1. Reasons for the decline at the end of the year
A. Portfolio Rebalancing
Sell for profit: Some investors, especially institutions, sell cryptocurrencies for profit before the end of the year to record positive performance in annual reports.
Liquidation of tax losses: Investors may sell currencies that have lost value to offset their gains from other assets, causing selling pressure.
b. Low liquidity
Sometimes, liquidity in the markets decreases at the end of the year due to the New Year holidays, making the market more volatile and prone to declines.
C. Negative news
Government Policies: If new restrictions or taxes on cryptocurrencies are announced at the end of the year, it could lead to a mass sell-off.
Negative Rumors and Forecasts: The spread of news or analysis predicting a market decline in the coming year may prompt investors to sell early.
d. price correction
If cryptocurrencies see significant gains during the year, a price correction may occur towards the end of the year due to profit-taking.
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2. Historical examples of the decline of digital currencies at the end of the year
2018: Cryptocurrencies saw a major decline towards the end of the year due to widespread sell-offs and market correction after the huge rally in 2017.
2021: Bitcoin and Ethereum fell in December after a period of strong gains, as profit-taking increased and fears of regulatory tightening.
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3. How do investors avoid downside losses?
A. Risk Management
Use stop-loss orders to avoid large losses.
Diversify your portfolio and do not place large investments in one currency.
b. Follow the news
Follow economic policies and global news to anticipate negative movements.
C. Long-term investment
Focus on assets with strong fundamentals like Bitcoin and Ethereum, rather than smaller coins that may be significantly affected.
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Conclusion
Cryptocurrencies can fall at the end of the year due to factors such as liquidations, low liquidity, or negative news. For this reason, investors need to be careful and manage their investments wisely during this period to avoid losses.