What to do when the crypto markets crash

In Trading Strategies

It’s every crypto trader's worst fear: the market is crashing. There's blood in the streets. Everyone is panicking.

What should you do?

Lessons from the stock market

Market crashes are just a part of investing, of markets and market cycles. The housing market crashes, the stock market crashes (sometimes at the same time, like in 2008), all markets crash at some point.

It can be terrifying to wonder about what a crash means – and what to do. Fortunately, the traditional stock market can provide some context and help when it comes to deciding what to do with your crypto investments if the market takes a downturn.

Do nothing?

Sometimes it pays to stay calm and do nothing. Fluctuations are natural in the stock market. If you make good investments, manage them well and stick with the market, you’ll be more likely to see a return on your investment over time. So, although a drop is scary, it doesn’t necessarily mean you should take any action.

Don’t sell?

One of the foundational principles of investing is “buy low, sell high”. It’s a simple concept.

Of course, if the market crashes, then the value of an asset will decrease. So should you sell, especially if you're in profit? Again, you need to assess your situation and decide what’s best for you.

But when people start selling out of fear during a downtown, that’s what drives prices further down.


Again: “Buy low, sell high”. If a promising asset has dipped during a crash, maybe it’s time to buy. This can be a particularly a good idea if an asset you’ve had your eye on has decreased in price as part of the downturn. Do your research and study the charts for clues.

Re-adjust your portfolio?

This is something you might need to wait to do until the market has steadied. Diversification is generally considered essential to investing success.

When the market has settled after a downturn or turbulent time, look at your investments and see how they’ve been affected. If you see areas of weakness or strength – and new opportunities for investment – it may be a good time to revamp your portfolio.

Exit to fiat or stablecoins?

If you’re particularly concerned about a drop in the market, you can begin to convert your cryptocurrencies to fiat currencies or stablecoins to hedge against volatility. On Liquid we have a range of fiat currencies, as well as GUSD and USDC stablecoins.

Go short?

On exchange like Liquid, you can short Bitcoin when prices are going down. Just know that shorting is a strategy that only experienced traders should consider.

A downturn in the crypto market can be scary – really scary. But if the crypto market crashes, applying some of these principles may help you out.

What's your strategy for coping with market crashes?

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All guest authors’ opinions are their own. Liquid does not endorse or adopt any such opinions, and we cannot guarantee any claims made in content written by guest authors.

This content is not financial advice and it is not a recommendation to buy or sell any cryptocurrency or engage in any trading or other activities. You must not rely on this content for any financial decisions. Acquiring, trading, and otherwise transacting with cryptocurrency involves significant risks. We strongly advise our readers to conduct their own independent research before engaging in any such activities.

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