Markets Crashing! What To Do If You Are A Crypto Investor?
With Bitcoin (BTC) and Ethereum (ETH) tumbling, the crypto market has suffered serious losses over the past 7 days.
Given the old investment adage of ‘buy the dip’, investors may now be trying to find opportunities in the current volatility in the hopes this marks a short-lived downturn instead of a long-term market contraction.
So, why is crypto crashing?
There are several factors which may have contributed to the newest drawdown. Investors generally are moving far away from risky assets like cryptocurrencies as U.S. policymakers tighten the monetary supply. That has pushed crypto prices lower, which is putting stress on institutions and other large players within the field who made investments near the top of the market. There are also other specific issues that are contributing to continued decline, such as UST losing its $1 peg and how investors have responded to that.
Crypto investing has never been for the faint of heart. Digital assets are volatile and such fluctuations have happened before. Though the factors driving each crypto crash are different, it is often helpful to recollect a couple of established investing principles.
When negative sentiment is spreading in crypto circles, some people describe the sentiment as “FUD”, or fear, uncertainty, and doubt. Though these emotions can assist you to identify red flags, it is vital to stay a level head and to believe whether short-term instability affects your long-range plans.
This is often the beginning of a protracted period of low prices, but that does not mean it’s game over for crypto. So, what does one do when digital assets like Bitcoin crash? Here are three things you to keep in mind:
1. Don’t panic
The desire to panic-sell — or panic-buy because you think that crypto is “on-sale” — is understandable. Nobody wants to see the worth of their investments halve, and it’s tempting to chop your losses and look for other opportunities. But if you are doing this, you’ll be locking in what you’ve lost. The market could rise again next week, and if you’ve sold your crypto, you will not benefit. It’s true this is often a comparatively new and untested market, but thus far, the market has always risen back.
Similarly, on panic buying, you’ll think now’s a good time to buy the dip, but don’t rush into that call. Check out what is going on within the market, and confirm you are doing your due diligence on each asset / coin. Sometimes the push to obtain a bargain causes people to skip the traditional research they’d do on a specific coin or token. Most of all, only invest money you can afford to lose. Prices may go down more, and you do not want to be left shorthanded in that case.
2. Check out the larger picture
There’s a lot of commentary about why crypto is crashing. Most observers put it right down to a mixture of a hawkish Federal Reserve System pulling back on economic stimulus measures, uncertainty over increased regulation, and concern over rising tensions between Ukraine and Russia.
The question is, what proportion do these factors impact your long-term view of your cryptocurrency investments? The Fed’s moves mean the broader economic climate could also be risk-averse for the near term, and that we might not see the large leaps we saw in 2021. But if your original investment thesis holds, then you ought to hold on as well.
3. Know that volatility is normal
Whether it is the stock market or the crypto market, there’ll always be downturns; more so with cryptocurrency, because it is a volatile and high-risk investment. The flip side of those significant drops is the incredible gains that certain cryptocurrencies have produced.
But the high level of risk is why it’s important to form sure it only represents a part of your diversified portfolio. With high-risk assets, like crypto, you should only invest money you can afford to lose. Bitcoin has halved in value several times since it launched — but it has also gained in value almost every year since its launch. Hence, you need to know volatility is part of the game!
The first time you experience a crypto crash, it is often bewildering and hard to make sense of the best course of action. Make sure to take a longer-term view of where you believe the market can be, and what has happened in the past, but most importantly don’t let your emotions rule your head and make rash decisions.
InvestorAi Crypto might be your answer
Crypto markets are volatile and need rigorous research to time the market correctly. But a lot of existing and potential crypto investors do not have the time or confidence for this. So, to help you enter this magical world without getting lost, we are launching a first-of-its-kind crypto app that uses artificial intelligence powered recommendations combined with trading bots that monitor your strategies 24/7!
InvestorAi Crypto has 2 strategies to choose from:
- Alpha Hunter
The objective of this strategy is to identify the right trades and trading cycle to maximise risk-adjusted returns. This strategy has higher risk but has also potentially higher returns. The AI dynamically selects a combination of 4 or 6 currencies and a trading cycle time based on the prevailing market conditions and predictions for a universe of 30 cryptocurrencies.
- Smart Accumulator
This trading strategy targets to accumulate more units of BTC. It does this through avoiding price dips and buying back at a lower price. The trading cycle will run continuously until you ask it to stop. The algorithm will compute the probability of BTC going up or down over the next 6 hours, switch you to USDT if the sign is showing a strong down, and will switch you back at the right time
And just to tell you how our strategies are performing during live testing in such market conditions, here’s one use case:
One of our users had invested $200 in each strategy. Alpha Hunter aims to give you low volatility exposure to top cryptocurrencies and Smart Accumulator aims to take advantage of price falls to gather up more units of Bitcoin (or Ether).
Both strategies behaved exactly as they were meant to even in a severe down market.
Alpha Hunter (down 5.9%) outperformed BTC (down 14.7%) by 8.8%. Accumulator, also down in value terms, showed a 5.5% accumulation in 11 days.
In both cases, the user was better off being in the strategies as compared to doing nothing. Some of our conclusions from this are:
- In a UP market, Hunter is likely to make you money, Accumulator will probably do nothing.
- In a DOWN market, Accumulator is likely to get you more Bitcoin (or Ether) and Hunter might give you some downside protection.
Volatility is a part of life in crypto markets. But InvestorAi Crypto is likely to give you a way to enter the market while helping reduce the research burden and support you in controlling your risk.
We are launching soon, so pre-register today to get the app before the world does: https://investorai.co.uk/crypto
Stay strong, stay vigilant, stay calm but above all, stay invested.
About the Author: Surmila Sen Roy is a Brand Manager at Bridgeweave, the company behind InvestorAi, a FinTech firm that creates AI powered next generation products to improve financial wellness and expand wealth enablement into the digital space.