Don’t panic - Remember to stay calm and think clearly
Diversification - Consider diversifying your portfolio to reduce risk
DCA and Staking - Strategies experts recommend to manage crypto winters safely
A Closer Look At The 3 Tips To Survive The Crypto Winter And Become A Better Long-Term Investor
Cryptocurrencies, like many other investment options, are volatile by nature. As a result, it is common for traders to see prices of these currencies swing wild in a short period. For instance, after Bitcoin hit an all-time high of $67,000 in November 2021, the sentiment in the crypto industry turned bearish. In 2022, the king crypto began its descent and hit $16,500 recently, representing a decrease in value of over 90%. Following Bitcoin, many altcoins lost 80% to 90% of their gains.
Experts call such extended bear runs 'crypto winters.' A crypto winter is triggered by a series of flash crashes. It ends when prices stabilize somewhere far beneath their last peak. However, it is important to remember that such phases are common and do not last too long.
Following some practices and ensuring you are using the right crypto exchange will help you get through the crypto winter safely. Here are 3 tips to survive the crypto winter and become a better long-term investor.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Do Not Panic
The first and most important thing to do is to calm down. During market-wide crashes, we tend to be negative and overanalyze the situation. However, remember to maintain a healthy state of being. If you catch yourself getting anxious or spending too much time online researching ways to 'fix' the issue, do yourself a favor and take a step back.
Consider distracting yourself from the crypto market for a while. You can consider going away for the weekend, meeting a friend you have not seen in a while, or even trying any form of art.
If you believe in blockchain technology and are (or were) optimistic about cryptocurrencies, then remind yourself of the reasons for investing in them in the first place. You may tend to lose sight of the obvious during a crypto winter, so simply trust your past, rational judgment.
Diversify
Diversification is one of the most important investing practices that help reduce an investor's portfolio risk. When building a crypto portfolio, managing risk in this growing, volatile market is key to protecting your assets.
If you want to experience this sector's innovation, you should not limit yourself to a single asset. Instead, allocating funds to various digital assets will help you profit from the growth in the overall crypto market.
Investing during a crypto winter may just be the best time to diversify your portfolio. When diversifying your crypto portfolio, let your risk tolerance be your guide. You might start by allocating more to the more stable cryptos (like BTC or ETH) and then add stablecoins to help manage the risk. Depending on your risk tolerance, you can adjust your holdings across a few or many crypto investments.
Consider Dollar-Cost Averaging And Staking
Market crashes provide investors with some of the best buying opportunities because they can Dollar-cost-averaging (DCA) to the bottom and optimize their ROI for the next bull run. Take, for instance, the crash in prices during the COVID outbreak. From the 2020 low to the 2021 all-time high, BTC surged 13x ($4,900 > $69,000) while Ethereum soared 44x ($110 > $4,800).
DCA is a bold strategy that an investor or a trader can consider pulling off, especially during a crypto winter, when coin prices fall significantly from their all-time highs. Altcoins tend to crash particularly harder than Bitcoin in winter, but they also provide higher ROI opportunities during a bull run as their market cap is smaller and leaves room for growth. DCA reduces the overall impact of volatility on a token's price and in turn, minimizes the investment risk.
Another strategy that experts recommend is staking. If you are reading this article during a crypto winter, you are likely looking for ways to protect your declining investments. During market crashes, staking is one efficient way to enhance your security and profit from your crypto holdings over the long term.
Staking involves locking up your cryptos on a blockchain for a designated period to generate passive income. Most layer-1 protocols let users stake their native coins on the network to earn a yield. This includes Avalanche (AVAX), Solana (SOL), Polygon (MATIC), Cardano (ADA), etc.
So once you decide on a platform you trust, staking becomes a matter of setting it and forgetting it. Investors swear by this tried and tested method during crypto winters to retain value and survive the bear market.
Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
Bottom Line
Historically, cryptos have always returned roaring and making new all-time highs. The last bull run resulted in a $3 trillion market cap for the industry, bringing it closer to the market cap of traditional assets like gold and silver.
The current crypto winter is a result of uncertainty in the global financial markets. However, remember that winters are nothing new to the crypto industry, and large downturns have occurred every past cycle. The market has emerged stronger than before and is very likely to do the same this time around.
Until then, consider following the above tips and using the right trading platform to keep your assets safe. Reach out to experts and conduct thorough research before investing large amounts of money in any digital asset.
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