Take it as a rule in the cryptocurrency market and in all financial markets in general: loss is inevitable and will happen to you no matter how skilled or experienced you are in the market.
So do not be deceived by illusions that you will not lose; this does not happen. But skill and experience lie in how to deal with these losses.

In this article, we will talk about strategies you can use to deal with your losses in the market.

Improve your entry level into the currency

One of the biggest reasons for losses for beginners is entering a cryptocurrency at its peak or at the wrong timing.
Don't think that catching the bottom of a currency is easy; it requires study and experience that goes beyond this article. But let's imagine that you invested in a currency and it dropped below your entry price, what should you do?

In this case, you can use what is called averaging down, and the idea behind it is to improve your entry level into the currency.

Let's assume that the current price of Bitcoin is $100,000, and you decided to buy 1 BTC at this price.

  • If the price rises above $100,000, you have made a profit.

  • If it drops below $100,000, you have incurred a loss.

Assume now that the price dropped to $80,000, you would have lost 20% of your entry value.
To compensate for this loss, you can average down by buying an additional 1 BTC at $80,000.
Thus, the average purchase price becomes = (100,000 + 80,000) ÷ 2 = $90,000.
In this way, your calculated loss is reduced to 10% instead of 20%.
Of course, the averaging strategy requires intelligence in application. It is more suitable for investment trades in currencies that you see have a long-term future, and it does not suit currencies with high volatility (like meme coins) because they may continue to drop, and your capital increases in a volatile and uncertain asset.

Diversify your investment across different sectors

There is no doubt that the market condition, whether in a Bull Run or Bear Market, affects all currencies, but usually the performance of sectors differs from each other.

As we have recently seen, some sectors performed well compared to others. Therefore, you should create an investment plan that diversifies the currencies in which you invest.
Do not put all your investments in one sector such as DeFi, RWA, or meme coins. Instead, diversify among these sectors to reduce your losses if momentum decreases around any of them.

You can easily check the sectors of cryptocurrencies and view their data through sites like CoinMarketCap and CoinGecko.