Why you shouldn’t be scared of a price crash
When the markets slip, you should see a bargain not a disaster.
Exploring the world of cryptocurrency is an exciting journey. But If you just got into crypto, you’ve only ever seen the good times. Experienced investors know that cryptocurrency goes through cycles of soaring highs and crashing lows. If you want to stick with it long term, you need to understand that price changes are all part of the ride.
Why are cryptocurrency prices going down?
No matter what some traders will try to tell you, no one knows exactly what the markets will do. But sometimes it’s possible to predict general trends. And that’s why this latest downturn isn’t all that surprising.
Cryptocurrency has just had a three year bull run. A bull run is when the market is doing well and prices rise. Many analysts have suggested this run was kickstarted by institutional investors like banks and hedge funds.
These investors inject huge amounts of money in one go and prices can shoot up very quickly. Other investors try to jump on the rising prices and also buy, which keeps the momentum going. But markets need a constant flow of money to maintain prices. The big investors won’t sell their investments, but they probably won’t buy any more at the moment either. This is one of the reasons that some industry commentators think that prices will either stay the same or shrink.
Lower prices means cheaper crypto!
If you started investing in cryptocurrency at the top of a bull market, it’s easy to feel frustrated when you see prices dropping. But price corrections are best seen as an opportunity rather than a punishment.
The first thing to remember is that investing is a long process, so what prices do in the short term isn’t that important. But there’s another upside. Your favourite assets just got cheaper, which means it’s a perfect time to buy more. This is a big trend in the cryptocurrency world, known as buying the dip. There are even memes about it! Don’t be sad because prices are down, be happy because they’re a bargain.
Cost averaging fixes this
Cost averaging is one of the quickest and most reliable ways to invest because it can help you to minimise the impact of market volatility on your investments long term. With cost averaging, all you need to do is work out how much you can afford to invest each month and then do it every month, no matter what the markets are doing.
Cost averaging is used by investors of all experience levels, from the best right down to absolute beginners. It’s simple and minimises the time you spend managing your money and lets you focus on living life. In fact, our famous Savings Plans use this very method. In just a few taps you’ll be investing like a champ, whether the markets are up or down.