Cryptocurrency prices have been collapsing so far this year, with the digital currency market proving to be vulnerable to major global economic issues.
Due to the industry growing at a breakneck pace in 2020 and 2021, acting quickly on highly lucrative opportunities is being prioritized over operational best practices, leading industry experts to call it “cryptocurrency winter.” In today’s article, here are several suggestions on how to survive a crypto winter.
What is Crypto Winter?
Crypto winter is an industrially defined term that refers to the prolonged depression in cryptocurrency prices. Cryptocurrency winter has typically extended from well-known cryptocurrencies such as Bitcoin and Ethereum to non-forgeable tokens (NFTs) and lesser-known cryptocurrencies and tokens.
Cryptocurrency winters may match other economic downturns or bear markets in the stock market, but this is not always the case. Cryptocurrencies are a relatively new asset class that can move independently of other markets.
“When cryptocurrency prices are down, it’s hard to decide if you should sell before additional losses or hold on waiting for a hopeful rebound,” said Michael Anderson, a financial advisor at Maranatha Financial in Ventura, California. “Cryptocurrencies are a risky asset that could eventually fall to zero value. While I don’t think all cryptocurrencies will fail, a good number may ultimately bite the dust.”
The bankruptcy of cryptocurrency lending and exchange platforms has Anderson concerned, who says: “Losses at Voyager, Celsius, and the demise of the LUNA stablecoin are good examples of why investors should be extremely cautious”.
Please consider these tips below to survive a crypto winter:
①Don’t invest more than you can afford to drop. Cryptocurrency is still fairly new. It is highly risky and volatile. Wise investors avoid investing more than they can handle losing. It is not smart to invest your life savings in any cryptocurrency. Be in control and make sure your assets are not in someone else’s balance sheet or wallet.
②Evaluate each cryptocurrency project carefully. Each coin and token is tied to a different governing entity or volunteer group. When it feels like the Wild West, it’s important to carefully evaluate each cryptocurrency project before deciding how much to invest. Risks may be low when it comes to counterparties, but they are never zero. Whether you are borrowing, lending, or dealing with a counterparty, review your settlement practices so they are immediate and straightforward.
③Beware of the herd mentality. Online communities are fun places to learn and discuss investing, but that doesn’t have to mean you should take everyone’s advice. When investing, stay focused on your personal goals and risk tolerance.
④Making portfolio adjustments is fine. In poker, there is a sunk cost theory that makes it challenging to fold if you have placed a large bet, even if you think you will lose. It seems logical to make a bigger bet to avoid losing your money, but putting in more money to chase your sunk costs can lead to more losses if the money is already lost. You don’t have to HODL on a falling cryptocurrency if you don’t think it will come back. it’s okay to sell and adjust your portfolio as long as you feel it’s necessary.
⑤Choose to buy the dips. Conversely, if you think the downturn in cryptocurrencies is temporary, you may want to buy at lower prices in hopes of buying low and seeing the value of your portfolio grow when the market recovers.
⑥Maximize security so you can focus on your core competencies. Companies need to do more with less. In order to do this, more work needs to be done upfront, such as eliminating single points of failure and establishing policies and workflows. This allows you to focus on your core competencies while remaining flexible and reacting quickly to headwinds.
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