Crypto market crashes often occur, but their severity differs. For instance, we experienced one of the worst crashes in 2017/18.
After the recent dip, many people have this question: How long will the dip last? However, instead of always worrying about the worst effects of a dip, it is best to focus on the question: how to benefit from a crypto market crash?
Benefitting from market dip
Although a market crash can severely affect investors, it offers others an opportunity to make a profit. There are several ways in which investors can benefit. The best option for an individual depends on his/her risk tolerance.
Buy the dip
Buying the dip can generate large returns in the short or long run. Essentially, buying the dip means that an investor buys the cryptocurrency of choice when there is a market crash. In the recent dip, the Bitcoin fell to $30 000 and within 24 hours it bounced back to $39 400.
If someone purchased it at $30 000, he/she could have made a profit of $9 400 within 24 hours. If an investor buys dip and HODLs, the return may become even higher.
HODling is a strategy where an investor buys a cryptocurrency and holds it for some time before selling it. The length of time an individual holds the coin depends on the market movements and the individual’s discretion.
Some people hold the crypto for a few days, others for a few weeks while some can keep them for years, waiting for a windfall.
HODlers do not speculate short term price movements but long term ones. What is the link with profiting from a market crash? The point is that an individual buys the cryptocurrency of choice when there is a great price crash, then holds it until the price firms.
However, one should always maintain caution. It is best to buy dip solid coins and tokens such as ETH and BTC, the best performing ones, which have been trending for a long period of time. By standard, HODling any of the top 5 cryptocurrencies by market cap is the best choice.
Shorting the crypto
Shorting takes place if an investor anticipates the price of a specific cryptocurrency to further fall from the prevailing price.
As a result, the person sells the cryptocurrency he/she holds at that time, then wait for the price to fall again. After anticipating that the price has reached the lowest level possible, the individual buys the specific cryptocurrency again.
The disadvantage of this method is that, the price of the coin may not decline as anticipated. Instead, it can start rising.
Pinpoint strong opportunities
When the general crypto market goes through a dip, it does not mean that every coin or token is affected in the same manner. Whereas the prices of some cryptocurrency decrease significantly, some will hold on.
Therefore, if experienced investors see signs of depressed prices of certain tokens, they can switch their investments to those whose prices remain stable. Of course, converting some cryptocurrencies to stable coins can help investors to maintain their crypto values.
It is true that crypto market price crashes result in anxious moments and loss of wealth. However, executing the right strategy at the right time can save your day and even results in bigger gains.
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