How to save yourself in a crypto crash

The recent crypto crash caused a lot of panic and with Bitcoin being over 70% down, it’s hurting more and more people every day. In the past week, around 500K Bitcoins were sold; out of these, 150k Bitcoins were sold by long-term holders.

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Jay Crypto

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Last updated Jul 27, 2022 at 6:59 PM

Posted Jul 22, 2022 at 4:00 AM

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The current crash pushed even the long-term holders to panic and sell their holdings. The cryptocurrency cycle of major and minor dumps in the market causes crypto holders, particularly retail buyers, to ‘panic sell’ their assets at lower prices. 

To make sure this doesn’t happen to you, here are some key points you can follow to stay at an advantage. 

How to save yourself in a crypto crash 

Long-term Perspective: 

Cryptocurrencies are wildly volatile and prices drop in minutes, but this volatility means the price gains are also rapid. Before declaring a situation ‘bearish’, switch the price chart to a longer time period and

see the bigger picture. No coin surges consistently: there are always dumps and pumps and you need to identify these. 

The left chart below is a daily time frame that shows the price movement in the last 8 to 10 months. Since the time frame is shorter, it shows only the dark side of Bitcoin. However, when you shift to the weekly chart and zoom out, as shown in the right image, you realize that the current dip is nothing but a part of the cycle and Bitcoin is ascending steadily. That’s how time perspective can change the way you look at a situation. 

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Bitcoin daily and weekly chart trend comparison 

Avoid Panic Selling: 

It’s natural that you want to cut your losses when the crypto market plummets, but again you need to look closely at the situation. If you’re a long-term holder, the short-term dumps shouldn’t bother you. People panic and sell to cut their losses and enter the market at a lower price, which is not defined – and the market might never hit that level.

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Understand the reason: 

Understanding the reason why the market is falling is of vital importance. The reason might play a pivotal role in your decision-making. Exiting the market at the right time might prove the best decision if there’s something negative about your coin or token. Recently this happened with Terra Luna holders. The coin experimented with an algorithmic dollar-pegged stable coin which proved fatal for both native token Luna and stable coin UST. The price fell to almost zero from $45 in days and has little hope of recovering. 

If such a situation occurs, you must be aware of it. If at least you know what’s happening to the coins you are holding, a well-timed exit can save you. 

Diversification: 

“Never put your eggs in one basket” is the best approach. Diversify your portfolio and divide your investment into multiple assets. Don’t merely buy different coins – or only cryptocurrencies. 

If a dump like this hit you, crypto would be just a part of your portfolio, not everything. This saves your portfolio from losing 70% or even more in a dump. 

Ladder Strategy: 

The ladder strategy works both in entry and exit from the market. This is also called ‘Dollar Cost Averaging’. Do not enter the market with all your investment considering the situation a final dip. Bitcoin was at $69,000 in November 2021 before it started tumbling to where it is today. A person holding funds to enter the market might have thought $49,000 a dump, while for another person, $28,0000 was the final dip. Eventually, Bitcoin bottomed at $17,800. Thus, for a person who bought the dip at $49,000, the current value is extremely low and worrying. 

Always divide your investment and spare only a part of it to buy at the current price. Always remember, trading works on Fear and Greed. Learn to enter the market when everyone is afraid of it and leave the market when everyone else is greedy. The ladder strategy gives you an overall better entry and exit point than going all in at a single point.

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