Market Failed: Since Bitcoin’s peak value in November 2021, it has dropped by more than half its price value. This Bitcoin’s price performance caused the failure or collapse of the whole crypto market.
Also, both Terra (LUNA) and TerraUSD (UST) encountered a massive drop that frightened a lot of investors. The steep fall was never expected by many. It caused a negative sentiment in the entire crypto market, which caused many investors to withdraw their investments.
As a result, Tether (USDT) also lost its peg to the dollar. These incidents have taught traders and investors to be extra careful in their crypto journey and also busted a lot of myths regarding digital currencies.
Is Bitcoin Truly a Hedge to Fight Inflation?
In the last few months of 2022, the cryptocurrency market’s price performance has been moving in sync with the stock market. The interconnection between S&P 500 and Bitcoin reached an extent of 17 months in March.
Most of the time, Bitcoin is perceived as the hedge that will fight inflation. This view shows that the crypto market cannot be affected by inflation. However, as the crypto market’s movement is interconnected with the stock market, this perspective might not be always true anymore.
What caused the crypto market to fail and collapse are tighter monetary policy and high inflation. These incidents occur in the crypto space as a result of cryptocurrency becoming more mainstream and market growth.
What Should Investors Do?
The extreme volatility of the crypto market is the reason why an investor should not only anticipate massive returns on their investments but also must prepare for worse things that could happen at any time.
A downward movement of the crypto prices has been happening after its price spike last November 2021.
The end of the crypto crash is not yet determined. However, this just proves that better and worse things can occur anytime in the crypto market. So, this is also a healthy reminder for investors to have good preparation.
Here are some things you need to do and prepare in case the market fails or collapses:
Do not risk a huge amount of your portfolio.
When investing in any type of asset, you can always hear a phrase saying, “Only invest what you can afford to lose”. It’s easy to get hyped with success stories in the world of crypto, thinking you might earn the same profits.
Suppose you borrow money to have a huge capital in investing in cryptocurrency. In that case, you will find it hard and impossible to recover when things turn the opposite way in your crypto investments.
However, if you only invest an amount that you can afford to lose in your cryptocurrency investment, you can still recover when the market crashes. Also, you will not decide quickly to panic-sell your current position in the market. You can just relax while waiting for the prices to bounce back and recover.
Choose a crypto asset with long-term potential.
Market sentiment can greatly affect the assets’ prices. An investor’s attitude towards an asset is a huge factor that might drive its value. Some investors view an asset as good for merely short-term speculative buys. Others also want to invest early for an asset with promising potential in the future.
The best way to invest in an asset is by looking from a long-term perspective. Out of thousands of available digital currencies in the market, it would take a lot of research to find these cryptocurrencies with promising potential.
Luckily, you can easily find various cryptocurrencies available to trade and invest in the market by using a broker-linking platform like Immediate Edge.
Do not forget to always secure an emergency fund.
Having an emergency fund prevents you from stressing out and panicking when the market moves in an unfavourable direction. It can save you from a financial crisis in case your investments fail.
Also, it is great preparation if, in any instance that you lose your job or any other incidents may happen that involve money. If things turn bad, your emergency fund can help you still achieve your financial goals.
It is still undetermined whether the crypto market will recover in the next coming months or years or if this is just the beginning of a longer downturn. As a crypto trader or investor, the best way to prepare for the best or worse things is to set a long-term perspective. Make sure to diversify your portfolio. Never put an egg in a single basket.