A cryptocurrency market crash may occur unpredictably anytime since it is largely inevitable. As a result, it can potentially wipe off trillions of dollars in the crypto market in very short periods of time. What’s even worse, it may come completely unexpectedly, wreaking havoc on your portfolio.
Individuals ought to prepare for potential market crashes and have an action plan to prevent excessive losses. But you do not have to worry since this article will help you prepare for potential crashes and show you how to survive them. Here are some of the ways to get through a crypto crash.
Points to Survive from a Market Crash
Below is a list of possible ways to prepare for the next cryptocurrency market crash. Though the most basic risk management advice for trading newbies is to “trade only what you can afford to lose and/or along with your full-time job” according to Bitcoin Loophole. Of course, we have compiled some more detailed tips below.
1. Market corrections are an unavoidable part of the cryptocurrency game:
Crashing in the crypto market is possible if it falls by double digits. It is relatively difficult to monitor a significant investment or the entire market. However, because volatility and price drops are not unusual in the financial markets, it is best to remain calm and relaxed. A rally may occur as the cryptocurrency market moves in a cycle motion just as easily as a crash happened. It is necessary to understand that it is all part of a cycle. So don’t stress out over each crash, as it likely won’t be the last one — and more periods of growth will also come.
2. Understand your crypto risk tolerance levels:
Individuals into cryptocurrencies require a high-risk tolerance level. Since the cryptocurrency market can be volatile sometimes, it is necessary for users to avoid drawbacks and conflicts (but anticipate them regardless). However, there are also higher levels of risks which give traders and investors a high profit margin in return. One important tool here is leverage. It can offer considerably higher returns in exchange for higher risk. But a market crash when trading with high leverage might wipe out your deposit and profits in no time. Users should get out of such positions or leveraged trading in general if they do not have enough tolerance for risk. Holding currencies for a short period without using leverage can also help people avoid total losses. With patience and persistence, you can recover from any losses when the market bounces back.
3. Reassess your cryptocurrency portfolio:
Re-evaluation of your cryptocurrency portfolio is also necessary. It is significant to understand that every project is not equal in the crypto industry. Cryptocurrencies differ in market capitalisation and volatility levels, so you might want to add or remove different coins as the market trends change. You should develop a habit of reassessing and rebalancing your cryptocurrency portfolio. Consider also the cryptocurrencies with better ratings, those are usually a safer bet.
4. Remain oblivious to market noise:
Wealthy investors consider this a relevant strategy whenever a crypto market crash occurs. Downturns are only temporary disturbances. The best option is to stay deaf to the critics and endure in silence while there is too much negative market noise (as long as it’s just baseless doubts and fears). Trust your portfolio and strategy more.
5. Have some cash on hand to buy the dips:
No matter what your portfolio looks like at any given moment, it’s always good to set aside some funds for making adjustments. In particular, it’s good to buy tokens during a market crash when their value is low so you can benefit once another bullish run starts. To execute this, you must monitor the value of Bitcoin and other tokens and watch out for trend changes. As time passes, you can potentially grow your portfolio by using only the market dips to buy new tokens.
6. Stop engaging in leveraged trading at this time:
Trading using leverage is not a great idea during a market crash. It’s best if you exit such positions or at least lower the leverage when the market is going through a rough patch. It is a common mistake for traders to keep trying, staying in these positions as if they can pinpoint where the crash will end. But such attempts can result in a catastrophic situation if the crypto market falls beyond your worst expectations. Uncertainties can only make it riskier. Leverage should be out of the question during difficult times. However, you can safely use it when the market trends are clear.
7. Increase your stake in your winning trades:
When you develop a diverse portfolio, you will notice some of your tokens perform better than others. During a market crash, it’s best to get out of the more iffy positions and focus your efforts on the coins that have disappointed you the least. One common mistake for users is to add to heavily losing cryptos. It is highly advisable to just buy the winners since they can gain exponentially and probably have strong fundamentals.
8. Look into cryptos that support staking and yield farming:
During a market crash it might be pointless to try and earn from short-term strategies. However, you can try to focus on another aspect in the crypto market which can allow you to gain profits from your portfolio. Namely, staking and DeFi farming is relevant for this sector. Staking can allow you to earn more from the tokens you own than regular trading during a crash.
Final Thoughts
Following the tips above can help individuals survive whenever a cryptocurrency market crash occurs. It is still necessary to control your emotions and practice discipline in taking action. Just remember to focus on the valuation of cryptocurrencies and do not make decisions in a hurry.
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