The recent significant drop in crypto markets is typical for cryptocurrencies. Cryptocurrencies are known for their high volatility, i.e. sharp price fluctuations in short time intervals. This is far from the first decline that has occurred in the history of crypto markets. Crypto markets have always recovered from all downturns, even horrific ones, and in turn prices have risen even more afterwards.
It is important to remain calm, not get swept up in the FUD and possibly use the downturn to replenish portfolios.
FUD, i.e. Fear, Uncertainty, Doubt, is also shown by the so-called fear and greed index, which tracks the prevailing mood on crypto markets, i.e. whether investors are more positive or negative about the price development. The value of this index is now at numbers showing fear, and even reached 10 last week, the lowest number in a long time, where it has not reached at all during 2021.
Golden rule of investing
But crypto market veterans advise to remain calm at this time, not to get swept away by the downward curves and to hold on. It’s also a good time to remember the golden rule of trading, never invest more than you can afford to lose. This rule is not recommended to be followed because you will actually lose your funds, but rather because in moments of downturn your position is stronger than if you have bet your entire life savings and are now watching live as their value rapidly declines.
Buy the dip
Conversely, professionals take advantage of these downturns to buy at bargain prices. So consider the price drop more like a post-Christmas sale and an opportunity to buy well.
The crypto markets are far from over; on the contrary, they are only in the early stages of a market surge. Data from last year confirms this. For example, the number of cryptocurrency users alone tripled in 2021 and the number of companies accepting crypto payments grew to 18,000. In total, investors invested over CZK 530 billion in cryptocurrencies in the previous year alone, and the total volume of all crypto transactions last year reached roughly CZK 310 trillion (source: Statista.com, triple-a.io).
Disclaimer: This is not an offer to enter into a contract. Cryptocurrency trading is a high-risk business and only you bear the risk and responsibility for your own decisions. Do not engage in trading unless you have done your own research and are fully aware of the risks.