Five essential strategies to manage a bitcoin down cycle, from avoiding FOMO to having a plan

 



Even within the longer-term trends known as bull and bear markets, the Bitcoin and cryptocurrency markets have experienced several cycles of rise and collapse since their launch in 2009. Although market declines have, so far, been followed by recoveries and strong gains, experienced traders and novice investors alike may find it difficult to manage these times.


Here, we go through five tactics you might wish to employ during a market downturn in order to preserve the value of your portfolio, stay away from irrational trading decisions, and suffer less loss.

Avoid succumbing to FOMO and FUD

Keeping up with the most recent news and developments in the bitcoin industry is essential, but too much knowledge may be harmful. This is especially true during market downturns, when it's all too easy to let your emotions take over and place some transactions at the wrong moment.
  • In the world of cryptocurrencies, the phrases "FOMO" and "FUD" are frequently used, and they might have a bigger impact on our buying and selling decisions than many of us would like to acknowledge.
  • FUD often refers to a negative market mood that is brought on by a rumour, adverse news item, or a well-known individual voicing worries about a specific market or asset. As traders sell their shares in anticipation of additional price declines, this may have a negative impact on the price. The opposite is FOMO, which describes a trader's propensity to lose sight of fundamental indications in a rush to board the next spacecraft to the moon after witnessing encouraging price movement or news.
Always keep in mind that no one can foretell the future, and you should never rely on someone else's advise instead of conducting your own research and drawing your own conclusions. Influencers and publications may occasionally have a financial stake in spreading FUD or FOMO in order to steer the markets in a particular way. Always attempt to confirm with several sources while learning about the most recent developments throughout bitcoin marketplaces.

Set specific objectives, diversify, and only engage in trading within your means as your second strategy.

You should never invest more money than you can afford to lose, regardless of how sure you are in a certain item. Nobody likes to experience an emotional rollercoaster while watching their portfolio's price progressively decline while hoping for favourable price action. In order to diversify their portfolio, the majority of astute investors also decide to keep a variety of various assets for an extended period of time, from alternative cryptocurrencies to stock market index funds.
  • Cryptocurrency is often quoted as not sleeping. Because the cryptocurrency markets are notoriously volatile, cryptocurrency investors should plan out their trading strategy, including, if at all feasible, their entry and exit points.
  • Even if you had access to all the information, a black swan occurrence, hack, or tweet from a well-known person might send values plummeting. This is why it's so important to prepare in advance and to take action to reduce your losses in the event of a rapid fall.
  • Investors may want to think about using set tactics like dollar-cost averaging, which allows buyers of cryptocurrencies to fully avoid trading on emotion or having to keep their eyes glued to the charts. Dollar-cost averaging is the practise of purchasing or selling modest quantities often.

Thinking strategically and long-term

The adage "it's not a loss until you sell" may only be partially accurate, but it still has some merit. Unrealized losses, or decreases in asset value since acquisition, are only recognised when an asset is sold for less than the original purchase price.
  • Long-term holding has so far been a successful tactic, with Bitcoin emerging as maybe the most successful large asset of the previous ten years.

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