Well, since you’re here, I’m assuming you already done that and it didn’t do much for you. Considering the recent dips & lows of the cryptocurrency market you must’ve wondered how you should safely handle your cryptocurrency portfolio in times like these.
Do you sell, hodl or buy more when the market crashes? Let me know in the comments below. Truth be told there will always be a downside, even a disastrous outcome as a result of each one of these options, given certain conditions, so it’s good to always have a strategy in place for whatever decision you make during market crashes.
Since this relatively new market attracted so many noobs in “investing” we also have to suffer because of youngsters panic selling the shit out of whatever coins they may hold, dropping their value even further.
In case you’re new to the crypto world as well, and you just mindlessly bought cryptocurrencies just because you witnessed the pump from 2017, then please, keep on reading because you’re making me lose money.
What to do during crashes
Reassess your portfolio, first of all, if you haven’t done it already. What you’re holding, what their value is, if it’s still worth it to hold them, the potential of the company issuing the coin and where you think they’re headed, using Probabilistic Scenario Valuation, Metcalfe’s law, or simply look at the market cap of your coin too figure out how easy it would be to crush it when a few whales decide to sell their coins.
If you haven’t by now, learn technical analysis!
Learn to read and interpret the chart, to figure out as many outcomes as possible and prepare yourself it any of those occur. Though, this should be done when you initially invest in your coins, because during the crash it won’t help that much.
It will help you prepare an exit strategy for whenever you think you have met your financial goals, so that you may not have to deal with situations like these.
Understand the dip
Now, before you make your decision on whether to sell, hodl or buy even more coins when the market dips, you need to understand why the dip happened. Many “investors” tend to push the sell button when they see everything in red and while that it’s completely understandable, there needs to be a little bit more logic and discipline behind your actions when it comes to handling your cryptocurrencies portfolio.
I’m going to assume that you were smart enough to only invest something which you could’ve afforded to lose. You knew, when you bought those coins that there is a chance they are going to shit and your money will be poof, so seeing everything red should not make you shake with panic and look for the sell button.
As I was saying, understand the dip: what caused it? is it easily fixable? will it affect the markets long term? is this the bubble bursting or is it another chance to increase my portfolio, when everything is at a discount?
After you answer these questions, based on your financial goals, you are able to make a decision more easily, in knowledge of cause. Maybe this will affect the markets long term and you only got in cryptos because you wanted to make some quick gains so if you don’t want to wait:
1) Be a man, take the loss and move on
Since I’m in for the long term, I can only advise people who are in for the same periods of time as me. And a long-term investor knows that crashes come and go and what’s important is that you still believe in your investment in times like these. If you’ve started to doubt the cryptocurrency market as a whole, please allow me to reassure you on the importance of cryptocurrencies and blockchain technology reminding you the following:
We are blessed with the Blockchain – the ability to transfer value between parties, without you needing to trust an intermediary or the person you’re on the other end of the line. As a bunch of big companies use the blockchain and many more companies will start using it, a lot of applications of the blockchain will use cryptocurrencies.
Smart contracts allow anyone in the world, regardless of whether they even speak the same language or not, to engage in deals. The utility of these smart contracts will only grow and attract more people as more people will become aware of this life-changing technology. Payments honoring the smart contract deals are done with cryptocurrencies.
As long as we have the blockchain and smart contracts, which is basically, forever, cryptocurrencies are here to stay. This distributed technology will change the way we exchange value forever. It will replace, or at least reduce the amount of trust we need to put in our governments and central banks to not fuck with our money, eliminating the fear of inflation because of incompetent or corrupt governments or catastrophic events going on. It is imperative that cryptocurrencies have a place in the financial system.
Now that you were reminded that the cryptomarket isn’t going anywhere, you still need to evaluate your coins, if they’re still worth it, using the methods above.
You done? Ok.
Your coins still good? Then you can do one of two things:
- HODL! Move on with your life carefree, knowing that you believe in your investment which you just reassured yourself is still a good investment. Watch everybody else panic while you patiently wait (a long time most of the cases) for everything to go back up and get in the profit zone once again.
- Strongly believe in your portfolio and got some spare cash to increase it? Buy more! Take full advantage of the crash as it happens, using the Scale In method: meaning, buying more coins as they crash, at different price levels, until they stop falling.
Example of scaling in:
Let’s say the market is crashing and you want to buy some bitcoins. You buy the first one at 8435$ (current price as of writing this), then when the price dips at 8280$ you buy another one, then another one at 8020$ and you do so until the price stops falling, at which point you’ll stop scaling in. Then the average purchase price of your 3 bitcoins would be 8245$, rather than 8435$ and on top of that your profits would be enhanced once the price starts to pick up.
No longer believe in your coins?
- Sell every one of them which lost your trust and proceed to scale in on some other coins in which you now see potential. If you need help in choosing here’s a list of the top 100 coins, neatly categorized and explained briefly, see what sparks your interest and learn more about them and whether it’s worth investing in them or not. Look to diversify your portfolio for better security of your funds. I would advise exchanging your coins in USDT until you make up your mind.
- Short sell them but if you’re not an experienced trader I would advise against this as the losses you can suffer can be disastrous, since you have no idea when the market will stop crashing and pick up again. Get somebody with experience to assist you if you want to pursue short selling.
Don’t give yourself too much shit about it.
You feel bad because you might end up with a potential loss? Don’t sweat too much about it. Bad investments are being made on a daily basis, even by the most experienced investors out there. Suffer the loss and move on with your life to the next big opportunity. You have learned to better research your investment and what to do in dire situations like a market crash. You are now a more experienced investor, yay!
I have lost over $200k because of bad judgment, falling for the hype, trying to make quick gains and simply not putting enough thought into my investments. Took me a lot of time to learn to discipline myself and to approach my investments in a more careful manner. You learn so much about this world, yourself and who you should be, from investing.
What you should be expecting from the crypto world in the future:
A lot of interest started to show up into the blockchain and cryptocurrencies, from giants like NASDAQ, NYSE, Goldman Sachs, JPMorgan, all of them planning to adopt and use blockchain and cryptos in the near future. Coinbase, one of the biggest cryptocurrency exchange also just announced a trading platform specifically designed for institutional investors, trying to pull in the crypto trading world as much of Wall Street as possible.
Given that such giants consider coming in, more as sure to follow, providing greater accessibility through all these exchanges, keeping a consistent transaction volume, which at some point will pump up the prices. On top of that, we have to take into consideration all the possible ETFs that are likely to come out in the near future.
Blockchain is staying!
Regardless of whether people believe in or like cryptos, the blockchain technology is here to stay and it demands cryptos, which are basically the next stepping stone in the evolution of the financial system. It may not demand the cryptos we currently have, so keep your eye out for the ones which have a future and the important ones that might come out later.
Remember to always invest in coins that you actually believe in, coins with real-life applications, with great teams behind them, after having done thorough research on them. That’s kinda it!
Moral of the story:
Believe in your cryptocurrencies? Hodl, long, long term. Don’t? Take the loss, start all over, or start something else if you lost faith in the cryptos as a whole. Feeling confident? Trade them and take advantage of every move. Takes time, nerves, good technical analysis skills, but the payout will be worth it. A trading guide will come out in the next few weeks so stay tuned.
You should not consider any information you read on this website as investment advice. These are all just guidelines that I have been following which got me decent results in my trades. I cannot guarantee you that you will succeed by following what was said in the article. Follow these guidelines with caution and always seek expert counsel if you’re serious about investing.