5 Tips From Coinbase On How To Manage A Crypto Down Cycle

Crypto exchange Coinbase Global Inc COIN shared five key ways to minimize losses in a crypto down cycle.

What Happened: Large-scale liquidations and brutal selloffs have defined the last few weeks in crypto. According to Coinbase, there are a few strategies that traders can use to navigate a period of decline such as this one.

1. Don’t fall prey to FOMO and FUD: FOMO (fear of missing out) and FUD (fear, uncertainty, and doubt) are common terms in the crypto space, and can have a stronger influence on choices to buy and sell, said the exchange.

Traders should remember to not make decisions based on either negative sentiment brought about by FUD or wishful thinking brought about by FOMO.

2. Set clear goals, diversify and only trade within your means: No matter how confident you are in a particular asset, you should never invest more than you can afford to lose, said Coinbase.

The exchange recommends strategies like dollar-cost averaging (the process of buying or selling small amounts over regular intervals) and defining key entry and exit points in their trade.

3. HODL-ing and long-term thinking: Coinbase advised against recognizing paper losses, or unrealized losses, if the value of the asset falls below the purchase price.

Holding for long periods has to date been a proven strategy, with Bitcoin BTC/USD emerging as perhaps the most successful major asset of the last decade, explained Coinbase.

4. Be ready to ride out the dip or take profits: Coinbase explained that investors should consider converting some of their more volatile crypto holdings into stablecoins to “lock in” their balance and reduce risk.

“But also remember that selling everything at once, called capitulation, can easily cause crypto holders to lose out if the market suddenly rebounds,” said the exchange.

5. See the opportunities: Even in a falling market, there are still opportunities to profit if one knows where to look.

Strategies like short selling, staking and DeFi yield farming and taking advantage of small peaks in prices with the right technical analysis can prove rewarding for investors.

Price Action: As of Thursday morning, Bitcoin was trading at $36,600, down 3.34% in the last 24 hours.

Photo by Kelly Sikkema on Unsplash.