Many of us have entered the crypto world after hearing from friends, relatives or acquaintances about stratospheric gains with minimal investments. This is often the case in the crypto world as it is still a new world and all it takes is a small inflow of money for the tokens to soar 1000-10000% in just a few months. But because of this, cryptocurrencies are often subject to very strong corrections that can range from 30 to 90% in a matter of days. In short, it’s possible to make millions of dollars with just a few tens of thousands of dollars invested, but you can also lose it all in 1 day if you’re not careful and don’t follow these golden rules of surviving all the crypto flash crashes. Since we are witnessing a very strong crash today, let’s get right to the facts! Try to abide by our advice and in the long run, you will have no problems!
How to survive all crypto crashes
1) Don’t invest money you can’t lose – This is the main rule and it applies to investments of all kinds. If you invest money you can’t lose, in 99% of cases, you will get scared during crashes and sell at a loss, wrecking your wealth. This is why you should always use extra funds that you can do without even if they go to zero. Unfortunately, too many people forget this rule and end up in debt after a bad investment. Never underestimate rule number 1.
2) Diversify – Altcoins are a great source of income, but unlike bitcoin, most of them have no backing (except hope). Therefore a quality portfolio should contain at least 80% Bitcoin and Ethereum and the rest can be used for tokens with lower market caps. Usually, during flash crashes, BTC and ETH drop 20-30%, while altcoins in the same period experience drops ranging from 30-90%. In short, if you put all your eggs in the wrong basket, you will end up with nothing in your pocket.
3) AVOID Margin Trading – Leveraged trading is great for experts but not recommended for those who have only been trading for a few months/years. If you make SPOT purchases, even if the value of the token drops 90% and you don’t sell, sooner or later the token will rise and you will get your investment back. If you had bought it using margin trading, 99% of the time you would have been liquidated. Absolutely avoid this type of trading and always prefer SPOT purchases. In the end, we are all holders and we are here for the long-term, don’t you think?
4) Hold stablecoins for DCA – DCA stands for Dollar Cost Average, which is the practice of holding some money aside to be able to buy a given altcoin even if it goes down a lot. If you have 10,000 dollars to invest in a token that costs 2 dollars, maybe invest 3,000 at 2 dollars and keep the other 7,000 to buy at 1.5, 1 and so on. This will make it easier to close the position during the first pullback and you won’t have to wait for the token to come back at too high a price.
5) Avoid Twitter, Telegram and all social media during a Flash Crash – Crypto Twitter and Telegram Groups are made for two things: creating coordinated FUD or the opposite. During pumps, everyone will talk a good game about crypto assets making you want to buy more, while during DUMPs everyone will find news, even old news, that will scare you even more and make you sell your tokens at a big loss. If you have made spot purchases, close all social media and wait a few days/weeks before checking the performance of your investment again. This in my opinion is the most important rule as it prevents you from falling into the trap of panic selling.
And finally, the last golden rule: HODL!