The Crypto Market Is Crashing – This Is Your Emergency Plan

Bitcoin has fallen by more than 70% since the all-time high, and market capital has also fallen by 65%. Is the big winter coming and how should we behave?

The last few months have been very frustrating, especially for younger Bitcoin investors. A price loss of over 60 %, in the case of bitcoin even over 70 % and in the case of ripple over 80 % leaves many questions as to whether this is the end of the crypto currencies.

The reasons given are as numerous as well known:

In the media, just about every economist who is opposed to Bitcoin was asked for an opinion. Such negative statements have recently culminated in a "battle announcement" by the Bank for International Settlements.
The ever more far-reaching regulation in the Chinese and other markets is understandably leading to a degree of uncertainty, as is the recent advertising ban on Facebook or the ban on credit cards.
Many people invested carelessly last year, partly with money they didn't have - now the tax authorities want to have their share of profits.
Concerns about tethering culminated in rumours of market manipulation of the bitcoin price, so that many see in the current price development a market manipulation of bitfinex (regardless of the fact that bitcoin can be bought on significantly more exchanges than only on bitfinex).
The futures on the CBoE and CME were often cited as possible reasons for a falling bitcoin price. Even if it should be emphasised here that the trading volume associated with futures is too small for a sustained price correction, the psychological effect should be taken into account.
Smaller technical reasons such as the dramatically high transaction fees charged by Bitcoin and the trench battles between Bitcoin Cash and Bitcoin also play a role here.
Finally, and I think this is the main reason, many people discovered the cryptographic currencies in the last quarter. Their profits, for example, if they had invested in TRON, have fallen by more than 90% since the all-time high. In this context, an exaggerated expectation with regard to price developments must also be mentioned - be it bitcoin or other currencies. That is why there are many frustrated new investors who are now taking their money out of the market - also at the expense of losses.
At this point, it should be noted that even the classical stock markets are not doing well: since the end of January, all major markets such as the S&P500, NASDAQ, Dow Jones, SSE Composite Index and the DAX have been falling. This is interesting because the cryptographic market has always been anti-cyclical to traditional markets. Both the market for cryptocurrencies and commodities has always been seen as collateral to the stock market. It is certainly possible to express the hope that such anti-cyclical behaviour could now be used, but it is too early to make such predictions.

Large falls are not the end of cryptocurrencies
All these reasons have been covered by BTC-ECHO with their own articles and just yesterday they took a look at the recent shock. We have always tried to gently counteract both excessive FOMO and excessive FUD. And today something has to be written against the latter.

The above mentioned reasons have a common feature: none of them questions the fundamental value of Bitcoins. Certainly, the transaction fees in the Bitcoin case were skyrocketing, certainly there were scam ICOs, but none of them called into question the sense of a decentralized, distributed peer-to-peer network as a whole. Instead, more thought is given to the value of distributed ledgers in different sectors. Interest in Bitcoin is also growing with the Lightning Network and the currently very low fees. Other cryptocurrencies are also evolving, so DASH Evolution should be released in the middle of the year, to name just one important milestone.

Likewise, different messages are seen more negatively than they actually are: A ban on the acquisition of cryptocurrencies by credit card is not surprising, given that even classic stocks cannot be bought by credit card, but rather the usual policy of acquiring assets. Similarly, the ban on cryptographic advertising on Facebook and Instagram is not the worst thing if you remember much of the advertising. If we want cryptocurrencies to be taken seriously, then we should not see measures that support such seriousness as an attack.

Winter is coming? Then let him come along
I'm being frank: At the moment, I don't see any improvement in the short term. It may indeed be that investors in the crypto sector are facing a longer winter. A look at the weekly chart, which was discussed some time ago, shows that Bitcoin has now fallen sustainably under the EMA20, an important support.

In addition to the candlestick chart, the MACD and RSI are shown. To be able to analyze the MACD behavior over several years, it is logarithmically plotted just like the candlestick chart. We see that there has not been a decline under the EMA20 for some time now. Circle the times when this happened. A look at the MACD shows that the fall in May 2014 differs from the fall at the beginning of 2014 in that the MACD has fallen much more steeply. Another difference is that the RSI was significantly lower. If you compare the current fall under the EMA20 with the previous times, the current situation looks more like the red rather than the purple circle - so it is possible that the price may fall even lower.

Well, is a winter the end of it? If, as explained above, the technology and disruptive potential behind cryptocurrencies is not attacked, certainly not! Accordingly, the current times and possibly coming winter should be seen rather temporarily. Some time ago, I wrote about the mindset that we should have in the case of cryptocurrencies, and these words are still true today: we should not become nervous and sell at a great loss, but keep calm. The exchange in our slack with other investors and with traders who scrutinize the market almost 24 hours a day helps me personally. I can also recommend the assessments we share in our crypto compass to newcomers on the market.

Let's think more in this direction: How often have I heard from people that they would invest in Bitcoin, it wouldn't be so expensive! The Bitcoin price has fallen dramatically, so you might consider buying. And about the worry of reaching the dip: It is perfectly understandable that a trader has this goal. However, the long-term investor should also think in the long term, which is why a cost-average approach, in which a fixed amount of money is invested in Bitcoin each month, makes more sense. As I have shown elsewhere, even those who would have started such an investment at the beginning of 2014 at the all-time high of the time at that time would have been able to record an increase of almost 25 % in January 2016, when the Bitcoin share price was still well below its 2013 level.

So the order of the day is to "keep calm" (or HODL, whoever prefers to do so) and to become aware of what inspired us about the technology and the disruptive potential.