It is no secret that the crypto space is swayed by volatility. Investors have witnessed the crypto market crash and then soar to the greatest heights within a jiffy. It is the very volatility of the space that has attracted profit-builders over the years. On the flip side, this aspect poses to be nerve-wracking for investors looking to build a sustainable crypto portfolio.
In recent times, the crypto market crash has led to a wave of a global scare. Assets have been brutally crashing with top tokens significantly sliding. The losses have ranged from high margins of anywhere between 30% to 90%. Bitcoin, the biggest player on the block, has suddenly plummeted below $30,000. While the ongoing crypto market crash reassures us of the possible fall and emergence of crypto assets, it is also important to stay well-equipped. Without further ado, let us help you understand how to best prepare for a crypto market crash.
Key Points
- Startling market crashes are part of crypto investing
- Prepare well to reduce the jolts of a crypto market dip
- Invest through the Crypto Investment Plan to reduce market risks
- Invest as much as you can afford to lose
Also Read: Crypto Bear Market 2022 vs 2018
Why is the Crypto Market Crashing?
Yes, the crypto market has plummeted to an all-time low over the past few days. It has seen a value-dip of almost 56 percent, leaving investors worrying across the globe. Experts believe that there are innumerable factors at play. To begin, the global financial market is battling an increase in inflation. There is growing tension in Russia and Ukraine while the economy of Sri Lanka is becoming more and more unstable. Closer home, the Indian rupee has fallen to a fresh record low of 77.69 (as of 17th May 2022) against the US dollar. The current happenings have a significant impact on the performance of the financial market.
Simply put, the fall in value has been witnessed across the investment spectrum. However, the crypto market is observing a relatively deeper dent owing to the rapid sell-off sentiment among investors. These collective aspects ultimately exert immense pressure on the overall performance of crypto assets.
Additional Read: What is a Crypto Bear Market?
Has the Crypto Market Crashed Before?
Economic down tours and sudden market dips are a part of the economy. These stressful periods work to create a healthier system. It is not the first time that the crypto market has witnessed a shaking crash. Over the years, there have been periods of dips with sustainable highs. Back in July 2021, the crypto market did jolt downwards before making an ascendance. The world’s largest crypto asset i.e. Bitcoin dropped to the value of $27,194 (as on May 12, 2022), just as it did in January 2021. It has currently lost over half its value since it hit its peak of $68,990 in November 2021.
Additional Read: Crypto Crash Reasons
How to Prepare for a Crypto Market Crash in Advance?
There is no reason to be taken aback in times of a crypto market crash. What investing aficionados do suggest is preparing well during these down tours and rebalancing your investment act. Read on to understand how you can best prepare for a crypto market crash in advance.
1. DYOR
As with any market, you must develop a good sense of its functions. Take time to review the dips and peaks, with the possible long-term effects. Evaluate assets that move beyond the bigger market names like Bitcoin. Importantly, review the whitepaper before you place your bets on any given asset. It is the holy grail that contains all the information that you require to understand before you invest. Conducting appropriate research will go a long way in making well-initiated decisions.
2. Diversify your Crypto Portfolio
We said it before and we say it again – Diversify, Diversify and Diversify! Diversification stands at the core of building a well-balanced crypto portfolio. It helps you make it through the volatility of the market. Every wise investor creates a basket for a portfolio that includes a slew of assets. Work on an effective allocation strategy to avoid long-term negative bumps.
Remember, never put all your eggs in one basket.
Additional Read: How to Diversify your Crypto Portfolio
3. Invest for Long Term(HODL)/ Only Invest the as much as you can Afford to Lose
Investing is an effective way of building long-term wealth. It allows you to grow your assets and reap the best benefits over the years. As a wise investor, you should be well aware of your risk appetite and ability to sustain market trends. Irrespective of the market class, you must invest only as much as you can afford to lose. As you must already know, the crypto market is characterized by volatility. This makes it even more important to carefully stride on your journey of asset building. The Crypto Investment Plan by CoinDCX is a great platform that allows you to invest and reap potential long-term benefits on your crypto share. It comprises putting in a fixed amount towards building your crypto goals. This approach does wonders in helping to build a stable crypto portfolio.
4. Make Sure to Have an Emergency Fund
An emergency fund goes a long way in securing your interest. It acts as an umbrella in times of a sudden downpour. You must always be prepared to face unexpected financial disasters. Try to maintain a minimum of six months’ worth of living expenses. This way, a sudden tide such as the crypto market crash will not impact you as badly.
5. Do not Become Disoriented
Investment assets have always dipped and climbed from time to time. Do not be overthrown by the sudden fluctuations. Keep track of your emotions and do not let them impact your investment journey. Investment decisions must be made wisely and rationally. Pacing through with rational judgment is the only way forward.
Start investing safely in crypto with CoinDCX, crypto investment app.
Bottom Line
These times may have rattled you, however, it is also an opportunity for greater growth. The long-term fundamentals of the crypto space are in place. Reassess your goals to understand why you plunged into the crypto space. In hindsight, investors now have an opportunity to garner a bigger share of potentially valuable assets. As an investor, holding on to your long-term goals is the way to make it through these uncertain periods of the crypto market crash.
CoinDCX brings to you the latest updates on the crypto space. Stay tuned for the trending crypto news with the CoinDCX Blog.
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