Crypto Survival Guide: 5 Things to Remember When Bitcoin Drops
Bitcoin is crashing. It was trading at around $20,000 just five days ago, on December 17, and now it has dropped as low as $11,300. If you had bought one Bitcoin at around $19,000 in the past week, you are now looking at a loss of $7,000 or $8,000, which is understandably hard to digest.
Please note that this is not financial or investment advice, nor is it any sort of recommendation – ultimately, you are responsible for your funds and your decisions, and anytime you invest in cryptocurrencies, the assumption should be that you have already lost that money.
Now, moving forward, there are a couple of things to remember in times such as these.
#1. There are a lot of trolls on Twitter and Reddit (or any other channel)
It is natural to turn towards the community when Bitcoin crashes and anxiety sets in. You want to know what everyone is doing – are people selling? Are they holding? What should I be doing?
The truth is, hardly anyone tells the truth on the internet. On Twitter you will see people claiming they saw the crash coming from a mile away and sold all their Bitcoin three days ago. You will see people claiming they cashed out around the time everyone else was buying at the top, and so on.
Yes, some people get lucky and some, with no guaranteed accuracy, determine price movements with technical analysis; but not nearly as many people are ‘always right’ as they would have you believe. People only post the good stories, and often even make them up or exaggerate them at the very least.
Moreover, a lot of the comments and Tweets you may be reading are going to be from people who are not even invested in Bitcoin and are just having fun spreading FUD.
The best thing you can do, if you believe in crypto, is to stay away from social media during a crash, and if that’s not possible, just take everything with a ‘spoonful’ of salt.
#2. ‘Panic’ selling is a guaranteed way to lose money
Remember when you bought Bitcoin at $18,000 or $19,000 and saw a little profit when it went up? That was on paper, it didn’t mean much because you didn’t cash out (and that’s what you’re probably regretting now).
Similarly, the loss you now see in red, however much it may be, is also just on paper. You will not realize that loss unless you sell.
Now, obviously that is tricky – because if you do manage to sell before Bitcoin drops further, you cut your losses. But no one really knows how far it will fall, or how fast it may recover. You may very well save yourself further losses by selling now, but the only way to recover from that loss is to buy lower and increase your Bitcoin holding in the hopes that it will go up and average out your investment.
Unless you get a chance to do that, and that’s still a ‘chance’, you are definitely losing money as soon as you sell. That’s why it is important not to ‘panic’ sell, because you are almost guaranteed to be irrational when panicked.
#3. This is not the first time Bitcoin has crashed
You may have bought Bitcoin recently, and this may very well be your first crash; but it is Bitcoin’s 5th this year, and 12th since 2010.
In March this year, Bitcoin fell from a high of $1,300 to a low of under $900, which is a 33% drop; in June, it dropped from $3,000 to $1,800, a drop of almost 40%; in September, it went from $5,000 to under $3,000 - another 40% drop; and in November, it went from $7,900 to $5,500, a 30% decline.
Each time Bitcoin dropped, it came back with a new high, and while there is no guarantee that it will happen this time as well, it is something to keep in mind.
#4. What goes up, must come down
There are no guaranteed wins and profits in life, or in Bitcoin. If it was as simple as buying in and waiting for your money to double, there would be no point to this. Corrections and drops are normal and healthy – they happen, they have to happen and they will continue to happen.
There are a lot of factors that could be affecting Bitcoin’s price– people may be taking profits, the market may be oversold, or it may just be the upcoming holidays, when people want to take time off from monitoring the markets, so they cash out for now.
This crash is very unlikely to be the end of Bitcoin and more likely to be a normal, temporary correction; so if you are in this for the long-run and believe that cryptocurrencies are the way of the future, you could be better off holding.
#5. Everything is cheaper now
No one ever got crypto-rich by buying high and selling low. It’s always about buying the dips (like this one) when everything becomes a lot cheaper. Once again, the assumption here is that you are not interested in selling off your coins and stepping away from crypto for good (or you wouldn’t be reading this). If you are in this for the long term and want to accumulate, there is no better time than a correction.
If you are thinking about picking up some altcoins at this time, you may want to purchase them in steps, rather than getting them all at once. That way, even if prices continue to fall, you can keep catching the dips, rather than buying it all at one price and then watching it drop further.
Finally, it cannot be stressed enough that cryptocurrencies are largely speculative investments. They are ideas, trials and minimum viable products that people bet on to gain traction and become everyday realities.
If you got into the market to make a quick buck, without understanding the dynamics, you are going to find yourself struggling. The same goes for people who are taking huge financial risks (mortgages and loans) in hopes that they will make it big via crypto.
Please be responsible, do your own research and only invest what you are willing to lose. It sounds like a cliché now, but it is the truth and the market will, every now and then, make sure we don’t forget it.
Nothing in this article is to be construed as investment advice. Neither the author nor the publication takes any responsibility or liability for any investments, profits or losses you may incur as a result of this information.