In early May, Bitcoin was trading at $58,000, but its value was gradually decreasing. Now the price of the leading cryptocurrency is about $39 thousand. How should those who invested in crypto assets before the collapse react? What should they do? Let’s try to figure it out.
For the period between May 1 and May 27, Bitcoin fell by 34%. The value of the leading cryptocurrency began to fall against the backdrop of Tesla’s refusal to sell electric vehicles for digital coins, Elon Musk’s criticism of Bitcoin, and the Chinese authorities’ intention to tighten regulation of mining and cryptocurrency trading.
However, many strategists and experts claim that despite this, Bitcoin is still in a bull market and is on its way to the $100K mark.
The market is changing
Recent weeks have shown that things can change very quickly from positive to negative and vice versa. One of the main positive criteria is the entry of funds and corporations into the cryptocurrency market. They have a much larger investment horizon than the average investor.
If the initial investment goal is long-term, the investor must have a plan on how to act when the market is going up or when it is going down. Typically, investors hold free capital for averaging and buying when the market is down.
With a long-term approach to investing with a horizon of 1–3 years, there is almost no point in selling; otherwise, a long-term investor turns into a speculator-trader. Long-term investors can be advised to look at the trading terminal less often and not make deals without a clear plan.
Long-term investor tools
Market participants should use three tools: a graph of price changes for a month, a logarithmic price scale, and an analysis of the entire price history of an asset.
Do not forget that in the past, bitcoin cost a few cents, then hundreds of dollars, and now it costs tens of thousands of dollars. The logarithmic scale “equalizes” all these periods. The historical trend is still stable, and the subsequent renewal of price highs has always accompanied the correction cycle.
Any trends, even such long-term ones, come to an end sooner or later. That’s why it is quite reasonable to set goals to exit positions in the event of a negative and positive scenario, relying on the global “logarithmic” trend.
Freezing positions and fixing losses
Other analysts believe that it is essential for a long-term investor to consider the possibility of freezing the deposit for three or four years since the likelihood of early completion of the global bull cycle has increased. They are convinced that the chance of repeating the cycle of the accumulation associated with halving is relatively high. According to analysts’ forecast, with the onset of a bearish cycle, Bitcoin may gradually fall to $10–15 thousand in the next 2–3 years.
Only six months to a year before the next halving (in the middle of 2024), the trend can change to a bullish one.
In some cases, fixing even 20–30% of losses may look like a priority to freezing funds for several years, especially if these are margin positions or there is a comparable investment instrument in terms of profitability.
A long-term investor should understand and realize that the risk of losing everything is always there. However, long terms approach with educated decisions minimizes that risk. Long-term investors should have pre-planned strategies on how to act when the momentum hits. If you bought your crypto on the spot market, while the asset is not sold and the losses are not fixed, it is enough to wait for a new impulse for growth. It can be anything: the launch of an ETF, new media personalities like Elon Musk, another halving, approval from large states, and much more.
Although most investors have a cap on selling, even with the recent decline from its highs, many have been bullish. There are wild speculative prognostications that make Bitcoin what it is. Many crypto enthusiasts are sure that it’s always better to keep it even if it goes to $5,000. Anyway, what comes around, goes around.
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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.
