4 Common Bear Market Mistakes To Avoid (PART 1)
The bear market will be a nightmare for investors new to the cryptocurrency market because of the sudden and sharp fluctuations. Without enough knowledge, investors can make mistakes. Here are 4 mistakes investors often make when the market is volatile.
Sell off when realize bear market is coming
Panic is universally bad. This is because when we panic, we experience an intense sensation of both fear and anxiety, and it usually comes as a response to an existing danger. When this happens, we tend to be more prone to losing control and making reactionary decisions that are devoid of common sense and logic.
Investing in a cryptocurrency is an act that should be based on sound, objective merits rather than emotions. For example, Bitcoin is largely considered to be digital gold – a store of value – something that has historically appreciated over time. Many people invest in it with the intention to preserve the purchasing power of their funds, especially in times of high inflation when fiat currencies tend to get devalued at a quicker rate. If this is the main reason behind the investment – one is likely to have a long time frame in preference, and the only reason to sell would be if something fundamentally shifts in the narrative and Bitcoin stops fulfilling its role.
However, what we see in practicality is many people start market selling their BTC when the price begins dropping. They forget (or fail to acknowledge in the first place) that BTC is also primarily considered a risk-on asset by many, and that’s the general consensus, at least at the time of this writing. Therefore, during times of economic turmoil, it’s entirely possible for investors to liquidate BTC before they liquidate other assets that they consider safer. This causes the price to go down, sometimes more aggressively.
During these aggressive selloffs, many investors panic. This is entirely normal but also likely to be the most common mistake.
Remember – no asset goes up in a straight line. There will be bumps along the journey.
Trying to Time the Bottom
Trying to time the bottom is another prevalent mistake that newcomers tend to make.
But consider this. Imagine Bitcoin trading at $10,000, and you think it will go down to $8,000 in another 20% crash. You don’t buy, and then Bitcoin goes on a parabolic bull run, hitting $100,000. Now ask yourself – were those 20% worth it?
The point is – nobody knows where the market will go next, it’s all just educated and informed guesses. Therefore, if you’re not a professional trader, one of the best strategies you can use is the Dollar Cost Average (DCA). If you DCA on the way down – that’s even better.
The idea is that you take the amount of money you want to invest, and you break it down into smaller batches that you invest on a regular basis – for example, once every two weeks or once a month. This will get an average price between all the entries and will minimize the risk.
These are some of the most common mistakes that people tend to make during a bear market. None of the above is financial advice. The purpose of this content is solely to entertain and educate. Investing in cryptocurrencies carries a high risk of capital loss. You can lose everything you invested. Therefore, never put in more money than you are willing to and can afford to lose.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
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