What if the cryptocurrency market crashed tomorrow? it could happen. What investors would do? There are three very common things: Selling off your crypto assets, panicking, and then steering clear of the crypto market for a long time.
These are three of the worst moves you can make during a crypto market crash. Here's a closer look at why you shouldn't panic, sell, and steer clear.
The crypto market is highly volatile, and a market crash can occur at any point in time, leading to a drastic drop in prices. Although these crashes have underlying causes, it usually stirs a tsunami of panic among investors, which leads to further reduction of prices.
According to recent news, the crypto bubble is currently bursting, where some major cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin are going through significant price drops. Ethereum sank more than 40%, following Dogecoin and Bitcoin, because of the China crackdown.
This might again cause a wave of extreme panic and stress among investors. However, there are certain things that investors need to be aware of to help them through this crash. In times like these, it is crucial to be mindful of what to avoid instead of worrying about what to do. Here are three things not to do if the crypto market crashes.
3 Things Not to Do If the Crypto Market Crashes
1. Never Panic
The first emotion that takes over investors during a market crash is panic and stress. But investors should always be prepared for such market volatility and brace themselves. The crypto market will often face inevitable crashes, which will have a more significant reason behind it.
When such crashes happen, your holding can be vulnerable to significant drops. Even though the overall market drop sinks to 20%, your specific holdings could fall over 40% or more.
For instance, take the case of Bitcoin. At the time of writing, the Bitcoin price has seen a drop of almost 30%, which might cause a wave of panic in BTC holders. But if you want to continue investing in cryptocurrencies further, you must be prepared for such drops and gear yourself to deal with them without panicking.
2. Do Not Sell In A Rush
Panic selling is a major mistake that most investors show during a cryptocurrency market crash. In this scenario, an investor decides that they want to sell everything they have in the market to cut their losses. They do this without even considering the quality, efficiency, or long-term effectiveness of their holdings, which is one thing you should not do if the crypto market crashes.
The blockchain market is prone to fluctuations, and it is entirely natural. If you have made solid investments, then manage them well and stick to the HODL method, the process of holding on to your assets. By holding on, you will more likely see a good return on your investment over time.
Although, in reality, the sudden crash is scary and evokes a wave of panic in the market, it does not mean that you should take immediate action and sell it in a rush and settle for less. Sometimes it is better to do nothing and wait until the wave settles down. This is why patience is a necessary quality that any crypto investor should possess.
Moreover, panic selling can also make the situation much worse during the market crash. All of a sudden, an increasing selling activity will further chip away at the market values.
Selling your buyings makes sense if there has been a change in particular cryptocurrency's competitiveness, the company's lack of development, or lack of transparency in future prospects. However, it is advisable to hold on patiently during a market crash rather than jumping on the 'sell everything' bandwagon.
3. Don't Forget That Cryptocurrencies Bounce Back After A Crash
The crypto market is volatile, which doesn't just mean that it is prone to sudden crashes, but also means that there will be sudden ups and a likely bullish rally after a market crash. The largest Bitcoin market crash observed was undoubtedly in March 2018, where BTC fell more than 32%, followed by the March 2020 crash induced by global pandemic and panic selling.
But the market bounced back in 2021, with BTC hitting a record-high of $64,863.10 in April. Therefore, hanging on to your crypto holdings during a market crash can bring reasonable or even substantial returns.
Therefore, never forget that after a huge sell-off, most cryptocurrencies, especially those that have high market capitalization, will bounce back. It is also the time for investors to expand their portfolios by looking out for coins that have attractive prices.
A tip for investors is to maintain an online portfolio of cryptocurrencies that they would like to buy. Ideally, these cryptos should have excellent growth potential, high market capitalization, and are backed up by a strong community. Once the market rebounds, look out for coins trading for attractive prices, do detailed research on its volatility and price rally, and grab the opportunity when you can.
Things Not to Do If the Crypto Market Crashes: A Final Word
Market corrections and crashes can be extremely unsettling and even scary, and the mere thought of losing your hard-earned savings can drive you to follow the wrong crowd, ending up in a worse scenario. But on a positive note, what investors often forget is that market crashes can also open new opportunities: To be successful in the long run, one needs to be patient, level-headed, and understand that market fluctuations are a part of the game.
Cryptocurrency is indeed a bubble that can burst any time, but it can just as quickly bounce back to a profitable level. Therefore, always be aware of the above-mentioned 3 things that you should not do if the crypto market crashes, and strategically manage your investment journey for good returns.
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Virtual currencies are highly volatile. Your capital is at risk.