When the Sky Comes Falling Down: How to Respond to the Volatile Crypto Market

I’m sure January 2018 is a month we won’t easily forget: Waves of sheer panic prompted crypto traders worldwide to dump their stock “before it’s too late”, with many even accepting losses up to 20%. But was there really a reason to panic? Let’s examine the Top 3 Reasons people decided to close their positions prematurely:



FUD: Fear, Uncertainty and Doubt

The abbreviation FUD is definitely going to be added to our Quick Guide, as it stands for all the false information that has been preached as if it were the crypto gospel. One example of fake news is that the South-Korean government vowed to ban crypto trading. Panic! “South-Korea is a major portfolio holder, let’s sell before it’s too late!”

Except it wasn’t true. The unilateral (and not authorised) statement by the Ministry of Justice was almost immediately rejected by the Ministries of Finance and Strategy. The country actually has a “Cryptocurrency Task Force”, which reports directly to the Minister of Finance. Their spokesperson said the following:

“The South Korean government has no other choice but to follow the regulatory frameworks and trends established by other leading governments. While there certainly exists a negative reputation attached to the cryptocurrencies, the government’s stance is to allow what has to be allowed, for the benefit of the South Korean market.”

TIP: Don’t make a buy/sell decision based on unconfirmed news: Everybody has their own agenda!


Don’t stare yourself blind on charts

Triangle patterns, Fibonacci retracement, Divergence Oscillator… Many traders will tell you to apply these tools and insights to understand the market, and even to predict its future. Take candlestick charts. It shows you the current sentiment and whether something big is going on right now, but the market’s volatility doesn’t allow for anticipating future movements. Don’t confuse traditional stock with crypto: This is the league of 24/7 trading.

…a look in the past…

TIP: Instead of relying on charts, focus on validated news, like Coinbase adding a currency.


Have a clear strategy

Warren Buffett has said he doesn’t understand crypto and that he has no desire to do so, but that doesn’t mean we can’t stick to one of his oldest mantras: Never lose money. To apply this lesson to crypto trading, let’s play by the following set of rules:

  1. Never, ever sell in red. Even when your position dips down to -70%: HOLD.
  2. Always sell in green, but keep in mind the spread and possible withdrawal costs!
  3. Only buy during a dip of at least -25% and don’t buy when it’s moving up again.

When it comes to strategy, I like to keep it really simple and really safe: 50% profit at least, 200% profit at most. Please note that I “short” my positions, meaning I don’t leave them untouched for a year, which is a whole different strategy. 50% profit is applied to unstable coins, 200% is applicable to coins that may even peak at 300% or more. There is no way to predict their movements, which is why I like to play it safe. My strategy is to take profits when I can, add them to the previously invested money, and open a new position during a dip.

TIP: Know what you want and when you want it: Stick to your plan, there’s always a next time!

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