The volatility of the cryptocurrency market in the last few months has been more evident than ever. The factors affecting such changes have come from all sources like rumors and even the slightest move by the crypto whales. From US$30,000 to US$23,000, it goes to show just how easily the prices can drop within a few days.
What can you do when the cryptocurrency market declines
When prices of cryptocurrencies drop, there are a few things you can do which include:
- Don’t act hastily – A dip in the price does not mean it will continue to drop. A lot of investors tend to panic and sell when the market drops fearing the worse. On the other hand, there is no reason to rush into the market and buy.
- Check out the current situation – If possible, you need to find out what are the reasons (or market forces) that caused the market to dip. Could it be due to some strong reasons and not just due to speculation or rumors? A lot of talks have gone on about how Terra’s change and dip in price caused the other cryptocurrencies to follow. The effects of 1 coin causing a ripple effect on the others have been a revelation for market observers and analysts.
- A volatile market is normal – At the end of the day, the fundamental concept of the cryptocurrency market is based on volatility. Hence, it is perfectly normal that prices to change overnight. Cryptocurrencies do not generate cash flow which means that investors will use sentiment changes to influence their prices. Volatility is something that every trader knows and expects and hence, changes in prices would be common.
- Look forward – it is very important to know what the current regulations are and what could happen in the near and mid-term future. Over the past 5 years, there have been a lot of changes and u-turns by governments on the issue of cryptocurrencies. Knowing if the government is going to be tougher or less strict will give you a good picture of what to expect in the near future. This can then help you to make better decisions.
- Take Action – Or at least have a plan for action. After going through all that above, you can then be clearer which will let you determine how to act. You would at this point realize that some of the dips could be opportunities. You can now decide if you want to hold on to your cryptocurrency longer or to cut your losses.
Would it bounce back?
A lot of speculation and analysis has gone into finding out why the decline happened in the current market. The regular economy is the main driver behind the decline in the cryptocurrency market. Tech stocks in the recent months have fallen quite sharply while inflation has become evident across the world. Terra, a project known to produce a stable coin was among the earliest to feel the crunch, causing the others to follow suit.
