How to survive the crypto crash

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The start of 2022 has been absolutely brutal for crypto investors. Bitcoin has plunged to its lowest levels since July 2021. Other coins, like Ethereum, Cardano and even Dogecoin, have followed suit. 

In times like these, it can be easy to run away scared or feel helpless. But good investors know how to deal with bad times just as well as good times. Here’s our guide on how to survive the current crypto crash. 

Ask yourself: are you in this for the long run? 

This is the most important question you can ask yourself. No one knows whether crypto’s bubble has finally burst, or whether this is just a small setback on the way to glory. On the one hand, this is a huge decline for the market, with over $1 trillion wiped out. 

On the other hand, this has happened before. Bitcoin saw huge declines in 2017 and 2021, before it rose to new records. 

You need to ask yourself whether long-term, you think this crash is temporary. If you do, then panic selling is not in your best interest, as you’ll just be locking in losses that might go away as crypto recovers.

If however, you believe that this is the beginning of the end for crypto, then maybe it’s time to start figuring out how to diversify away from your current investments into something you believe has more long-term potential.

Take advantage of short-term volatility 

A crash is not just a straight line down — it’s filled with ups and downs. Active investors will buy and sell positions fast, hoping to catch those rare moments when a coin rises, and selling before it falls again. 

This is a quicker version of buying the dip — when people buy a coin as soon as it crashes because they think the price is now cheap, and it won’t go down any further. 

Be careful here though — trying to make money off a falling stock or cryptocurrency is what people in the financial world call catching a falling knife. You have to have very good timing, a bit of luck, and you’re still very likely to get hurt. 

See if value-averaging investing is right for you 

If you’re not one for knife juggling, there are safer ways to deal with volatility, like value-averaging.

An investor who does value-averaging basically invests a small amount regularly. This way, they smooth out the peaks and troughs of market movements. Sometimes they buy when markets are about to go up and make a ton of money, and sometimes they buy just before a crash. This way, they average out the volatility of both, hoping to get a reasonable return. 

All of this depends on the market going up over time. Nothing will save you from a market that only keeps sinking, apart from shorting the whole thing, but that comes with its own risks. 

So if you’re still a crypto believer, and you want to soften the blow of this latest crash, make sure you’re not making any rash decisions now. Volatility is hard emotionally, but with the right attitude, you can also overcome it.

Photo by Ivan Babydov from Pexels

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