The crypto market has been experiencing a lot of volatility lately. That’s the nature of the game—but what if you could take advantage of that volatility and make it work for you?
Yes, you read that right. This article talks about how to capitalize on cryptocurrency market crashes and liquidations. Why? Because if you can learn how to play the game right, you can be working with the market, not against it.
You might not think this is possible, but trust me: If I can do it, so can you! I won’t say that it will be easy, but you can take advantage of market crashes and make them work for you with a bit of knowledge and practice.
Set a Limit-Loss Order
One of a trader’s biggest mistakes is not using a stop-loss or limit-loss order. Now, what exactly is a limit-loss order? You set this order to sell your position at a specific price automatically. It effectively puts a cap on your risk and takes the emotion out of trading by giving you an exit point should things go south.
Let’s say you buy crypto from a cryptocurrency exchange at $7,000 a coin and want to set a limit loss at $5,000 (40% off). If BTC goes down there, your position will be sold automatically without any input from you other than setting the limit in advance. So how do you set one?
Most exchanges have this ability built into their UI, and it’s relatively simple to use, check out okx.com. For example, a leading cryptocurrency exchange offers an option called “Trailing Stop Sell,” where you can set it as either a fixed amount or as a percentage.
Once the trigger price is reached, it automatically sells your coins at market orders (meaning they will be sold immediately but not necessarily for the best price possible because they are market orders). There are also advanced options that allow clients to explore more sophisticated strategies like limiting sell orders if needed.
Tips for Market Crashes in Terms of Investments
In addition to the standard investing rules, a few fundamental principles can keep you safe in a market crash. The first is to set limits on your losses. Let’s say you’re watching the current market movements, and suddenly you see that the price of Bitcoin has crashed.
Don’t panic and sell to convert cryptocurrency to fiat money right then! Not all markets move up and down simultaneously, so don’t sell all at once when something goes slightly awry. Set a limit loss order before you hit the sell button, and stick with it until it’s out of danger—or until your stop-loss order is triggered by movement in your favor.
For crypto traders, this means setting stop losses. This is how you tell your machine what price level you want to buy or sell—lest you get caught in a downdraft and be forced to dump everything for half its value because of how fast things can change in a blink of an eye on this market.
The Bearish Market
The first thing you need to know is that bearish markets are not suitable for long-term investors. In fact, they are probably the worst time to start investing in cryptocurrencies because the market is in a constant state of decline, and the price action is only going to get uglier as more people decide to sell their assets to avoid further losses. This means that anyone who buys during this period will have acquired their coins at inflated prices, and it could take years before those assets recover their value — if ever!
However, bearish markets can also provide opportunities for short-term traders looking to profit from liquidation events. When people panic-sell their portfolios, they will often do so without thinking about why they invested in cryptocurrency or what they plan on doing with those funds once they’ve cashed out (if anything at all).
The Bullish Market
The majority of market crashes are created by a market turning bearish. And the result is a massive liquidation that can cause a significant death spiral effect. Below we will look at the best strategies for profiting from these volatile markets, and you can take advantage of them to turn your crypto portfolio into cash!
On the opposite side of the spectrum, when a new bull run kicks in, it is an exciting time that sees many investors joining in with their friends and family members to buy cryptocurrency.
The price is rising, and supply is low, so there is no better time to purchase cryptocurrencies than now. This is also a great time to HODL your coins, especially if you’re looking to build up some long-term capital gains on your investment.
However, if you have been sitting on cryptocurrency for some months or years already, then this may be an ideal moment to sell off some of them so they can appreciate further over time while you reap the benefits.
Be Cautious. Wait for the Market to Settle
When investing in crypto, it is essential to understand the market and the elements of human psychology that drive it. The price can move up or down more than 10% in a single day, with extreme volatility during significant announcements and launches by coins like Bitcoin.
It is easy to panic when the market turns south, and your liquidations start stacking up on your account.
While there have been some massive profitable opportunities during past crashes, it is crucial to be cautious. Wait until the market settles before making rash decisions based on how much money you might make or lose from following a specific strategy.
Here are a few things to consider when researching:
- What kind of coins or tokens do you want to invest in?
- What type of wallet do you need?
- How much digital currency should you buy?
- Where can you find information about your preferred cryptocurrency or token? The project’s website is the best place to start, but don’t stop there! There are also forums, social media groups, subreddits (like r/cryptocurrency), and online communities that can help provide more information about specific cryptocurrencies (such as r/Bitcoin).
There you have it! These are our top strategies for capitalizing on cryptocurrency market crashes and liquidations. The only thing that’s left for you to do is put them into action.
