"The crypto market is like a lazy man; it goes up the stairs and down the elevator" - this saying accurately describes the volatility of the crypto market. Did you know that Bitcoin lost more than 80% of its value four times in its history, only to return and reach new all-time highs each time?
Crypto market volatility is not a flaw, but an inherent nature. Understanding this fact and developing strategies to cope with it is what distinguishes successful investors.
Laila, a software engineer, invested a large amount in Ethereum in 2021 when its price was approaching $4,000. After months, it dropped to less than $1,000. "I felt panic and frustration, but I decided not to sell. Instead, I started buying more monthly in small amounts." Today, her average purchase price is much lower, and her portfolio is in the green despite the volatility.
Robert Kiyosaki says: "It's not what happens to you, but how you handle it." In the crypto world, volatility is not a problem in itself; the opportunity and challenge lie in how you respond to it.
Here’s how to handle market volatility intelligently:
- Deep understanding of cycles: Crypto markets go through cycles of boom and bust. Understanding these cycles helps you see the bigger picture. Remember that every previous crash was followed by a bigger rise.
- Dollar-cost averaging (DCA): Instead of investing a large amount all at once, invest small amounts regularly regardless of the price. This strategy reduces the impact of volatility and eases psychological pressure.
Someone says: "I allocate 5% of my monthly salary to buy Bitcoin and Ethereum, regardless of the price. On good days, I buy a little, and on bad days, I buy more. The result? A growing portfolio without daily worry."
- Mental preparedness: Expect volatility before it happens. Have a pre-planned strategy for how you will act when the market drops by different percentages (20%, 50%, 80%). Mental readiness prevents emotional reactions.
- Diversify investments: Don't put all your money in crypto. Spread your investments across different asset classes (stocks, real estate, precious metals) to reduce overall risk.
- Stay away from the noise: During periods of extreme volatility, it might be better to stay away from social media and trading platforms. Media noise amplifies emotions and drives hasty decisions.
Fadi, a professional investor, says: "During the crash of 2022, I deleted trading apps from my phone for two months. It was the best move I made. When I returned, I was calmer and more able to make rational decisions."
- Seize opportunities: Look at sharp declines as buying opportunities, not disasters. As Warren Buffett says: "Be greedy when others are fearful, and fearful when others are greedy."
Remember that the greatest fortunes in crypto history were built during "winter" periods - when prices and interest decline, and only long-term believers in the technology remain.
Karim, a financial analyst, says: "I keep a Bitcoin chart from 2013 on my office wall. Whenever I feel anxious about a sharp decline, I look at it and remember that this is a normal part of the journey."
In the next session, we will discuss the importance of diversification in your crypto portfolio. Are you ready to learn the art of risk distribution to maximize returns?