Once it comes to Cryptocurrency‘s volatile market, don’t claim strong pumps without expecting big drops. Nothing goes up endlessly. Everyone thinks they are Crypto experts when it is a bull run dominating the market. Until the wave hits and people start panic selling.
So what do you do when the prices start falling down? Do you start selling your coins or HODL them till the end?
Once you finish reading this article you will know what exactly to do in such situations and stand out from the crowd. Let’s begin.
What is panic selling?
Simply said, when sell orders outnumber buy orders on high volume Crypto starts to decline. This often happens when some events force people to sell their holdings or when short-term traders manage to pull the price down far enough to trigger long-term stop-losses. Such a phenomenon is inevitable and is part of the market.
Many people don’t understand what they are investing in and how the market works. That’s why they start panic-selling when they see a small or even major decline. Yes, I know it’s not easy to remain calm when the market comes crashing down on you. You need to mentally train to cut off your emotions during your investing journey. This is one of the 6 important steps of how to invest in Cryptocurrency.
How exactly panic selling happens:
- Something occurs that causes the price to decline on the high volume.
- Sellers and buyers fight for control of the trend. The winner takes the trend on the low volume.
- If after step 2 no significant changes occur then there is typically another point of high volume in which a substantial reversal (long or short term) may occur.
- This process continues until a long-term is established and confirmed with fundamental and technical factors.
Why do people panic sell?
People tend to sell their Cryptocurrency holding because their fear of losses is greater than the joy of gains. Besides that, some people invest money so they can withdraw it 2 weeks later in hopes of profiting. Unfortunately, that’s far away from the harsh reality.
Some investors use money that is essential for their daily life (expenses, bills, groceries and etc.). That’s why even a small drop in value might scare them, resulting in panic selling. Investors also act irrationally trying to “play it safe”. Trying to “play it safe” justifies their decision to sell – making their losses become real.
Nobody knows exactly whether the price is tanked at the top or it just hit the bottom (Well unless the price is 0). There is always room for a course of events. The price might break its past all-time high and go higher. It can also break its bottom and go lower.
That’s why investing in Cryptocurrency requires a different approach from stocks. Don’t get nervous because your portfolio dropped 20-30% in a day. It’s Crypto – it happens.
How to avoid panic selling?
There are several things that are going to help you maintain your frame while investing. No matter what rollercoaster ride the market takes you to.
Don’t act based on emotions
Emotional detachment is the key to becoming successful investor. Being highly reactive to your emotions is what makes you vulnerable in the market.
Develop long-term thinking
Hold your horses if you invest in Cryptocurrency only with a plan to make some profit and withdraw it a couple of days later. That’s what’s called gambling. For example, if you want to accumulate profits with Bitcoin, selling is not so good idea. Unless you are an expert trader who knows, based on your experience, how to optimize price dips and price surges in your own favor. The whole history of Bitcoin shows that just HODLing and buying the dips is a way better strategy than selling it. Do your own research, be confident in your investment, and keep it for the long term while buying the dips when other people sell.
Only invest what you can afford to lose
Don’t rely on getting lucky. You definitely don’t want to invest your whole month’s salary if you know that there are bills to pay and other expenses to take care of. Set a specific budget for yourself. For example, if you have 1000$ for investing it’s not necessary to invest the whole amount right away. As mentioned, there’s no way to know exactly when the market will bottom out and begin its rebound. But by investing the same amount of money in a certain investment on a consistent basis (such as monthly or weekly), you can reduce the effect of the ups and downs.
Panic selling is very common. Unfortunately not every person has a mindset strong enough to resist this feeling. Nobody starts out as a pro but proper learning and experience help you to get there. Be a visionary – don’t mind small losses when there are big gains ahead.
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