Crypto market is very, very volatile and that’s why every good crypto trader advises that you need to DYOR (Do Your Own Research). What do we mean by DYOR?
It simply means that you need to understand the project before you invest in it. At the same time, you also need to understand the consequences of investing in a project because it could turn out bad as well. There is always a 50/50 probability with unconventional assets about their outcome.
#Cryptocurrencies except for leading ones like Bitcoin, BNB, and Ethereum, are often valued more on hype than substance, with many lacking a working model. To prevent panic selling in the crypto market, it's crucial to first grasp what panic selling actually means.
First of all, what is panic selling?
#panicselling is when you sell out of fear that the price of your asset is going down. It is a common reaction across all financial markets. It is also called FOMO (Fear of Missing Out) - which is often associated with the opposite behavior but can very well explain the panic selling behavior as well.
So, how do you make sure that you are not panic selling? What are some of the strategies you need to use to make sure that your moves are constructive and based on logical planning?
Well, to be honest, markets around the globe have recessions and expansions - we call them ups and downs or bearish and bullish - they all mean the same thing.
To prevent panic selling, investors should adhere to a well-crafted investment plan that they can revisit during emotional turmoil.
Here are some key strategies to help avoid panic selling:
Understand the Fundamentals of Cryptocurrencies
If your investment is in a cryptocurrency with solid fundamentals, there is usually little reason for concern in the long term. Especially market conditions won’t impact it much.
To find cryptocurrencies with solid fundamentals, read about their use cases and learn about their backers and funding. Who are the key players for that cryptocurrency, which financial institute has funded that token? Find answers to these questions and see if the institutes behind that token are trustworthy.
Invest What You Part With
There is a wise saying: Invest what you can part with.
When you are investing in volatile currencies like cryptocurrency, only invest the capital that you can afford to lose. This means don’t invest the capital that you will be needing for your daily or emergency needs. This will help you stay out of FOMO conditions and not to panic and withdraw at the first sign of trouble.
Have a Long-term Vision
Investments take time. You cannot expect to become a millionaire in just a year or two. It took Bitcoin 7 years to grow to just $26 initially. Now it stands at $70,000 after 15 years.
So, when you invest in a good cryptocurrency, don’t look at it every now and then. Give it time to scale to new heights. Short behavioral changes and bearish movements in the market won’t impact its long term growth.
Be Prepared for Market Volatility
All financial markets are volatile. They are impacted by news, events, and governments. Accept this as part of the market culture as this is something that will stay. Instead of worrying about these movements, learn to embrace them and be mentally prepared that they will arise from time to time.
Markets always have historically recovered. Although sometimes they take more time, recovery is always inevitable if the assets are chosen wisely.
Buy the Dips
Learn to ‘Buy the dips’. This is another important concept in trading. You always need to have extra cash available to buy the dips in the market. According to most traders, there are 10 days every year in the market where investments can gain exponential profits.
Keep at least a 30% amount in cash to buy more of what you have already bought during the dips. This will help you not only reduce your buying price but also reap more profit during market upward movements.
Always Focus on Dollar Cost Averaging
The whole purpose of investing in cryptocurrencies or any other financial markets is to stay above inflation. How do you do that? By doing dollar cost averaging or DCA in short.
The strategy is to consistently purchase small quantities of the asset at regular intervals—whether weekly, monthly, or quarterly. By doing so, you naturally average out your buying price, minimizing potential losses. This approach helps reduce the emotional stress of market fluctuations, as it emphasizes steady accumulation over attempting to time the market perfectly.
To sum it up, successful crypto investors maintain emotional detachment, have a strong, long-term investment strategy, and focus on robust, functional cryptocurrencies. By adhering to these principles, you can navigate market downturns with confidence and resist the urge to panic sell. For further guidance on managing emotions in trading, consider reading resources on emotion management in trading.