Things To Do When The Crypto Market Crashes


Since it is all-time high in November 2021, the price of Bitcoin (BTC) has decreased by almost 65% as at the end of this year 2022.

Cryptocurrency hasn’t yet been accepted as a diverse asset class that investors utilize to limit risk and hedge against losses. Instead, the crypto market has traditionally been driven by speculators attempting to make some quick money.

If your investment account is taking what appears to be a continuous battering, here is everything you need to know about how to survive the crypto storm that has engulfed the entirety of 2022.

Think Long Term Investments

Investments in cryptocurrencies are subject to high levels of volatility in the short term. 

If you look at the chart for 2022, you’ll notice that there have already been numerous major drops in price. Following each significant dip, the prices of cryptocurrencies ultimately – and for the most part – gradually recovered.

Don’t get caught up in just the 24 hours chart. Instead, broaden your perspective and consider the year so far. The ups and downs that are a natural part of any market cycle are amplified and more severe when dealing with a new and relatively untested investment such as cryptocurrencies. 

You can afford to wait out the losses in the market as long as you haven’t invested any money that you will need in the near future. As the popular crypto slang goes – “Buy and Hodl”.

The future for cryptocurrency looks very promising, with more institutions pulling in their weight behind the virtual currency. As crypto gains more widespread acceptance, the prices are bound to shoot up even more in the long term.

Resist the Urge to ‘Panic Sell’

When it comes to the cryptocurrency market, maintaining emotional control is just as important as it is when trading stocks. 

It is only normal to desire to sell your crypto assets and cut your losses when you observe a sudden decline in the value of your crypto investments. However, this frequently results in you selling at a lower price than you would have otherwise done and missing out on any future price recovery.

If you get rid of your holdings now, you won’t be able to participate in the market rebound when it occurs since markets go through cycles. Inevitably, the crypto winter will end, and spring will come back.

It might be emotionally taxing to witness your investment portfolio suffer losses on a daily basis, but the old adage that “you don’t lose until you sell” is absolutely correct.

Therefore, have faith in the research and investment thesis you conducted originally. Be optimistic that the price of your Bitcoin investment will eventually rise if you have strong convictions on your long-term investment. At crypto exchange platform TimeX you can find the current Bitcoin chart AUD. And make the right decision about your investments.

Find Out Why the Market Crashed

It might be in your best interest to understand the factors contributing to the current price decline in the event that these factors have an influence on the investing hypothesis you first developed. 

Consider the following scenario: you purchased a cryptocurrency because you believe the blockchain – based technology has the potential to trigger a revolution in a particular sector. As reports spread that the technology has become obsolete, the price of the coin begins to decrease. If such stories turn out to be accurate, it’s probably time to rethink your investment strategy.

In the case of the most recent crisis, there are several factors that contributed to the decline throughout the market as a whole. One reason is because investors were nervous about the omicron COVID disease in 2021, which made them pull out their money from risky assets.

Another reason for the crash could be the Russian-Ukraine war in March. Wars and civil unrest bring about instability and the financial market is not usually spared. Most investors were probably scared that it might develop into an all-out World War III and it predictably triggered the sell-off.

So, in a nutshell, understanding why the market crashed at a particular time will help strengthen your investment decisions and prepare you for future occurrences.

Use the Opportunity to Conduct More Researches

When the economy is doing well and everyone is raking in the cash, good news about your expanding fortune is easily available, even without your beckon. So, no one will blame you for abandoning all research and education since the stars of fortune are shining brightly at that moment.

However, when that star begins to go south, you are provided with a priceless opportunity to disconnect from your portfolio tracker and bury down in crypto materials, in order to be well-prepared for the market boom when it finally arrives. You should use this opportunity to tune out the negative news and focus instead on the research that will make you a more successful investor.

Who are the people working on the most exciting new cryptocurrency projects and how did they get started? Which software designers have the most successful track record? Which communities on NFT offer the highest value for their catchy NFTs? When was the last time you went through the rigours of reading a white paper? These are all questions that require personal evaluation.

During a crypto market crash such as this one, trying to keep track of how much money you’re losing is a certain way to induce anxiety and make poor choices. On the other hand, research and education are the keys that will unlock the door to make that portfolio interesting to watch once more.

Buy the Dip

It’s a common misconception that market timing can be accomplished by buying low and selling high, but in reality, it’s quite difficult to successfully achieve it this way.

On the other hand, crypto dips can provide an opportunity to stock up on more of your preferred tokens at a more favorable price. 

For instance, there might be tokens that you’ve been keeping an eye on for a while but have been waiting for the proper time to buy before doing so. You can also consider increasing your holdings of particular tokens that you already possess if you believe that they have significant potential in the long run.

Despite the allures of dip-buying, you should also avoid being caught up in the frenzy of panic buying. There is no point in purchasing a coin that you have not investigated and that you do not actually desire just because it is now cheaper. 

It is not a good idea to spend money simply to buy the dip when there are other financial commitments that require your attention.

Diversify your Portfolio

Lastly, the sharp drops in price that have occurred recently serve as a useful reminder that investing in cryptocurrencies is a highly risky endeavor. 

When prices are on the rise, it may appear to be very easy to make money. However, time and effort are required for any form of investment, and there is no guarantee that the return on the investment will be positive.  But you can be confident that with cryptocurrency exchange platform TimeX your money and crypto will be safe and secure. 

It is prudent to take precautions against the risk by allocating only a modest proportion of your overall portfolio to cryptocurrency investments. There are many other, less risky investment opportunities available; therefore, you should work to achieve a healthy exposure-to-risk balance.

Final Words

If nothing else, the recent drop in the value of cryptocurrencies should serve as a lesson: if you’re thinking about putting money into digital currencies, you should be prepared to weather the storm at some point.

If you think you can handle the volatility and uncertainty of the cryptocurrency market, then you should invest in cryptocurrencies in the same way you would in stocks. Diversify your holdings rather than placing a large allocation on a single coin. Invest based on your own strategy, rather than following current market trends.

Take your time and don’t make any impulsive choices. Before you start selling, you should wait until the market has stabilized, else you risk selling at a very bad point.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.