What should you do when Bitcoin prices start nose-diving? Should you sell off all that you have or should just wait for the storm to blow over? The first thing you need to understand is that Bitcoin prices falling is a normal phenomenon. When you invest in a cryptocurrency it is not equivalent to investing in a government bond. You have no guarantees in cryptocurrency investments and neither any regulation. Prices can rise or fall and it is not in your control; the fluctuations can be dramatic and one after the other.
You have to figure out why prices may have nose-dived; usually there is some event that triggers such a phenomenon. For instance, the plan to create SegWit2x, that was intended to make transactions faster and cheaper, failed. Then, people started to move their funds out of Bitcoins into Bitcoin Cash which assured faster transactions compared to the original Bitcoin. Values of Bitcoin Cash simply doubled in a day’s time.
Things not to do when Bitcoin prices are falling:
- The truth is no one can be sure which way the market will turn. You can be very well-versed in cryptocurrencies buy you still have to depend on your own predictions. If you have been able to identify the real reason behind the price drop you have to then decide whether the situation is under control or if it is fatal enough to make prices go down even more.
- When you are fortunate to still have some capital in fiat currency when such a price drop happens, you should restructure your portfolio right away. If you stare at a crypto chart and see the prices fall you keep thinking when it will end. The attempt to enter a trade when the prices have hit rock bottom is difficult because you cannot catch an exact bottom. It is similar to catching a falling knife and you will lose out on important trades in the process. So, continuously waiting for a reversal of trends may backfire; it is always better to somehow enter a trade near the bottom instead of waiting. You can relax a bit when you employ automated trading bots like bitcoin revolution to carry out the trade autonomously.
- You should never start selling the coins in exchange of those that are rising in value. You may have done your research on an asset and held onto it for long hoping that it will go up. After a while you start to second guess yourself and follow a friend who has invested in some other crypto coin that has done reasonably well for some reason. In doing so, you invest in another coin, moving all the funds from the previous one that you had invested in. and the very next day, your original coin witnesses a meteoric rise in value. This is something that you must avoid at all costs.
- Finally, even if prices are down you must not sit and look at the charts round-the-clock. Staring at charts will not change the facts. Rather, when you stare at charts for a long time, you tend to take wrong decisions out of fatigue and restlessness. You are likely to become emotional and end up overtrading. So, the best thing to do is set a limit order and then let it do its job. You have to keep faith in your trade strategy; else you are actually gambling and not trading.