In January of 2018, cryptocurrencies big and small took a huge dive in value. People around the world panicked. They didn’t care why it happened. All they thought about was all the value they were losing. You may have felt the same way – but you don’t have to. There are plenty of reasons why a crash shouldn’t make you nervous, and just as many reasons why you should actually be excited about it. Here are a number of them:
You Only Lose Money Once You Sell for Less
For many people, especially those who just entered the world of investments and trading, watching the value of your purchased cryptocurrencies spiral downwards can be nerve-wracking. It will feel like everything you’ve planned is all for nothing.
However, that’s not true. While you hold those currencies, you hold potential. Markets take dives all the time, and that’s something not unique to crypto. The only time you lose money is if you flinch and sell for less than you bought in for, and that should only be done if the currency is done for. Do your research. Is this a yearly trend or is it the end?
They Happen All the Time
Cryptocurrency can be described using many words, but stable is not one of them. Volatility is part of the game. Even a simple rumor can send prices falling. Entire companies can fold, cutting the legs right out of many digital currencies.
However, this isn’t new. This is something that will not only happen all the time, but can actually be predicted. Don’t be afraid when numbers start dropping. Look to why they’re dropping to determine your actions.
It’s a Discount
“Buy low, sell high” is an often rendered piece of advice, but it’s just as often ignored. Many people forget this adage when their money is on the line, resulting in the opposite behavior. They end up selling as value drops, minimizing any potential gain they could have had.
Ideally, the application of the adage is as follows – sell before value drops, wait for it to hit its lowest point, they buy-in at what is essentially a discount. You profit off your initial investment, reposition yourself on currencies you believe are poised to rise the most, and profit again when the market corrects. Dips are an opportunity. Treat them as such, and they’ll be more exciting than terrifying.
More and More People are Entering the Market
What was once an incredible niche practice is becoming more and more common. Even the average person has at the very least heard of Bitcoin and the various alternatives. Anyone interested can do a bit of reading, put up money, and enter the arena.
It is this interest and mainstream penetration that should keep your nerves at bay whenever your crypto drops. The more people and companies use and buy into it, the more likely it is that it will recover from any price dips it might experience. Cryptocurrency crashes are common, but so are spikes in value.
People Will Run Out of Things to Sell
Most crashes are self-perpetuating events. The price dips, and someone sells a big chunk of their assets. This results in the value of their sold currency to drop. This causes more people to sell their stock, thinking a big drop is about to come, which further convinces others to do the same. What begins the initial dip varies, from market manipulation to seasonal crashes, but the end is still the same – people will run out of things to sell.
When the price reaches its lowest point, that’s when the smart will start buying in again. This will cause value to skyrocket, essentially making them money. Unless the underlying technology or purpose behind a digital currency collapses, its value will never drop to 0.
There is a Limited Number of Each Cryptocurrency
It doesn’t matter what crypto you get into. Bitcoin, Ethereum, Stellar – they all share a common trait, and that is that each one has a limited number of denominations. This is what makes their value so volatile. It also means that it can only rise in value.
Cryptocurrencies follow many of the same rules as traditional investments. Value is determined by supply and demand, and as it stands, cryptocurrency will always rise in price due to its limited supply versus growing demand. This knowledge should help you stay strong when the sky looks like its falling.
It’s Being Adopted Around the World
It’s not just individuals and companies getting into the game. Entire countries are opening whole new markets for cryptocurrencies to play in. Countries in Asia, for example, have taken to the technology. China may have banned it – at least as of early 2018 – but Japan and Russia have adopted and are considering adoption, respectively.
The more governments accept and adopt cryptocurrencies as a whole, the more legitimacy these currencies will have. This will increase demand and subsequently, value.
Trading in cryptocurrencies is inherently scary. There’s so much market manipulation and disinformation running around that finding your feet can feel impossible, and that’s before you take sudden crashes into consideration. However, while value variance tends to be wide, what you need to remember is that cryptocurrencies will almost always rebound and rise in value. Stay the course. Don’t let fear lead you down a path filled with bad decisions and regret. Focus on the numbers and you’ll do fine.
- 7 Reasons Cryptocurrency Crashes Are Nothing to Panic About - January 23, 2018
- If You Like It, You Should Put a Ringly On It - October 27, 2015