Crypto Winter: Possible Mistakes to Avoid

The long and well-thought-out plans that led Warren Buffett and George Soros to success don’t inspire today’s investors. The new role models in the financial market are the student who spent their pocket money on BTC and became a millionaire in a couple of years and the trader who invested $100 in crypto just in time and made a fortune.

These stories share two things: a quick result and a few simple but successful actions. No wonder everyone enters the crypto market for the same reasons. The less money a person has, the faster he wants to get rich. However, this psychology often leads to fatal mistakes.

Let’s step back and briefly examine what we mean by the term “crypto winter.” To give you a very wide, non-generalized definition, it is something that traders and speculators are not happy with. This meme-style name stands for the longest bearish trend in the cryptocurrency market. Even though Bitcoin has fallen by 80% since December 2017, the market has repeatedly recovered from such falls. How can we survive BTC’s poor performance, and what will happen next?

Pre-History

At the end of 2017, BTC and a dizzying buffet of alternatives experienced meteoric price gains. In the most successful year for crypto, the BTC rate rose by 57% in just three months. This growth was the beginning of a crazy rally. As a result, BTV set a record high of $20,000 at the end of December 2017. At the beginning of that month, the asset’s price was almost half as much: $10,200.

Right after reaching the historic high, the digital gold began to decline sharply, and by the end of February, it was worth just $10,700. Despite such a roller coaster, the exchange rate of the coin increased by 5% over three winter months.

The toughest year for virtual currency was 2018. The market fell by $400 billion, so institutional investors and banks had nothing left but to suspend participation in crypto projects. That was when the main decline in the exchange rate took place. Many users lost interest in this industry, and a slew of companies were forced to close.

There were many reasons for the market collapse. The most popular one was that 99% of the cryptocurrency market consisted of speculators willing to earn money and leave crypto-land at the first negative sign. Therefore, nothing is surprising about this dynamic.

Winter 2019 was the single worst of the last three years. Legendary Wall Street trader and crypto enthusiast Mike Novogratz broke his silence and expressed his opinions about the future of BTC. According to the former Goldman Sachs partner, in the coming months, the king of crypto would be unlikely to change its trend and return to growth.

Novogratz shared his thoughts on Twitter. As he declared, the long silence regarding the crypto market was caused by a high probability that price would decrease. The expert firmly believed that over the next few months, the market wouldn’t turn “north.”

Even though Novogratz had painted a troubling picture of the future, it was not that bad. He simply reflected market developments. The head of a cryptocurrency bank was convinced that “institutional investors have always been inertial and required more time to enter” the potentially promising digital currency market.

Novogratz noted that the preparation of the market infrastructure was hidden, which would eventually lead major players to the industry. Novogratz hinted at the launch of the Bukkit platform, the start of the Fidelity Digital Asset Services, and the issuance of SEC permission for the Bitcoin-ETF VanEck/SolidX solution. The introduction of these products has been delayed, however, due to the recent government shutdown in the US.

What’s Next?

It is important to remember that the behavior of an asset in the past does not guarantee the same behavior in the future. Obviously, no one knows how the crypto market will develop. From the very beginning, many analysts and commentators claimed that virtual currency was a scam and hype. BTC buyers were believed to be daydreamers because digital gold was not supported by anything. It is still far from reality.

With all this in mind, the first question that pops comes to mind is how to avoid past mistakes. Observing the market and investors’ behavior, we have formulated some strategies to help you survive a crypto winter:

• When investing in internet cash, you need to start with a negative forecast. It’s crucial to understand that the risk of losing everything in the short run is a reality, not a lack of optimism or adventurism.
• Before you step into the crypto world, get rid of greed. Realize that the profits are not yours until you literally take them from the table. As long as the income is shown only on the display, you can’t count on receiving it or waiting for further growth. To minimize the risk, fix the profit partially. If growth happens, fix another part, and so on.
• “What project is the best to invest in?” is the most common and incorrectly posed question for many crypto enthusiasts. It forms the wrong approach — an attempt to invest in not only one cryptocurrency but “the best” one. As a result, the investment turns into a game of roulette. How can you avoid the “best ICO” error? Working with any financial instrument will help you.
• A competent investor does not look for the best asset but builds a portfolio. Some projects will fail, some will cease their activities, and the rest will gradually develop. Investing in an ICO should be regarded as a high-risk tool — a kind of startup. We initially took the statistics of the venture market as a base and assumed that only two or three out of ten ICOs would be successful. This approach allows you to manage your expectations and test out statistics.
• Follow the crowd. At first glance, the easiest and less risky way. The majority can’t be mistaken, right? The market is cyclical, and the world of crypto is no exception. In these cycles, the one who moves against the crowd will definitely get more. Buy scared, sell greedy — this is the key strategy in this space.

The Bottom Line

It’s great to be full of ambition, but great feats take time. There’s no way around it. The main thing is to understand that any investment is a risk. It is not about searching for one successful asset or instrument. It is ongoing hard work. Keep up to date with the latest crypto news, carry out risk assessments, and consult specialists. Eventually, you’ll get create a competent portfolio and strategy that takes into account the mistakes and achievements of investors in previous cycles.

Stay hungry, but be patient. Focus on the daily process of improving your knowledge, and the results will live up to your expectations.