This week has presented landslide losses across the crypto industry, with the entire market valuation dropping over 20% in just a week. As cryptocurrencies bleed money, where does this leave investors? We explore why the market is crashing, and what you can do to protect yourself over these turbulent market conditions.
The recent market crashes are believed to be a knee-jerk reaction to official data being released that indicated imminent rising inflation rates. Last week, the US Federal Reserve announced plans to raise interest rates by 0.75%, the largest single hike in the last three decades. Analysts fear that this could be the catalyst for a recession.
Following this news, investors were quick to liquidate their cryptocurrencies, causing a massive $260 billion to exit the market over the course of a weekend.
It wasn’t only the crypto market that was affected. Stock markets suffered a similar fate, with the S&P 500 falling 4%, the Dow Jones -2.8% and Nasdaq dropping 4.7%, reaching new lows for the year. As the US stock market officially entered bear territory, this had ripple effects across the rest of the global stock markets.
Following the weekend’s news, Bitcoin dropped to $23,000, lows not witnessed since December 2020. As investors pulled their money from riskier assets (tech stocks included), the markets took a wild tumble.
Before we touch on survival tools, let’s first look ahead to what will happen next. Analysts are predicting that we’re likely in for a few more weeks of volatility as the markets recover from the mass sell-off and incur probable further losses. Long term, however, insiders are predicting much bigger highs, as has been evident in trading history.
Due to the cyclical nature in which most asset markets move, trading goes through periods of expansion, peaks, recession, and recovery. As we move through the recession period, while fear is the dominant emotion, hope should be dished out too as recovery is on the horizon.
As the crypto Fear and Greed index points to “extreme fear”, investors are quick to follow suit and sell their digital assets, often incurring great losses. Here are 5 tips on how to survive the current market crash:
As the famous American investor and mutual fund manager, Peter Lynch said: "In the stock market, the most important organ is the stomach. It's not the brain." If you have not liquidated your cryptocurrencies, the losses you see on the screen are not yet realised. Keep hodling.
Hold tight, grit your teeth and push through the chilly crypto winter, the markets will eventually recover as they always do.
Disclaimer: This article is intended for communication purposes only, you should not consider any such information, opinions or other material as financial advice. The information herein does not constitute an offer to sell or the solicitation to purchase/invest in any crypto assets and is not to be taken as a recommendation that any particular investment or trading approach is appropriate for any specific person. There is a possibility of risk in investing in crypto assets and investors are exposed to fluctuations in the crypto asset market. This communication should be read in conjunction with Tap's Terms and Conditions.