How to Protect Your Crypto During Market Crashes

Market downswings are, unfortunately, a regular aspect of investing in cryptocurrency. The market will fluctuate outside of your control; the only thing you can do is change how you react to a market crash.

During a market crash, you should shift your holdings into cold storage, buy more cryptocurrency, and consider rebalancing your portfolio. Read on to learn more about how to protect your crypto during a market crash.

1. Shift Your Holdings Into Cold Storage

Markets crash, and you shouldn’t default to automatically selling (unless the asset is in a death spiral like TerraLuna), though it can be challenging to convince yourself. Although prices are bad now, that doesn’t mean it will always be the case, and we recommend continuing to hodl even when you itch to sell.

Of course, this is easier said than done, which is why we recommend shifting your holdings (that you know you won’t be selling anytime soon) into cold storage. This is a safer place for your cryptocurrency long term, and you won’t be as tempted to give in to rash decisions. This is also just a good habit to get yourself into, as software wallets are not safe places to store your cryptocurrency long term.

2. Buy More Crypto

We know this is hard to do, especially when you see the numbers going in the opposite direction of where you want them to go. However, we challenge you to see a crash as a sale rather than the end of investing as you know it.

As we mentioned above, typically markets do bounce back, so when the price drops, this is the perfect time to buy more. This is also why tactics like Dollar-Cost Averaging tend to work. So, when you start to see the downward swing, don’t panic, buy more.

3. Consider Rebalancing Your Portfolio

While we do have an overall positive feeling about the future of cryptocurrency, we do recognize that not every project will survive. When the downswing hits, this is a good time to take a look at your portfolio to ensure it is still serving your needs.

Sometimes, though a token may seem like a good buy initially, during a downswing it shows its true colors, and you may decide the risk isn’t worth it. That’s okay. You won’t predict every product perfectly each time. The downswing will not only allow you to make changes to your portfolio, but it will also be a good opportunity to switch into some assets that can better weather turbulent markets.

We also recommend using this time to diversify your holdings. If your portfolio is too focused on an asset that is performing terribly, this is a good time to make the changes you need to make to ensure your future success.

4. Re-Evaluate How Much You Are Investing

It is always recommended only to invest money you are willing to lose into crypto. That being said, if you are using a tactic like DCA properly, you should be investing the same amount on a monthly basis. When the market crashes, if you find yourself panicking, this might be the time to revisit the amount you are investing.

Again, we are not suggesting you stop investing, but if you find yourself too stressed at the market crash to think rationally, then it’s clear there is too much at stake. For example, if you regularly invest $200 per month in crypto and panic when it crashes, consider scaling back to $100 per month to give you more peace of mind. It will be easy to do so at this point, because remember, assets will be cheaper. So even if you scale back, you may find yourself purchasing the same number of shares/assets.

5. Don’t Panic

The biggest mistake cryptocurrency holders make when the market crashes is that they panic. Emotions like panic, fear, and FOMO are a trader’s biggest enemy. Not only do they lead you to make rash decisions, but they also make it difficult to think clearly and rationally.

Though it’s challenging, you should do everything possible to stay calm during a market crash—even if that means not watching the news or unfollowing certain reporters on social media. Remember, markets crash, sure, this might be a big one, but there will also be market booms in the future too. So, take this time to revisit and rebalance, then bunker down and weather the storm.

6. Do Your Research

Unless you have to stay off the internet due to FOMO and FUD reasons, a market crash is a good time to research new assets or get up to date on those already in your portfolio. It’s simply a good idea to know what you are investing in, and to keep up with it, just in case there are signs that this might be the end for a certain asset.

We truly believe cryptocurrency will never completely crash as a whole. That being said, certain tokens die every year, and investing is always a risk. However, if you use every downturn to evaluate your portfolio, you’ll be able to spot bad news, scams, and the end of projects well before the next crash comes.

7. Just Wait

Last, but certainly not least, the best way to protect your crypto during a market crash is just to wait. Unfortunately, some crashes start with something as simple as a large business selling its shares. Not all markets can tolerate large shifts like that. Sadly, when these shifts happen, people panic and begin selling off, causing a dip to be larger than it should have been, often creating “crashes” when market sentiment remains overall positive on an asset.

See a price dipping? Just wait. This likely isn’t the end times. If you must do something, research what happened instead of pressing the sell button. Chances are, if you just wait, the prices will eventually bounce back, and you’ll be glad you didn’t sell at a loss.