Advice for navigating cryptocurrency downturns
It’s not a given that we will have a recession, which is commonly characterized as two consecutive quarters of declining gross domestic product (GDP). However, an increasing number of economists are concerned that this is what will happen. According to the portfolio manager at the massive fixed-income firm, the Fed can pull off a soft landing and the United States will avoid a recession. Furthermore, the chairman of Goldman Sachs, recently stated that while the possibility of a recession is significant, it is not “baked in the cake.” Smart investors would tell you that bear markets are unavoidable and are frequent when fortunes are formed, regardless of whether we’re in for a prolonged crypto winter or a brief gulf. Here is a brief overview.
- Put your feelings aside. Although it’s acceptable to have anxiety, don’t let it guide your financial decisions. Emotional trading can result in poorly timed trades, such as selling at the lowest prices or buying at the highest prices out of FOMO.
- Dollar-cost averaging (DCA), which involves buying a smaller amount of an asset every week or month regardless of price movement, is an alternative to trying to time the market. If you think that the price of cryptocurrencies will generally trend upward over a longer time horizon, this is a wise course of action. Traditional investors have used this tactic for decades to deal with stock market volatility, despite the fact that DCA is a popular way to purchase cryptocurrency. Anyone with a Coinbase account can set up automatic recurring purchases for any listed asset with ease.
- Learn how to DYOR, or “do your own research,” in the time and mental space provided by the down market. Learn the fundamentals, read cryptocurrency news (including articles from reputable financial publications and specialized websites), explore the whitepapers of projects you’re interested in, and explore analytics (via sites like Messari, DappRadar, Dune Analytics).
- Always use common sense. There is no such thing as a return or yield without danger, no matter how interesting a new DeFi initiative may be or what you discover while studying; therefore, if you see double-digit interest rates when banks are only paying fractions of a percent, only invest what you can afford to lose.
Why it’s important: It’s crucial to pan out and take in the overall scene. Cryptocurrency is still extremely young. In the past, each bull run saw BTC values reach new highs. The first time Bitcoin exceeded $1,000 was during the rise in 2013, it nearly surpassed $20,000 four years later, and the most recent cycle peaked at $69,000. The most crucial action you can do at this time is to position yourself for success during the upcoming upswing. And in the interim, get in touch with a reputable, licensed financial counselor if you have any questions or concerns.