How not to react emotionally during the fall in the price of digital currencies?

Bitcoin and other digital currencies are going through tough weeks. The price of Bitcoin has fallen by more than 18% in the last 30 days, and as the market data shows, the trend of the total value of the digital currency market, after reaching its peak on November 10 (November 19, 1999), has always been downward. The fact that the price of some NFT tokens has reached historical highs is also a sign of weakness in the market.

For a large number of newcomers to the digital currency market, this can be like a new experience. The last two years have seen an incredible increase in the number of users of exchanges like Kevin Bass. In the second quarter of 2020, the total number of users who have authenticated in this exchange reached 37 million people. By the second quarter of 2021, that number had risen to 68 million users, and finally in the third quarter of that year, the number of 73 million approved members was announced.

Based on these data, it can be said that tens of millions of new investors have entered the digital currency market during this period, none of whom have experienced a real downward market so far. It is not yet possible to say for sure that we are facing a full-blown declining market, which is why market newcomers are advised to be mentally prepared for anything.

What you read below, Note By David Morris is one of the leading authors of the Kevin Desk website. In this article, he examines the feelings of traders after the fall of prices and offers solutions to deal with emotional behaviors after the fall of prices.

Look for suitable entry points

Let’s look at this a little more clearly. The fact that bitcoin has fallen to $ 40,000 for someone who has been involved with this space for a long time does not mean that the world is over. Bitcoin only experienced this price for the first time a year ago, in January 2021 (December 1999). The price fell below this level in July (July) and even reached less than $ 30,000 for a short time. In the long run, the current 38% drop in Bitcoin from its November high is not on the list of the digital currency’s deepest price declines. For example, in 2018, the price of bitcoin fell by 84% in just a few weeks.

In short, those who bought bitcoins at the peak are naturally a little upset at the moment, but many other bitcoin investors, who were looking for suitable entry points to accumulate new units, are still making a profit.

This is probably the most important lesson for investing in digital currencies. Because these assets are readily available and highly liquid, they are always subject to large and rapid fluctuations due to changing investor sentiment; This usually leads to falling prices.

The following advice is a consistent statement from Warren Buffett, a successful American investor and entrepreneur, about the stock market, which, of course, is more true of digital currencies.

You have to be afraid when others seem greedy, and you have to be greedy when others are scared.

Important developments that can reverse the trend

The last sharp drop in the price of bitcoin dates back to July; When the market experienced a 50% decline. Although Bitcoin was very good at rescuing itself from this predicament, important developments such as the acceptance of Bitcoin in El Salvador and the addition of Bitcoin payments to Twitter have been instrumental in accelerating the recovery of the digital currency. General market conditions may be more likely to continue the downtrend; But something similar to past developments can reverse the current trend.

On the other hand, the US Federal Reserve’s decision to restrict the money supply this year is affecting prices and will not allow bitcoin to act as an “anti-inflation asset”; This is likely to limit the budgets of digital currency startups and other high-risk investments.

The nature of the market is always somewhat predictable

What seems to remain intact is the nature of the period of acceptance and interest in digital currencies, as well as market trends. This pattern has largely been in place for the past decade. Every sudden boom in the digital currency market attracts a huge new stream of seasonal traders and venture capitalists, many of whom have a vague understanding of the technology and why it’s important. Many of these new investors feel “fear of losing” or FOMO as the market plummets.

These investors sometimes get smart and buy tokens that their founders have described as the “next bitcoin”; But later it turns out that those tokens are worthless and buying them was not the right decision. Especially in the current cycle, the divergence between the price performance of digital currencies is greater than ever, and the difference between a good deal and a bad choice is much greater than ever.

Also read: 15 ways to control emotions and obsessions during trading

Do not leave the game after defeat

Some losers, like many of these newcomers to the digital currency market who now find themselves defeated, often withdraw their capital and return home in disgust. However, many of them stay, learn from their mistakes, and ultimately pursue the market deeper and more committed than before. Newly equipped with the powerful “Perception” weapon, they will be part of a stronger team the next time price fluctuations attract public attention. Obviously, this cycle cannot continue forever. Eventually, digital currencies, especially bitcoin, will become more reasonably priced and market trends will be more stable than ever. Maybe this reasonable price for Bitcoin is around $ 50,000 right now; Something that has happened before.

The introduction of new ideas, the interaction and acceptance of digital currencies, especially by governments, will probably remain significant without being affected by price fluctuations. This, along with the millions of new people being trained in the applications and even development of digital currency systems, will provide a solid foundation for the next round of market dynamics and growth; Whether it takes three months or three years. Both of these scenarios are possible at the moment, so it’s a good idea to adjust your portfolio and expectations accordingly.