With interest rates rising in the United States and the world starting to emerge from COVID, financial conditions across the globe have tightened. Bitcoin and Ethereum are both down more than 50% from their all-time highs.
The season of “up only,” a term for the bull market on #cryptotwitter, has come to a close.
So, what can you do when things go sideways or down for a bit?
Here are five ideas that may help
1. Forget your peak net worth number
Even though it’s difficult, try to avoid obsessing over the loan you could have paid off, the house you could have bought, or the riches you could have been swimming in.
Anchoring yourself to this number as a goal will likely lead to biased decision-making.
Instead, try journal about what happened to your investment and what you might change in the future.
- Did you not take profits as you had planned or not leave enough cash on the sidelines for a dip?
- Were you listening to the wrong influencers?
- Did you “marry your bags” and focus too much on a project’s hype instead of its fundamentals?
- Did you not have a plan in the first place?
Identifying these habits can help you get better results in the future. But the first step is acknowledging the problem.
2. Avoid revenge trading and FOMO
If you’re down substantially from your portfolio highs, you’re likely not going to make it back on one trade.
Yet, this doesn’t prevent people from revenge trading, or trying to recover a large loss from a previous trade with one or more trades in a short period, often acting irrationally in the process.
Instead, make a plan and write it down.
I’ll buy $X in BTC and ETH every day/week/month. If it hits the price of $Y
I have $Z set aside to buy that dip.
When you have a system, you develop rules. When you follow your rules, you make fewer mistakes.
3. Consider dynamic dollar cost averaging
Macro investor Darius Dale tells his audience to not only dollar cost average — investing a set amount weekly or monthly — but to dynamically dollar cost average.
What does this mean?
When the financial outlook is negative, you scale back your buying in favor of holding more cash. When the financial outlook improves, you increase the size of your purchase.
To make the strategy even better, you can direct part of your monthly investment into a dollar-pegged stablecoin like USDC, USDT, or USDP and move them into a Rewards Account that earns up to 11% APY.
4. Take risk off the table if you can’t sleep at night
The predictable thing about crypto is that it’s unpredictable. If that causes you to lose sleep, you may have too much at risk.
5. Keep an open mind
We’re still in the early innings of this technology.
When the internet went mainstream in the late ’90s, it was hard to imagine what Facebook, Google, and Amazon would become.
The same goes for Ethereum and Bitcoin today. We don’t know what amazing use cases will emerge or which projects will thrive.
We know it hasn’t been easy out there.
But the good news is that crypto has been through difficult times before. Did we miss any tips? Let us know in the comments section.