One Thing Never To Do When The Crypto Market Goes Down

Do not stress what to do when the next crypto market goes down. Here’s why.

Last Updated July 23rd 2021

6 Min Read

Cryptocurrency has always been subject to extreme volatility and is always unpredictable. Therefore, whenever investors hear about a market crash, it might cause a wave of intense panic and stress in the market. There are several investment strategies that investors can stick to during a bear market. But what is that one thing never to do when the crypto market goes down?

Panic selling. You might have often come across this term during a crypto market crash. It is induced by fears, uncertainty, and doubts, as well as harms the investor sentiment. For example, the crypto market took a turn for the worse earlier in May 2021. The crash was driven by Tesla CEO Elon Musk’s tweet expressing concerns over Bitcoin’s power consumption and the crypto crackdown in China. Even though these crashes have underlying causes, it often stirs fear among investors leading them to sell off their holdings and further reduce prices in the market.

With that being said, it is essential to know why panic selling is bad and how to manage when the crypto market is going down.

Key Takeaways

A crypto market crash can stir a wave of panic and fear among investors.
The one thing never to do when the crypto market goes down is panic selling, which can lead to more losses.
It is always important to diversify your portfolio with multiple cryptocurrencies with high growth potential and community support.
The best investment strategy is to hold on patiently until the market settles down rather than selling everything off and settling for less.

What Not To Do When The Crypto Market Is Going Down?

Before getting into what to do when the crypto market crashes, one should understand what not to do during a market fluctuation. Panic, sell and steer away from the market for a long time is often what novice investors do while nearing a bear market. Rumours and often unnecessary news often trigger panic selling. Therefore, the one thing never to do when the crypto market goes down is to sell off all your holdings and settle for less.

Cryptocurrency is one of the most volatile investment assets available, so plunges like these are inevitable. Therefore, investors should always be prepared and braced for it. But the first emotion that takes over is panic and stress. This might force you to sell off all your holdings and settle for less, leading to huge losses of your hard-earned money. However, if you know how to deal with a crypto market crash, then you can power through the market lull and generate good returns from your investments.

Although, in reality, a sudden crash or price correction might be scary and evokes a wave of panic in the market. But it doesn’t always mean that you should take immediate action and sell your holdings in a rush.

When the crypto market is going down, the best thing is to do nothing and wait until the waves settle down. Patience is a necessary quality you should possess if you want to be a successful investor.

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Why Not To Panic Sell During A Crypto Market Crash?

Apart from personal loss, there is more than one reason why panic selling is the one thing you should never do when the crypto market goes down. It can make the market situation much worse. When several investors sell off their buyings, the sudden selling activity will further chip away at the market values. This will again create a stir, and the market might again go down.

Investors should remember that even if the broader crypto market crashes, some of the assets could hold up and rebound to record heights. Therefore, never forget that after a massive sell-off, most cryptocurrencies will bounce back. On the other hand, a price correction would open up several opportunities for investors. Therefore, it is the best time to expand your portfolios and search for assets that have attractive prices.

By diversifying your portfolio with cryptocurrencies that have huge growth potential, you might be able to withstand a market crash and gain back your losses.

‘Panic Selling Is Bad’: Experts

Several experts opine that panic selling is something that you should never do when the crypto market goes down. Changpeng Zhao (CZ), Binance CEO, sent out a tweet and lent a powerful lesson to crypto investors. According to him, panic selling is wrong, and investors should learn from their mistakes. He adds that people need to maintain a balanced crypto portfolio to mitigate risks.

CZ isn’t the only famous person who clarified why panic selling is terrible during a market crash. Michael de Poppe was also worried that several people were contacting him for buying advice while BTC hit $60k. He said that people are taken over with fear and panic, leaving them in over 50% loss.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

What Is A Good Investment Strategy To Manage A Crypto Market Crash?

The crypto market is volatile; this also means that sudden peaks and a likely bullish rally are also possible, along with crashes. For instance, after the recent crypto crash, the market bounced back successfully, with BTC hitting a record-high of $64,863 in April. Therefore, hanging on to your crypto holdings when the crypto market goes down can bring reasonable or even substantial returns.

The best tip for investors to manage a crypto market crash is to diversify their portfolios with multiple assets. Numerous cryptocurrencies have excellent growth potential, high market capitalization and are backed by a strong community. Here are two essential tips on how to manage a crypto market crash.

Reassess Your Investments

A tumbling market could be the ideal time for a financial review. Reassessing your investments means analyzing your initial investment thesis to realign financial goals. This is what investors should do when the crypto market goes down rather than acting in panic. Determining whether the same goals persist even today and if the currency still upholds value in the market helps you cut your losses. In addition, assessing whether there is any compromise on your crypto investments will help you upgrade your portfolio if necessary.

Check Out: 5 Explosive Cryptocurrencies To Buy After The Crypto Market Crashed

Hold On For Dear Life (HODL)

Every crypto investor might be familiar with this unique strategy. Panic selling is a state where investors sell off everything without waiting. This could lead to a considerable loss of their money and increased selling activity, further sinking the market.

Selling your buyings makes sense when there has been a specific change in a crypto token that you are holding or the company’s lack of development. But the best thing to do during a market crash is to hold on to your investments patiently rather than jumping on the ‘sell everything in panic’ bandwagon.

The HODL strategy simply means buying cryptocurrencies and holding on to them for a substantial period, despite how much the asset’s value fluctuates.

The Bottomline

Therefore, panic selling is undoubtedly the one thing never to do when the crypto market goes down. Market crashes and corrections can be extremely unsettling and scary. The mere thought of losing your hard-earned savings can drive you to follow the wrong crowd, leading to a much worse scenario. But, on a positive note, a market crash can also open several new opportunities for investors. Now you know what to do when the crypto market goes down. Therefore, do detailed research, create a risk-proof investment strategy, hold on patiently and grab the opportunity to ensure that you gain good returns.