"The crypto market is like a lazy man; it climbs the stairs and descends the elevator" - this saying accurately describes the volatility of the crypto market. Did you know that Bitcoin has lost more than 80% of its value four times in its history, only to return to achieve new record highs each time?
The volatility of the crypto market is not a flaw but an inherent nature of it. Understanding this fact and developing strategies to cope with it is what sets successful investors apart.
Laila, a software engineer, invested a significant amount in Ethereum in 2021 when its price was nearing $4,000. After months, it dropped to below $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 fluctuations.
Robert Kiyosaki says: "It's not what happens to you, but how you deal with 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 deal with market volatility wisely:
- 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 larger 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 worries."
- Mental preparation: Expect volatility before it happens. Have a pre-planned strategy for how to 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 may be best to steer clear of social media and trading platforms. The 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 better 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 drop, and only long-term believers in the technology remain.
Karim, a financial analyst, says: "I have had a Bitcoin chart on my office wall since 2013. Whenever I feel anxious about a sharp drop, I look at it and remember that this is a normal part of the journey."
In the next session, we will talk about the importance of diversification in your crypto portfolio. Are you ready to learn the art of risk distribution to maximize returns?