very successful, just like most companies, according to experts. If you are a venture capitalist, you should find quality coins with teams that you can trust to execute a plan that weathers a crypto crash.
Experienced traders offer suggestions that you are required to evaluate tokens and the market in general. It is essential for all investors to look for digital currencies with a firm foundation, and their business model should be highly compelling.
This strategy assumes that there are high chances of fluctuating with a strong cryptocurrency in place, leading to high prices in the future. That said, it is up to you to assess and see whether you can wait for the opportunities or go for other options like the ones listed below.
Consider Fiat currencies
All over the globe, most investors tend to flock to fiat currencies when the crypto market crashes. This is because it is the best thing to do. Although the rewards are minimal compared to what you can earn with cryptocurrency, it is the only option in case of a crash.
Tim Enneking, a managing director in one of the firms dealing with cryptocurrency, said that crypto asset management continually uses this approach when most digital assets fall and decline. Nevertheless, implementing this strategy successfully may tend to be more challenging as compared to when said. This is because people fail to acknowledge that they need a shift when crypto is down.
Another thing that makes implementation difficult is that shifting to fiat currencies requires you to be well conversant with the trends in the market. It is even complicated when you have not been keen on the trend.
What matters is to have an efficient and brilliant strategy plus an extended plan which includes all possible eventualities. For example, you have to allocate some amount of money and time that you can afford to put at risk if such an incident happens. Furthermore, you have to continually stick with your strategy execution regardless of the variations in the global market trends.
Try Shorting Bitcoin
Shorting a digital asset requires you to borrow it from somebody else, sell it in the market, but later repurchase it. After repurchasing it, you are required to return it to the person you borrowed it from. In case of a fluctuation in price, for example, a fall in price, you will be able to make a fortune. However, if the price rises, as an investor, you may lose everything.
Well strategized and executed shorting bitcoin generates robust returns in terms of profits to investors, an opportunity you can find offered by most exchanges. There are a lot of exchanges that have been noted to provide these benefits. It is a matter of carefully assessing and signing up in the suitable exchange that may offer you such help.
Be warned that this approach is hazardous as it is a strategy that requires highly developed and advanced investors. An investor must perform due diligence in the current trend of the global market before using this strategy to make an income and profit in case of a market crash. It simply means you have to be good at assessing market trends to get the best out of these.
Very few popular digital assets and exchanges offer this strategy efficiently as an option in the global market. But with a good plan, as stated above, you will find it easy to maneuver around a crash.
Be Conversant with Your Abilities
Any strategy you use should be based on your skills and your risk tolerance level as an investor. As an investor, you should probably hold if afraid or don’t want to take any chances of losing your digital currencies. Any time you feel like you are not comfortable transacting anything, please hold. You can also consider tools, like Bitiq uk, to trade on your behalf.
If you don’t mind being involved in fiat for a short period or possibly forever, then you should probably do your selling at highs and try rebuying it when the prices are low. Short selling applies to an investor who is high flying and very experienced in trading.
After understanding your abilities, it is easier to execute your plan or strategy. An ideal plan means having goals and objectives but keeping an eye on anything that may arise on the way. According to experienced traders, it is challenging to succeed during a crash if you don’t understand your strengths and weaknesses.
Hold On for Dear Life
Many global industries use HODL (Hold On for Dear Life) as one of the most efficient ways to deal with a crash in digital currencies. This strategy involves buying cryptocurrencies then holding onto them for a specific and substantial period, regardless of how many fluctuations there are in value.
However, you should note the difference when using this strategy during a crash and when to make profits. The difference is that when you want to make profits, you are allowed to sell your assets when the prices go up. On the other hand, during a crash, you hold onto the holdings without considering fluctuations.
It is wise to hold in this manner because it is a viable strategy that investors should use and always stick to during a crash. While implementing this strategy, you are required to identify a more volatile and stable digital asset that tends to shift in price quickly. Ethereum and Bitcoins are outstanding examples of such assets that fluctuate; thus, you can capitalize on making regular profits as an investor.
Try buying the dip
Implementing this strategy requires you to be conversant with the trends in the market and do your timing well. This is considered challenging by many market newbies and even for experienced traders.
When buying the dip as an investor, you can accrue very high returns and compelling profits. However, purchasing the drop tends to be more accessible than practicing and pulling it off efficiently.
Buying a dip in case of a market crash is difficult because you often don’t know the value has leveled or even bottomed out. According to experts, buying the dip may only work in a general bull market, and it is useless if the global trend tends to reverse.
Selling Your Cryptocurrencies
It is essential as an investor to sell your digital assets at hand if you feel insecure about the future outcome, and this also applies during a crash. In case of a crash, you can sell your crypto assets without considering making any profits.
Chances are you can miss significant future growth in profit, but that is not important during a crypto crash because you need the cash to start something else or avoid more losses. In this strategy, as an investor, consider losing a few assets but salvage your business from a total loss. You will still have money to invest somewhere else.
You should avoid panicking during a crypto crash because you can still make money with the above strategies. Some may apply, while others may not apply to you, depending on your investments. Whatever the decision you decide to take, what matters is the plan or strategy you have for your business.
Note that you may be forced to abandon your objectives and goals to make money and continue trading during a crypto crash. Continually assess the market trends to make the right decisions.