It's a new month for crypto. Everyone is riding the "moon-wave", everyone is watching the market rise in value, everyone is watching their portfolio climb up the ladder. But nowadays, it seems like the simplest tweet can cause Bitcoin to plummet, along with the entirety of the crypto market. While aimed to coincide with environmental sustainability (specifically from the tweet above), investors and traders do not like to hear their stake is coming to a grinding halt on what seemed to be a promising new project regardless of the situation. Whether it's Bitcoin, Ethereum, or your other favorite altcoin, any amount of bad news will send the crypto market into a violent panic frenzy almost instantaneously.
But what's with all the panic? Why do people react in such a way? In this article, we will take a look at what causes a cryptocurrency crash and get an understanding as to why this happens!
I am not sponsored by anyone or anything mentioned in this article.
This is not financial advice. I am not a financial advisor.
Please do your own research before making any decisions before investing.
This article is meant for educational purposes only.
* THE SKY IS FALLING! *
* THE WORLD IS CRASHING AROUND US! *
* WE ARE DOOMED! *
Not quite! If you're new to the crypto market, welcome to the show! This is a place where you can have $1,000 in your portfolio and, within 5 minutes, you're down to $500. As scary as this seems, it's not uncommon to find yourself in this predicament. If you've invested in something worth while, there is no need to panic as that stability will let you continue to grow that portfolio once the market stabilizes and begins another bull-run. You don't lose anything if you don't sell, right? That's what we hear all the time at least.
Although it can be breathtaking at times when the market crashes, there's really no need to worry at all. This is common with all marketplaces, as supply and demand dominate all methods of business. It's hard to stay focused on not worrying when you're constantly surrounded by FUD every time something doesn't go according to plan. With the crypto market, nothing is ever going to work according to plan, as the market is highly volatile. This isn't necessarily a bad thing if you know what to look out for. Honestly, it makes investing that much more fun and interesting in my opinion!
While it would be nice for trends to move in the upward direction all the time, it will never work out this way... especially in the crypto market! Values will rise, plummet, stabilize, and begin to rise once more. This is completely normal for the market, crypto and traditional markets alike. It's important not to get caught up in the wave of fear, uncertainty, and doubt whenever your portfolio value begins to drop. An easy way to do this is to take a second to reflect to see how far you've come in the first place when you first started building your portfolio.
There's numerous factors that contribute to the rise and fall of any market. We touched on negative publicity above, so let's take a look at a couple more key factors.
Profits. If you're an investor, you'd be silly not to want to make a profit at some point. You've been watching the uptrend of your coin/token for days, weeks, or even months. You finally get to your threshold of where you want to sell for great profit, and you sell it. You're not alone. This mindset is shared by millions of other investors around the world, and they are all doing the same exact thing. This sell off can be one of the causes of a market correction, as other less-experienced investors will follow in selling, creating a spike downwards on the charts. This helps the coin/token stabilize after a period of time. This stabilization will allow for a higher price point when at its' lowest, creating a new floor for the next bull-run.
Breaking the support line is another factor than can cause the value of your coin/token to crash. Breaking a support line can either be good or bad depending on how you look at it. If the support line maintains and breaks upwards, then the value will increase. If the support line breaks completely, this causes immense selling pressure that will cause a further decrease in value. Holders will begin to sell their stake out of fear and traders will short the coin/token. This is where breaking off of the support line shines in a negative light.
So... should you be panicking too? Sure, only if you want to stress yourself out with crypto alongside the other daily life stressors. The crypto market is highly volatile and never closes. This perfect combination allows for the market to move freely at any time without the need for business hours to tell us when we are allowed to invest our hard earned money. Just because the market isn't looking too favorable doesn't mean it won't be like that forever. Dips in the crypto market allow for the highest of portfolio gains, as it allows you to purchase your stake in the coin/token of your choosing when it's lower valued. If you've done your research and financial planning, this should only benefit you over time. If you're buying a dip, the next step should be a rise in portfolio value. Make sure you are doing your own market research and figuring out when the best time to buy the dip is first!
Take a deep breath. Sit back. Relax. Maybe go for a walk or something. You'll be reaping the rewards of your investments from the market crash in no time!
Are you easily swayed by the FUD we see all around us?
Let us know in the comments down below!
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