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Withstanding the next ‘Crypto Winter’

Michael Kamerman, Group CEO of Skilling

by uma

 

 

If you are a cryptocurrency investor, you might have been worried over the last few weeks when looking at your portfolio. As a matter of fact, you need to only look on social media within the past month to see that many are worried about the dips in value of cryptos such as Bitcoin (BTC) and Ethereum (ETH).

Though this may seem like an obvious time to panic, it’s important to act rationally, rather than acting on emotion alone. Emotional intelligence is paramount when trading, especially with something as volatile as crypto, and these dips are not unprecedented. Looking back to just one year ago with BTC, you can see that harsh dips are almost an essential part of crypto trading.

Navigating the dip

As it stands, the digital asset space is proving to be a trickier environment to navigate than previously. With the backdrop of broader selloff in risk assets and growing conviction that the Fed will increase rates, traders and investors are erring slightly more on the side of caution when it comes to cryptocurrency. The plunge has hit all corners of the crypto ecosystem, from BTC to ’meme coins’ and publicly listed crypto exchanges and miners; scarring both long-term and more recent investors.

However, this isn’t something never seen before in the digital currency world. With something as volatile as crypto, traders should be prepared to take extra precautions when commencing their trading journey. Given the incredibly strong performance of cryptos over the past two years, with BTC, ETH and other crypto reaching record highs, it’s almost a question of accepting that on balance, at some point there will be a dip in performance and market value.

You only need to think back to the BTC dip of 2017, where it fell 45% from its peak at the time, to realise that those who stuck around ended up reaping up the rewards. With the influx of novice retail traders piling into crypto, there is a need to apply suitable emotional intelligence when presented with volatile market shifts. This crypto winter may in fact be a beneficial time for trusted brokers to educate their customers about the nature of cryptos, as well as how to apply suitable emotional intelligence when trading to maximise profits.

Applying emotional intelligence

While retail trading has substantially increased over the past few years, those who have been here for a while, especially in the crypto space, will understand that fluctuations in a crypto coin or token’s value are often driven by either excitement or fear that comes with it. With social media posts about crypto being seen all over at any given moment, it’s easy to make hasty or regrettable choices. It’s therefore in a traders’ best interest to go through a couple of key steps when investing to make sure you can ride out time like these.

Firstly, traders need to do their due diligence. There is a wealth of knowledge accessible online and from trusted brokers about the ever-growing range of cryptos available. Doing so will enable traders to have confidence and reassurance in what they are investing in, as well as an understanding of current market issues that may affect a crypto’s value. It’s also worthwhile to only invest what you can afford to potentially lose, as with any investment, there is no guarantee of a return.

Constantly monitoring the price of a coin through fear of losing money will not only potentially cause a spike in blood pressure, but also lead to further wrong decision making. By carrying out thorough research, traders can take a considered approach when navigating crypto trading, which would be especially beneficial in times such as these.

It’s arguably not a good idea to take investment and trading advice from celebrities and influencers on social media. Instead, making logical, informed decisions about crypto investments is a much better way of riding out the lows and enjoying the highs than following trends on social media.

The adage of “stocks always go up” is somewhat also true for crypto. Cryptos with good propositions will generally be the ones that withstand “winter” periods and bounce back in value – as shown historically. The onus is on each trader, however, to decide whether to be emotionally intelligent when investing, to reap the most rewards.

89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.Not investment advice. Past performance does not guarantee or predict future performance. Trading cryptocurrency is not available for UK retail clients. 

 

 

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