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Crypto is down, don’t panic!
What you should do when your investment goes down, and how you can make the most of it.
Just started investing in Bitcoin or Ethereum and seen prices dropping this week? Understandably, you're worried. But short-term volatility is just part of the cryptocurrency scene.
The long-term picture has looked different so far. As 2011 started, 1 Bitcoin was worth under $1. By 2014, it was worth over $400. By 2017 it had risen above $20,000, and in 2021 peaked at over $70,000 for a single Bitcoin.
That doesn't mean there is zero risk. There will certainly be moments of stress for investors as the charts swing wildly – 2019 had a 71% drop in price, for instance.
But no form of investment is risk-free and most successful investment strategies require patience. Selling your crypto is something you should consider when it's up, not when it's dropping.
The hidden cost of being out of the market
While it may be tempting to sell and cut your losses when prices are crashing, it's worth remembering the old investing adage - "time in the market beats timing the market".
Selling to try and avoid bad days can often mean you also end up missing out on the good days. According to one analysis, there are, on average, around 7 days each year when Bitcoin records a gain of more than 10%.
Being caught sitting on the sidelines because you sold during a downturn can mean missing out on significant gains when prices recover. Not only that, but timing the market is extremely difficult, and is best left to the experts.
How to take advantage of market downturns
A simple way to lower risk when investing in cryptocurrency is through dollar-cost averaging. With dollar-cost averaging, you regularly invest a fixed sum into a cryptocurrency – say $100 at the start of every month. Doing that means you can avoid some of the market's volatility and short-term instability.
It's easy to set up recurring trades in your Finder app, and now you can even do it fee free. Just go to your Crypto tab, scroll down to the "Set up a recurring trade" section and click "Get started".
Disclaimer:
This information should not be interpreted as an endorsement of cryptocurrency or any specific provider,
service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and
involve significant risks – they are highly volatile and sensitive to secondary activity. Performance
is unpredictable and past performance is no guarantee of future performance. Consider your own
circumstances, and obtain your own advice, before relying on this information. You should also verify
the nature of any product or service (including its legal status and relevant regulatory requirements)
and consult the relevant Regulators' websites before making any decision. Finder, or the author, may
have holdings in the cryptocurrencies discussed.
Ben Knight is a contributing cryptocurrency writer for Finder. Having written for Alternative Assets, PianoDreamers and YeahAustralia in the past, his passion for language and creativity with words drives his work. Ben has a master’s degree in writing, editing and publishing, and a bachelor’s degree in creative writing.
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