The crypto market is volatile and keeps even the most experienced investors on their toes. Crypto market downturns are frequent events due to the dynamic nature of crypto assets. However, the volatile nature of crypto has also benefited investors who have done their due diligence to time the market well. Factors such as increasing inflation, interest rates, and other macroeconomic factors can extend a crypto bear market. Other factors, such as legal and regulatory actions from financial governing bodies, can also result in crypto market crashes. So when a booming crypto market plunges, it’s common for panic to set in. However, a strategic approach to crypto investing can mitigate the risks of a market crash.
Investment strategies in a Crypto bear market
Different factors affect each crypto bear market, but following some established investing principles can help safeguard yourself from a crash. This blog will highlight six aspects for investing in a crypto bear market. Please note that this list is based on internal research and is not an exhaustive list. Readers should not consider the below points as investment advice.
1) Keep calm:
It is common for investors to panic and sell their crypto once the market takes a nosedive. Some see an opportunity to buy more, but keep calm before taking the next course of action. Making emotional investment decisions can lead to heavy losses.
2) Assess the current market situation:
Investors should determine the next course of action after calmly assessing the current market situation. They can exit the market or invest more in the dip, but they should evaluate the market situation before taking the next step.
3) Keep an emergency fund.
It is vital to have emergency funds before investing in crypto. You can decide to invest in the dip or use it for other purposes when your crypto investment is at risk.
4) Buy the dip:
Investors who have emergency funds or have expendable funds in their accounts can buy the dip. This refers to investors buying crypto whenever there is a dip in the crypto market. The objective is to make a profit when prices return to their previous highs.
5) Diversity in your crypto portfolio:
It is hard to predict the end of a crypto bear market and harder to know which crypto will rally the highest. So it is always a good idea to diversify your portfolio to mitigate crypto market crash risks.
6) Consider potential future developments:
Many countries are considering how to regulate their crypto markets. Investors need to consider the future of crypto protocols and re-evaluate their risk appetite when their crypto holdings are in a tough spot.
These are six things you can do to mitigate the risks of a crypto market crash. The crypto market is volatile but offers many opportunities to buy the dip during a bear market. It is vital to keep emergency funds and be calm before making any investment decision.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Each investor must do his/her own research or seek independent advice if necessary before initiating any transactions in crypto products and NFTs. The views, thoughts, and opinions expressed in the article belong solely to the author, and not to ZebPay or the author’s employer or other groups or individuals. ZebPay shall not be held liable for any acts or omissions, or losses incurred by the investors. ZebPay has not received any compensation in cash or kind for the above article and the article is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.