A Cryptocurrency Market Crash May Be Coming: 5 Things to Do Now
During a crypto market crash, the best thing to do -- at least for a while -- may be nothing. Here's why.
Last week the crypto market witnessed enormous upheaval when major coins such as Bitcoin, Ethereum, Binance Coin, and Dogecoin went down significantly. This is a sign of high turbulence in the crypto space, which has happened before. According to experts, a crypto market crash is on the way. If you have made or are considering investments in this market, here are five things you should do now.
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A Big Drop In The Crypto Market Will Be Coming Soon
Firstly, everyone should understand that a crypto market crash is quite normal as the market is highly volatile and prone to sudden changes. From China reinforcing its stance against cryptocurrencies to Elon Musk's Tweet that he would no longer invest in or sell bitcoin due to its hefty environmental cost, a lot has happened in the market that might again catalyze a massive crash.
As the crackdown in China continues to rattle investor sentiments, the crypto market has struggled with a loss of more than $1.3 trillion since a market peak on May 12. It has currently hit a new post-peak low of $1.2 trillion over the past few days.
China's sudden move to ban financial institutions and payment providers tanked the prices of major cryptocurrencies in the market. The country denied offering any service related to cryptocurrency transactions, further causing disruptions. The biggest news so far is the snap fall in Bitcoin prices. It touched a low of $31,000 this week which is over a 50% decline from its all-time high of $64,000 from mid-April 2021.
Therefore, considering all these factors, we can say that a crypto market crash may be coming soon.
If a cryptocurrency market crash or serious correction is in the cards, here are five things you’ll want to do.
5 Things To Do If A Cryptocurrency Market Crash Occurs
Now a crypto market crash can have both pros and cons. Even with the values of several cryptos going down, it does open multiple doors for new opportunities for investors. If handled strategically, a crypto market crash can bring in a lot of profit and ways to expand your portfolio.
Here are 5 things you should keep in mind before a crash happens and stay prepared for it.
1. Analyze And Understand Your Risk Tolerance Ahead Of Time
Before the next crypto market crash happens, investors need to understand their risk tolerance levels clearly. The crypto market is volatile and can be prone to sudden upheavals overnight. Therefore, investors must be all set with a risk management plan in action when a sudden crash occurs.
For instance, Bitcoin has fallen by over 80% on three different occasions, in 2018, 2020, and 2021. Taking into consideration this year alone, it has already experienced several steep drops in its price so far. There will likely be more crashes in the coming decades too.
Even though BTC often bounced back from its slumps to hitting all-time highs, this is not a default situation, and there's no guarantee that it will always recover.
Therefore, before investing in any cryptocurrency, think about whether you can tolerate the level of risk. Investors should remember that taking the safer route does not mean sacrificing success. If you can handle all risk factors, then crypto is the investment choice for you.
2. Reassess Your Investments
There's never really a wrong time to reassess your investments, but a tumbling market is especially a good time for a financial review. Reassessing your investments means analyzing your initial investment thesis and realigning your financial goals. Further, it is best to determine whether the same goals persist today and the currency still upholds its value in the market.
Though a short-term crash does not necessarily affect the crypto token that you have invested in, it is always better to see if there has been any compromise on any of your crypto investments. Therefore, if a crypto market crash is coming, this is the best time to reassess your investment portfolio and upgrade it if necessary.
3. Cash Out
If you want to take advantage of the opportunities that a crypto market crash opens up, you should have sufficient cash on you. Several crypto traders and analysts suggest that cashing out digital assets to fiat currencies when you think a crypto market crash is coming up is the best strategy.
To profit from this strategy, investors should time the market correctly when they exit and re-enter. Timing the market is not something one can do without practice and research. It takes a lot of strategic moves, research and analyses to accurately time the market.
The first emotion that takes over the entire market when they hear that a crypto market crash is coming up is panic. Panic selling is a state where investors sell off everything they have to cut their losses. This can lead to losing money, plus an increased selling activity will further chip away the market values.
If you think a crypto market crash is coming soon, the best thing to do is to keep calm and follow the HODL method. HODL (Hold On for Dear Life) is the straightforward action of holding on to your assets until the waves of the crash settle down. If you can thrive the market crash by holding your assets back, it will likely bring in good returns on your investment in the future.
5. Invest In Cheap Cryptocurrencies At the Early Stage Of An Economic Recovery
Most investors run after prominent cryptocurrencies with huge trading prices. One should never forget that many altcoins are available, which are pretty cheap and have high future growth potential. With many cryptocurrencies trading at low prices right now, it is an opportune moment to diversify that portfolio by making strategic choices.
Cheap and undervalued cryptocurrencies like Tron, Uniswap, ChainLink, etc., can significantly outperform growth during the early stage of an economic recovery and is a great addition to diversify your investment portfolio. Do your part of research and choose a cheap coin with a good past rally and an array of developments in place.
Things to Do Now During a Cryptocurrency Crash - The Bottomline
The crypto market cycle is a boom and bust cycle with sudden bullish rallies and huge market crashes. But with a strategic plan in place, even a market crash can be an excellent opportunity to reap good income. If you think a crypto market crash is coming soon, try to model your plan based on these five main things that would reap good returns from your investments.
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Virtual currencies are highly volatile. Your capital is at risk.