How to Survive a Crypto Market Crash Without Losing Everything: Emotional Discipline, Strategic Planning, and Risk Management
Crypto is famous due to its highs and lows. The prices may shoot up quickly, and the prices may spiral down during the night. The thought of losing everything in a crash is quite possible to many individuals, mostly beginners. Though the crypto market crash can be survived. Emotional discipline, great planning and robust risk management are what is most important.
The initial one is emotional discipline. Panic ensues when markets collapse. Selling at the bottom is something adopted by many individuals as they are unable to conquer fear. I have witnessed friends in Nigeria who will purchase coins when the market is high and sell them when the market drops only to realize later on when the market rebounds. The fact is that we tend to lose more money when we are driven by emotions rather than in the crash itself.
The only prudent thing to do is to relax, not be hasty in making decisions and it is important to recall that crashes have been a part and parcel of crypto history. Bitcoin, as an example, has fallen by 80% on multiple occasions and has regained its emerging heights. Emotional discipline refers to not being a puppet driven by fear or greed.
The second is strategic planning. No investor would want to go in a market without a plan. A plan will provide answers to such questions as: Why am I investing? "How long can I hold?" and What wilt I do should prices come in by half? When you purchase Bitcoin or Ethereum because you think they might have a high value in 5 or 10 years, then a short-term crash will not ruin your faith.
A strategy implies goal setting as well. Others invest in long-term holding ("HODL"), others trade on a short-term basis, with stop-loss orders, and others also diversify into stablecoins during bull markets. People end up making random decisions which result in losses, without a plan.
The third one is risk management. It is the most viable method of survival. It is the golden rule never to put money into something you can not afford to lose. Crash can destroy you when you deposit your school fees, rent or emergency savings. The other aspect of risk management is diversification. Keep not all in a coin.
Some coins can go to zero. Stablecoins may serve as a haven in time of volatility. Dollar-cost averaging (purchasing small quantities every now and then rather than in one large purchase) can also help to lessen the effect of any sudden crash. And in the case of traders, stop-loss will help to avoid making more losses than intended.
Liquidity, i. e. cash or stablecoins on the side, is also important. At the time of a crash, a number of coins are actually being discounted. Individuals who are liquid are able to purchase strong assets at low prices, whereas fully invested individuals can sit back and observe in agony. As a matter of fact, some of the wealthiest in crypto bought in crashes and not in booms.
To sum up, it is not that it is possible to survive a crypto crash without losses of any kind, but rather that it is possible to avoid complete destruction. Emotional discipline makes your mind steady, strategic planning makes you have direction and risk management gives you protection of your money.
Crashes are inevitable, however, prepared people do not simply survive, they emerge tougher. It seems to me that the ones who survive in crypto are not the ones who follow the hype, but the ones who control fear, and make plans and take precautions.
This well articulated. Crashes in financial markets are inevitable when it comes to crypto. They are something that you cannot avoid, however you can prepare for them.
Investors, especially beginners need to believe that even if the market crashes, if you don't sell your holdings, you have lost nothing. The only thing that changes after a crash is the value of your holdings. So, if you don't sell when price is low, then you can still enjoy your peofits when the price rises again. The loss only comes when you sell at a lower price and for sure the funds will be deducted from your pocket, there is no mercy.
This brings me to the second important point you raised. Invest what you can lose and use proper risk management. If you know that you can either win or lose from your investment, then you become content. You are prepared to hold and see where the market takes you even after a crash. But if you invest all your savings, then thats where the panic to sell comes from.
Managing risk is also key, planning before any trade or investment. This will give you planned entry and exit points, by the time you enter an investment you already have calculated potential losses and wins. This is very important to prevent panicky behaviours.
Trading or crypto investment are not get rich quick schemes. The market rewards the careful and punishes the greedy. Sitting down and planning before any investments prepares you for bad economic times and market crashes. Just a personal opinion.
This is an informative post for me. Because I always face the problems that you have shared with us. There are always I need that's kind of articles. Thanks for sharing.