The crypto crash, which saw the crypto market lose billions of dollars in value and hundreds of companies shut down, is being called the beginning of the end of crypto. Crypto traders are depressed, companies are closing and investors are looking to divest from their crypto holdings as quickly as possible—but it doesn’t have to be this way. Follow these three tips to help you navigate the economic fallout from the crypto crash and come out on top.
What is happening with the stock market?
There have been multiple economic crashes over recent years, both crypto and non-crypto related. For example, in 2022, a major crash caused most currencies to become worthless, followed by a sort of hyperinflation period. This led Luna investors to favor more traditional stock exchange investment (NYSE and TSX). Although there were some exceptions such as Bitcoin and Ethereum, during those first few months of 2022 they only decreased in value. Once investors began returning to crypto trading in January 2023, they found out that their currency was almost worthless. A $1 investment became worth less than $0.01 due to hyperinflation after banks stopped accepting cryptocurrency as an accepted form of currency.
What does this mean for cryptocurrency?
In reality, nothing’s really changed for cryptocurrencies—they’re still as volatile as ever. But what does change is that some investors have lost hope in them or have been driven away by fears that they can’t protect their assets during an economic crash. Cryptocurrencies will rebound, however—and many investors are currently looking for how best to position themselves within these markets.
Tips for investing in cryptocurrencies going forward
As cryptocurrencies continue to tumble, there are two things investors can do in order to make sure they don’t get stuck holding a bag of worthless coins. The first is dollar cost averaging; instead of investing everything at once, you should use a smaller amount of your capital on a regular basis and consistently re-invest as time goes on. This tactic will help reduce risk by ensuring that you never have all your money tied up in one cryptocurrency, and it also helps you ride out any downturns in prices while giving you opportunities to invest at lower prices over time. The second thing investors can do is be cautious, conservative, and diversified when it comes to their portfolio. While certain altcoins might seem like solid investments, anyone who bought into them back in December has seen significant losses. And while some people have reported seeing gains from those same altcoins after they began falling again earlier this year, I think we need to remember what happened last fall: crypto investors were excited about an altcoin because its price was rising rapidly—but then panic set in and everyone tried to sell off their coins before losing even more money. That kind of herd mentality may work for day traders who know how to move quickly and cash out fast but not for long-term investors looking for more stable returns. I'm no financial advisor, so please take my advice with a grain of salt. If you're interested in altcoins or want to take advantage of market fluctuations to pick up a few extra dollars here and there, go ahead and try dollar cost averaging—just keep in mind that you'll likely experience more volatility than if you'd invested all your money at once. But if volatility is something that makes you nervous or if you're just starting out with little capital to spare, stick with larger cap coins like Bitcoin (BTC) or Ethereum (ETH). They're safer bets right now than smaller altcoins whose value depends largely on speculation.
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