How to Survive a Crypto Market Crash

Bitcoin and the crypto asset markets are experiencing yet another significant market correction. There are many factors that contribute to such price pullbacks. More recently, inflated price sentiment and fears of an overdue correction in both the traditional stock market and the crypto market is what is being attributed to the recent price drop. This is the second major retracement following the last major market pullback which came after the first quarter of 2021, when Bitcoin’s price had reached an all-time high of US$64,863, and subsequently dropped in price to levels just below the $30,000 mark. During that same period, other crypto assets also dropped significantly and the overall cryptocurrency market wiped off over 50% in market cap. 

These kinds of downward trends can be astonishing to new market entrants but for seasoned investors and traders those swings are not so surprising. The crash in March 2021 isn’t the first time Bitcoin has experienced such a massive price crash and unfortunately, it likely won’t be the last because bearish trends are a natural part of market cycles. To those looking to buy bitcoin in South Africa or any other country, it’s important to know what to expect and how to navigate such scenarios, but most importantly understanding the risks involved when getting involved in a market with high levels of volatility. 

Most people aren’t aware that making money with cryptocurrency isn’t only limited to when there is a positive movement or an upward price trajectory in the market. In fact, the axiom has always been ‘buy low, sell high’ meaning that the most opportune time to purchase digital assets is when the price is trending downwards. So while a price crash could be any trader or investor’s nightmare, there are ways you can benefit from it.  

Before explaining how to thrive off a price crash or bearish trend, let’s give an insight into what a bearish market is

What is a crypto market crash?

A bearish market means a market that is experiencing a significant drop in asset prices over a certain period. In simple terms, it means a tumbling market. It is used to describe a situation when the prices of assets decline over a lengthy period. However as stated earlier, despite the negativity that always surrounds the bearish market, it is the best time to buy bitcoin or any other digital asset. While as a crypto trader, you always want the price of any asset you buy to keep rising, you should nonetheless be prepared for a downtrend. It offers you the opportunity to buy bitcoin or any altcoin at a cheaper rate. Furthermore, if properly managed, a bear market can be a blessing in disguise to any trader or investor.

Managing your portfolio during a market downturn

There are several ways you can take advantage of this situation to make more money and build your portfolio. The period also comes with a set of opportunities that can be used for your benefit. Below are some of the ways you can make a profit.

Swing Trading

Swing trading refers to a popular trading strategy that typically involves predicting the price movements of an asset within a specified period which generally ranges from a few days or weeks. Despite the general sentiment moving in an upward or downward trajectory, there will always be price movements that form highs and lows. When swing trading, a trader has to be able to predict such small price movements. Implementing this strategy requires a trader to carefully study the market and perform technical analysis in order to make predictions and potentially profit from taking trade positions (long or short), consequently taking profit if the predictions are accurate.  

Shorting the Market

Shorting or taking short positions means anticipating a market downturn which is technically the opposite of when people buy bitcoin or other digital currencies in anticipation of price appreciation. When it comes to shorting the market, a trader’s typical strategy can involve taking a position in hopes that the value of the asset drops below the entry price. When short selling, a trader essentially borrows the crypto assets they wish to short with the aim of returning it later.

There are numerous crypto exchanges that enable users to execute that strategy. The process involves borrowing the crypto one intends to short from the exchange and selling at the current price. After closing their position, the trader has to buy the same amount of crypto back to refund the exchange, however at this point they’d be purchasing the asset at a cheaper price. It involves selling the asset low and buying it high. By doing this, they are taking advantage of the bearish market.

Diversifying 

The bear market offers you the option to diversify your crypto investment portfolio and buy some good altcoins with strong growth potential at lower prices. So instead of putting all your eggs in one basket, you can decide to spread your risk by buying other crypto assets. While one performs poorly, another might perform better. 

HODLing

HODL which literally means holding on to a coin despite the price action is also a great way to manage a price crash for people that don’t want to take more risk. Looking at the historical price actions of cryptocurrencies, especially Bitcoin, it is almost imminent that every crash is followed by a market recovery. 

Conclusion 

As a crypto trader or investor, there’s no need to panic when the price of Bitcoin and other crypto assets crashes. In fact, there are numerous strategies one can implement to minimize portfolio losses. Some traders simply convert some of their digital currencies into stable coins such as USDT which are meant to be pegged 1:1 to the dollar, thereby avoiding loss of value. 

For those looking to get involved in the crypto space, there are ways to earn cryptocurrencies without spending your hard earned money. Global peer-to-peer crypto exchange Remitano for instance, recently launched its native token, RENEC, which is aimed at improving the peer-to-peer exchange’s service quality, lower transaction fees and enable faster and more secure transactions on the platform. Remitano is providing an opportunity for Remitano users in South Africa to earn FREE RENEC tokens.