The world is now largely digitalized. Even then the fear of failure in the digital world is a major thing that deters many prospective investors from investing in digital currencies. There have been many previous instances of crypto traders failing. Even the eponymous Bitcoin has encountered a steep loss.
In this article, we will read about the biggest crashes in the history of cryptocurrencies and examine the facts that you should learn from these failures to take your future trades to perfection.
Major Falls in the Crypto Market
Bitcoin, the largest currency in power and volume has failed six times since its inception. Even though other major cryptocurrencies have also suffered losses, Bitcoin’s failures were the most eponymous in the history of crypto crashes.
June 2011: The price of Bitcoin fell 99% from its high
This fall in price occurred due to the hacking of Mt.Gox, a major exchange for Bitcoin trade. At the time of the crash, Bitcoin’s price was $17.50. But after the 99% fall, it soon recuperated to $31.
April 2013: Bitcoin fell 83% from high
The Mt.Gox exchange crashed due to excessive trading volume. This caused a price crash of Bitcoin from $260 to $50.
December 2013: Bitcoin fell 50% from its high in 24 hours
Bitcoin’s price was reduced to half from $1151 due to China’s first strike against it. It took more than three years for Bitcoin to gain back its price.
December 2018: Bitcoin fell 83% from its high
The price of Bitcoin fell from $19,497 on December 15 2017 to $3,300 in December 2018.
The Bitcoin crashes were due to varied reasons. While the early crashes happened due to variations in the market cycles, the crash in December 2013 happened due to China’s banning of cryptocurrencies. The crash in December 2018 occurred due to the initial coin offering (ICO) craze in the market.
How to Navigate Crypto Crashes?
In the case of cryptos, a hundred percent positive environment cannot be guaranteed at any point in time. You should expect a fall to happen at any time and therefore you should be vigilant about the ways to navigate such a fall.
Here are some points that you should keep in mind when navigating a crypto market crash.
Apply Logic
If you have lost a significant amount of your investment to a market crash, do not act according to your emotions of fear, doubt, and uncertainty.
Use your logic to spot a pattern to use your trading portfolio, decide on what coins to sell and what to retain, and devise ways to protect your investments during an uncertain market.
Monitor Onchain Metrics
You should keep track of the technical analysis of the various coins in your portfolio to get to know about any change in their metrics as soon as possible.
In this way, you get a clear picture of the market devoid of the influences of sentiment, social media hype, or market hearsay. A thorough analysis of the bullish and bearish trends of a coin helps you early on in your decision-making process.
Educate Yourself
You can navigate unexpected falls in the crypto market with a thorough education about the overall workings of cryptocurrency and blockchain technology. Proper knowledge will help you navigate the pitfalls and negative reviews about crypto investments.
Use Dollar Cost Averaging
Dollar-cost averaging is a method to ensure that bear markets are exploited without costing you too much funds for one particular trade. This is done by taking advantage of market drops and then flipping that investment into a quick profit once the value climbs.
Pay Attention to Macro-economic Trends
Macroeconomics concentrates on the overall economic performance of the market and analyses how the economic sectors interact. Macroeconomic trends consist of the evaluations of inflation and unemployment, which helps you maximize your trading position in the crypto market.
The Bottom Line: What Can We Learn from Crypto Market Crashes?
A crypto market crash is an eye-opener toward unstable and unsustainable cryptocurrencies in the market. At the time of a general bearish trend, such cryptocurrencies will perish, while the genuine ones will sustain over the years despite occasional falls.
You can study the previous market crashes and understand the trends to align your investment decisions accordingly. You also should understand that the assets that are trending on social media need not be those with true potential to win in the market.
Previous instances of crypto crashes emphasize the need to thoroughly study the market and use cases of a cryptocurrency before investing in it rather than going behind the hype.
You should invest only after looking into the cryptocurrency’s tokenomics, white papers, on-chain analytics, and development activity on GitHub and others.
If you are convinced that the crypto coin in which you have invested has a long-term investment prospect despite its interim fall, you can use this opportunity to increase your token holdings.
