In the past week, we have seen some extreme volatility in the Bitcoin and crypto markets, which has caused a lot of distress among traders and investors alike. This turbulence is likely a result of the impending trade wars, and strategic crypto reserves.
For those who are new to Bitcoin and crypto, these steep corrections can instill fear and seem catastrophic, especially if your experience is limited to investing in relatively stable assets like real estate, stocks, or bonds.
On the other hand, those who have been involved in crypto for more than a few years are probably accustomed to, and possibly desensitized to, these erratic market swings.
Crypto veterans see the market plunge and think to themselves "Here we go again..."
The Future of Money?
Crypto skeptics often argue that such a volatile asset class could never be used as money or become the "future of finance".
The counterargument to that is, how do you introduce a free-market replacement to debt-based fiat and have its price increase steadily without any dramatic ups and downs? It's impossible.
If crypto is going to replace traditional finance, some extreme volatility is inevitable during its infant stages. Taking that into account, how can we better handle our emotions during these drastic market movements?
Only Invest Disposable Income
They key to wealth is spending less than you earn and investing the difference. Therefore, you must cut back on your unnecessary expenses, start saving your excess income, and investing a portion of it into the crypto markets.
You will feel less anxiety if the money you have invested isn't required to pay your living expenses. Conversely, if you need it to pay for next month's rent, groceries, or utility bills, then your stress levels will soar.
Have A Safety Cushion
Easier said than done, but you should always have some savings, or at least an income stream that you can survive on, while the prices of your various cryptocurrencies fluctuate wildly.
You can hold this cushion in a traditional bank account, or as stablecoins on various blockchains if you are more technically inclined. Having a stable income stream, or at least a few years of savings, can calm your nerves as you witness these sudden 10, 20, or 30% corrections.
Zoom Out On Price Charts
Ever since Bitcoin rose to near $30 back in 2011, and then crashed to $2, sharp price corrections have been commonplace in the crypto world.
How do we put these abrupt corrections into perspective? Zoom out on the price chart, and look at the trend since Bitcoin's inception. We are clearly witnessing the emergence of a new asset class. The long-term trajectory is up and to the right.
So long as you're willing to endure the short-term volatility, you will be rewarded in the long-term.
For example, anyone who has invested in Bitcoin and waited for at last four years, has profited from their investment.
Until next time...
Getting used to the market volatility of crypto can take some time. Meanwhile, you can reduce your anxiety by only investing disposable income, having a safety cushion, and zooming out on the price charts.
If you learned something new from this article, be sure to check out my other posts on crypto and finance here on the Hive blockchain. You can also follow me on InLeo for more frequent updates.
Further Reading
- Bag Biases, And How To Not To Let Your Emotions Get The Best Of You
- Bitcoin Surpasses Its All-Time High Of $69k And Repeats The Pattern Yet Again
- How To Spot The Difference Between Good and Bad Crypto Projects
Posted Using INLEO