New investors who are completely green in the crypto world find bear markets to be brutal. The price swings are usually more violent when compared to stock markets, and it is possible for a token to drop 80% or more from its peak price.
Many investors encountering a crypto bear for the first time tend to make a lot of mistakes. For this reason, we will discuss the most common mistakes investors commit and how you can avoid them.
When you panic, you normally experience a strong sensation of both anxiety and fear in response to present danger. As a result, you are likely to lose control and make reactionary decisions that lack logic and common sense.
In crypto trading, panic selling involves investors selling off their holdings primarily due to fear.
Investing in crypto must be based on objective and sound merits, not emotions. For instance, Bitcoin is considered a store of value, and most people invest in it in order to maintain the buying power of their funds, particularly during high inflation when fiat currencies lose value fast. If this is the primary reason for investing, then one is likely to hold that crypto asset for a long time and would only sell when BTC ceases fulfilling its role.
But what we see in the market today is that most investors begin selling Bitcoin immediately after its price starts declining.
Many people tend to panic when they see such aggressive selloffs, and they are also tempted to sell. However, it is advisable not to forget the primary reason that made you invest.
Marrying Your Bag
While it is important to avoid panic selling, it does not mean that you should not sell your crypto holdings. In case you realize that you invested in a bad project, it is totally okay to sell, even if it means incurring some losses.
Some investors usually get married to their bag; that is, they become emotionally attached to their investment, causing them to stop using common sense. In the process, they lose sight of the main reason they invested.
Many investors tend to overtrade when they have a strong desire to recover losses incurred in previous trades. This prompts decisions based on emotions. But always remember that the market does not care about your emotions. Therefore, It is essential to know when to exit the market.
Trying to Time the Bottom
This is another mistake that most new investors make. They hope for Bitcoin to go down so that they can buy, but eventually, they do not. This is what happens. For example, BTC is trading at $15,000, and a new investor waits for it to reach $13,000 to buy, but it does drop to that level instead to goes on a massive bull run to hit $100,000. The investor ends up missing a big buy opportunity.
This occurred in 2020 during the Covid pandemic when Bitcoin dropped to $4,000. At the time, many believed the worst was yet to come, as lockdowns around the world were causing an economic crisis. However, BTC defied the odds to reach its all-time high of $69,000 a year later.
To avoid missing such opportunities, your best strategy is DCA (Dollar Cost Average). Since no one can accurately predict where Bitcoin will go next, you can opt to DCA, that is, breaking down your investment fund into smaller batches and then buying Bitcoin on a regular basis. It could be monthly, weekly, or even quarterly.