The volatile crypto market can be particularly frightening for investors who hope to see their efforts bearing fruit. A sign of truly seasoned investor is someone who cannot act in haste at the first sign of instability.
While gambling at the best crypto casino may come with risks of losing, figuring out whether to hold on to your investment without panic selling while the price is plummeting can be a true test of your resolve.
What Is Panic Selling?
In the crypto world, when the volume of sell orders is higher than the volume of buy orders for a specific currency, it declines. Often, this is the result of panic selling, as investors find it challenging to deal with the volatility of that currency.
Panic selling usually occurs at the dawn of a specific event that forces investors to sell their holdings. It also surfaces when short-term investors try to pull the price of a currency down to trigger long-term stop losses.
While the unprecedented rise of Bitcoin’s value attracted many new investors to the crypto scene, these novice investors started panic selling after Elon Musk’s tweets caused a stir in the market.
Many people need help understanding what they invest in and how the crypto market operates. Because of this, they can make irrational decisions when there are slight shifts in the landscape.
How Does Panic Selling Happen?
Panic selling is not something that people decide to do for the fun of it. It usually follows a pattern of activity and snowballs with a herd-like mentality.
Typically, some event causes the price of a specific or multiple cryptocurrencies to decline on a high volume. Buyers and sellers fight for control of the trend, with the winner taking the trend on the low volume.
If there is no substantial change after this, there is usually another high volume point where a significant reversal might happen, either in the short or long term.
This process will continue until a long term has been reached and confirmed with basic and technical factors.
Why Do People Panic Sell?
People usually panic sell their cryptocurrency when they fear that their losses may supersede their gains.
Many short-term investors also hope to profit quickly by withdrawing their investments after a few weeks, causing a ripple effect amongst investors of a similar mindset.
Other investors find fluctuations in value to be a scary proposition and panic sell at first sight of a currency behaving erratically. These investors justify their actions as playing it safe in an uncertain market, not realising that their decisions have more extensive ramifications.
Cryptocurrency Investment Risks
Understanding the risks associated with cryptos is essential to understand panic selling better.
A major factor in their vulnerability is the market volatility fuelled by demand, adoption, and hype. In the process of specific crypto getting attention from new investors, the media, and the general public, the price of that currency can become unstable.
In terms of inexperienced traders, this scenario increases their ability to make poor investment decisions on a currency’s potential value.
While these decisions can lead to devastating losses, specific crypto can earn a bad reputation through no fault.
Cryptocurrencies can also be affected by discontinuation or forks that could lead to volatility.
Gapping or spillage is another risk you must be aware of, as this could occur during highly volatile periods. With this volatility, market prices could shift multiple levels while bypassing some in-between levels.
In cases where you have a stop-loss, this has a chance of being executed at a less favourable level than was requested and makes your losses even more dramatic if the market moves against you.
Questions To Ask Yourself Before Panic Selling
While the talk has been about the volatile nature of crypto markets, there are many things to consider regarding your crypto investment. These will help you maintain your frame when uncertainty reaches greater levels, and you need to ride out the storm without panicking.
1. Am I In Control Of My Emotions?
To become a successful investor, you must be able to keep your emotions under control. By having a clear and calm mind, you can make more rational decisions and not act hastily at the first sign of volatility. This clarity of thought will help you to ride out the crypto storms that may come your way.
2. Am I Thinking For The Long-Term?
While the prospect of profitable short-term investments sounds enticing, they amount to more of a gamble.
Always focus on long-term investments by optimising price dips and surges to your advantage. Holding your investments in the face of adversity will reward you in the long run as the market corrects itself.
For long-term investments, buying in the dips is best to ensure greater rewards. Make sure to conduct enough research on the different cryptocurrencies’ performance and diversify your portfolio to keep things fresh.
3. Am I Investing Only What I Am Prepared To Lose?
Although you should never invest, thinking that you will lose it, you must consider the volatile nature of the crypto market. This means you should only invest money you will not miss if you lose it.
In a worst-case scenario, this could conceivably be the case, and you must not be reliant on those funds as they could no longer be yours.
There is very little way of finding out when the market will bottom out and begin to rebound, so it is better to invest smaller amounts consistently in a diverse portfolio instead of putting all your eggs in one basket and hoping for the best.
When Is The Right Time To Sell?
If panic selling is not the best idea in the crypto world, you may wonder when is the best time to sell your crypto.
While there is great difficulty in accurately predicting price movements, selling your currency does not require any elaborate strategies. Instead, you should employ a few concepts to your circumstances to determine if it is the right time to sell some or all of your crypto.
Investors never know how the market will behave and, therefore, cannot say with uncertainty whether to buy, sell, or hold onto their cryptocurrencies at any given time.
It is always recommended to keep an open mind and watchful eye on the markets. This way, you can make an informed decision instead of holding your investment until a specific time or price has arrived.
If you are holding on to your investments, be alert to any news or events that can impact your investment at short notice.
Cultivate Your Mindset
You must remember that the market is largely unregulated, so many potential risks could spell disaster if you are unaware of the crypto environment and its dynamics.
While many new investors prefer to shoot in the dark and hope for the best, good investors will take the time to learn what works for them in terms of the types of values of investments that they make.
If you cultivate a mindset of mitigating risks, you will have a better frame of mind to determine if selling your crypto at that time is in your best interests.
Since there is no specific time to hold or sell your currency, your intuition will undoubtedly influence your decision.
The good news is that you will significantly develop your intuition by riding out storms as you learn more about the market when you are most challenged.
Make sure to engage with other investors and listen carefully for any tips or advice they give you. Seasoned investors with years of experience can open your mind to concepts and ideas that may not have crossed your mind, giving you greater energy to devote to your investment.
Many investors appear to live with regret. Those who prefer to hold their cryptocurrencies may miss the chance to maximise their profits by not cashing out when the crypto is at its peak.
Other investors wait too long before committing to a particular investment and end up investing when the price is at its peak. Upon the anticipated drop in price, these investors go into a tailspin, regretting their delay in purchase and then regretting their purchase at such a high price.
Such investors end up panic selling when the price eventually drops or crashes, making their entire investment pointless and based on irrational decision-making.
Use Your Intuition
It is wise never to hold on to your investments for too long. This volatile crypto market is prone to severe crashes and spikes at the most opportune moments.
If there is a case where you observe a significant drop in the price of a specific crypto and you have already banked your investment funds, then you should read up on investment strategies to counteract your future losses.
In such cases, the best thing to do is ride out the storm and wait for the value to normalise.
Some investors like to hold a portion of their investment while selling a bit. This enables them to hedge their investment and reduce the risk of losing the entire portfolio in a short space of time.
Panic selling is caused when your frame of mind is rattled. This often leads to financial losses as the market corrects itself, and that specific cryptocurrency bounces back to normal levels later.
Some investors rely on their investments for their day-to-day living. So, they may panic sell to get some liquidity while holding on to the rest of their investment. This enables them to remain financially stable while riding out the storms that affect their specific cryptocurrency value.
Investors mustn’t let Fear of Missing Out (FOMO) trick them into holding their assets, especially when the markets tell them otherwise. While it is a sickening feeling to sell off a cryptocurrency only for it to spike in value the following day, it is all a part of the market.
Many traders tend to hold on to their investments longer than necessary when they should have cashed out with a profit before waiting for the next dip to reinvest.
Don’t Believe The Hype
Cryptocurrencies operate on hype in value. If these coins are not well established, there is bound to be a monumental crash at some stage. Altcoins that don’t have a specific purpose tend to sell out quickly as they don’t appear competitive.
Investors will do well in some cases to sell these and come off with a profit to avoid devastation later.
If you have invested in a currency that a reputable exchange has dropped, it is a clear sign that you need to get rid of that investment. Once reputable exchanges stop carrying your coin, others will follow suit, and its value will plummet.
Investors will do well to sell these before their valuation drops to levels that will bring with them losses. You must sell that to avoid ending up with a dead crypto you cannot get rid of.
Always be on the lookout for government regulations on cryptocurrencies, as they look to clamp down on them due to their decentralised and non-fiat nature.
Suppose governments start to impose restrictive measures on cryptocurrency trading and investment. In that case, that could be an excellent time to sell, as you could lose your entire portfolio through penalties and fines.
Panic selling is common among less experienced investors who don’t appear to focus on long-term goals. Make sure to pick up some strategies from reputable platforms like BC.Game’s blog before investing.
Remember to stay aware of the latest news and events that could affect the value of your cryptocurrency. Good luck!