This article is one of the important articles that must be read well to benefit from it in the crypto market because it provides us with the best strategies to confront selling during volatile market cycles, set clear investment goals, maintain emotional discipline, and advice from experts to help investors make the right decisions during periods of market stagnation.
*Bear markets are rife with panic selling, which is the act of exiting a market at a low price based on fear. While the fear of missing out tends to apply more to buying when markets are in an uptrend, panic selling is more closely associated with bear markets. The Fear and Greed Index distinguishes between the two using a measure based on market sentiment, allowing anyone to monitor market sentiment before making a trade.
Panic selling is not unique to cryptocurrency markets, in fact, it can be found in stock and financial markets as well. People have an inherent trait that allows fear to override reason, often leading to poor choices, especially in the investment sector.
Fear is often triggered by news, especially in the US, China and the UK, where fear, doubt and suspicion spread like wildfire and stock prices can drop in an instant. Take Elon Muskâs tweets about Bitcoin and Dogecoin and the media hype surrounding this as a prime example.
To avoid this, traders should create an investment plan that they can stick to and refer to when emotions get the better of them. To avoid any pain when it comes to investing in cryptocurrencies, we suggest you pay close attention to the following indicators.
How to Avoid Panic Selling
If you find yourself tempted to take an unprofitable action, consider the following tips on how to avoid panic selling altogether.
Always go back to basics.
When it comes to making any decisions in cryptocurrency trading, always go back to the primary goal: the value proposition of the cryptocurrency. While there werenât many early investors, many have since entered the market to take advantage of the incredible gains that cryptocurrencies have offered over the past few years.
When in doubt, donât get carried away by the price action and instead go back to the cryptocurrencyâs value proposition. If you invest in a cryptocurrency with great fundamentals that you believe in, there should be nothing to worry about in the long run. Similar to buying a property in a good area of ââtown, as long as the neighborhood remains that way, your investment is solid.
Consider reading a research paper or two on cryptocurrencies to learn about their use case and use case potential, in order to weed out the riskier assets.
Start investing capital you don't need.
You've heard the saying "never invest more than you're willing to lose" but keep this in mind: If you invest $100 that you're counting on every month if the market goes down, you'll need to withdraw the money as soon as possible to cut your losses because you need that money to survive.
On the other hand, if you invest money that you don't need that month or in the following months, small changes in prices will carry less emotional weight and you will have a greater chance of realizing long-term benefits.
Focus on long-term results.
Anyone who has invested in the cryptocurrency market knows that in ten years, the price of Bitcoin has risen from a few cents to $67,000. While these returns are almost unbelievable, keep in mind that it took a decade to achieve them.
Although the markets have since fallen, the long-term returns are still impressive and definitely worth taking advantage of. Any smart investor will always keep an eye on the long-term perspective. With increasing adoption by countries around the world integrating Bitcoin into their financial systems (some even allowing citizens to pay their taxes in the cryptocurrency), there is still a lot to be done.
There's no denying that we've all become accustomed to instant gratification, but take a look at the following average yearly prices for Bitcoin and see the value in focusing on the long term:
2015: $500
2016: $900
2017: $15,000
2018: $8,000
2019: $10,000
2020: $9,000
2021: $40,000
Prepare for setbacks and accept risks.
The cryptocurrency market is notoriously volatile, and the best way to deal with this is to accept it. Markets have been known to lose thousands of dollars in a matter of hours. If you want to invest in the best performing asset in history, you need to be prepared for this.
While Bitcoin has lost more than 85% of its value multiple times since its inception, it has regained that value each time. Even individuals who bought Bitcoin at $20,000 in 2017 regained their value and then some during the December 2020 bull run.
Be prepared to sit through some market dips, but know that they will recover. If you focus on the long-term perspective and use capital that is not dependent on it, then market dips and declines should not be harmful factors.
This is crucial: never invest more in cryptocurrencies than you can afford to lose entirely. Yes, as fun and profitable as cryptocurrencies can be, there is a real risk of losing everything you have invested.
If the only money you have invested is money that would be nice to see go down to zero, it eliminates a lot of the panic during dips and crashes. Panic comes from over-leveraging money you need for rent, food, or other critical expenses. This causes weak hands.
Set firm rules â and stick to them no matter what!
Set some simple rules in advance to govern your buying and selling decisions, and then follow them like a robot no matter how crazy the market gets. Make decisions about things like:
* What percentage of profit will you make from the profits? (eg selling 25% of my bitcoin if it doubles)
* What percentage drop would you automatically sell to avoid bigger losses? (e.g. sell if my ETH price drops 40% from my entry point)
*How much of your investment portfolio will you invest in any one asset?
Use trusted and reputable trading platforms.
Speaking of executing buy and sell rules smoothly, you want to use trusted and tested cryptocurrency and trading platforms â especially during peak periods of volatility and volume.
* Sites like Binance, Coinbase, Immediate Next Gen, Gemini, and Kraken are veterans of cryptocurrency trading.
Their platforms are designed and built to handle crazy traffic spikes during market turmoil without any glitches.
* So, do yourself a favor and stick to major exchanges and platforms like Binance and pay a little extra if necessary â itâs totally worth it to prevent the panic of not being able to trade or view prices when you need them most. Not having a reliable platform during downtime will only exacerbate panic selling impulses.
Keep calm and hope for the best.
Sometimes the best cure for panic is simply to take deep breaths and meditate â both mentally and on your trading charts/portfolio overview. During dips and crashes, your mind can easily get caught up in a vicious cycle of short-term rumination that amplifies feelings of fear.
When you hit refresh every 30 seconds, watch price fluctuations second by second, and focus excessively on your temporary unrealized losses, you are feeding the emotional frenzy that leads to panic selling. At some point, you go from watching the market to obsessing over it in an unhealthy way.
This is the time to take a complete break â close your trading window, turn off your phone, and step away for a while to clear your mind. Getting some fresh air, calling a friend, or taking a shower can completely reset your mind in just 15 to 20 minutes.
Don't go through this alone - talk to others.
Finally, you donât have to panic all by yourself. Having a cryptocurrency friend, a great online community, or even just one voice of reason you can turn to can go a long way in helping you stay calm when prices go crazy.
Reference links :
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