Crypto Is Becoming More Correlated With Forex Trends. Here's How To Benefit From The Downturn

It has been a relatively challenging past few months for the cryptocurrency industry. After over a year of mostly bullish movements where investors continued to cash checks and smile to the bank, coin prices have essentially tumbled and gains have been wiped out.

For several reasons, crypto has now essentially become a minefield. Investors are feeling more scared than ever to come in, and even some of the top platforms in the market have now been rendered vulnerable - if not entirely bankrupt.

The Crypto-Forex Correlation

The recent movement in crypto prices has become incredibly reminiscent of forex and stock prices in the past few months as well. A little over two years ago, when the coronavirus pandemic was at its worst and everyone was forced to stay indoors, crypto had initially served as a safe haven for most of these investors who are looking for gains now.

Sure, Bitcoin BTC/USD began the endemic trading at a low of $3,600. However, in the months following the lockdowns and entire pandemic, the crypto market was able to surge to a new high, with coins breaking records and becoming more valuable than ever before.

On the flip side, forex and stock markets only saw slight jumps - although they did surge as well. Investors who bought crypto during the pandemic made the biggest gains of everyone, and it became rather clear that digital assets were indeed the best bet for anyone looking for safety.

Compare that to this year, and that belief appears to now be very wrong. On the back of struggling economies and the possibility of widespread recessions, cryptocurrencies - as well as other markets - have tumbled entirely.

Looking at the stock market, several of the high-growth tech stocks that have been delivering gains for investors are now trading down. In fact, several highly rated tech companies have seen their stocks drop by over 50 percent as they continue to deal with the worst of the current economic condition.

Energy stocks are down as well, with the current conflict in Ukraine leading to an unstable market that several top energy companies have been unable to navigate properly.

As for forex, the Ukraine conflict has also dealt a major blow to the space. This, as well as the fact that several top economies appear to be slowing down and bracing for recessions, has led their currencies to be more volatile than ever before.

Making Money From The Downturn

It is the basic tenet of any market that downturns are a good time for money to be made.  In crypto, this law is absolutely no different. The best way to navigate the current market is to have the long game in mind as the last thing you’d want to do is get crushed in your search of quick, short-term profits.

With that in mind, here are some things you need to keep in mind:

Vet your brokers

As you trade, one thing you need to keep in mind is to verify that a selected broker is right for you.

This is especially important because we’ve seen several brokers that have locked customers’ funds and prevented them from withdrawing in the past few weeks. Obviously, you don’t want to be kept in this situation as you trade.

Just like you would do this when entering the forex market, having the most ideal crypto broker for you will also play a major role in your success as a crypto trader. 

Rate value above anything else

Trading in the crypto market right now can be tricky. However, this is also a good time to remember the basic truth of the market - cryptocurrencies with value eventually do well in the long run. To be on the safe side, invest in those.

Valuable cryptocurrencies are simply assets that are looking to solve a real-world problem. These are coins whose developers are looking to bring actual solutions and which play perfectly into these solutions themselves.

Instead of investing in the typical assets that only drive short-term profits, let these value-driven coins form a major part of your portfolio. In the long run, they are the ones that will deliver the most value.

Of course, this isn’t to say that meme coins and other assets don’t necessarily have value. As the market works on flipping bullish, even these assets will see gains as well. However, considering that we’re in a downturn, investors looking to play it safe might want to ease off most of these assets for the time being.

Trade the news

Keeping an eye on the current market events and trends will also help you in your quest to make money from crypto right now.

Since we’re in a bear market, there will be several pieces of breaking news coming in that will rattle investors. As much as you can, you want to keep an eye on them to know when to enter the market and when to stay away. Fundamental analysis becomes much easier in a bear market because there’s just so much news to sift through. As shoes continue to drop, be ready to move accordingly.

Interestingly, the news doesn’t need to be related to crypto alone. When the US government released data on inflation for June, showing that the metric had jumped by 9.1% year-on-year, the crypto and forex markets took major hits. Instances like these show that major news tends to affect every market, regardless of where you play. So, try as much as possible to keep your ears to the ground across the board.