The past few weeks have been brutal for all cryptocurrencies. Even the best of projects have crashed. The market cap of the sector that stood at over $2 trillion (roughly Rs. 15,610,304 crore) around March this year, currently stands at $892 billion (roughly Rs. 89,265 crore), as per CoinMarketCap.
At this point, when the global economic situation is facing recession-like circumstances, investors are running lowly on their risk appetite. The recent crashes of Terra and Celsius networks also triggered fear among investors.
Here’s how much the top crypto assets are down as compared to their All-Time Highs (ATHs).
Bitcoin is down by 70 percent Ether is down by 77 percent BNB is down by 68 percent Cardano is down by 84 percent Solana is down by 88 percent Dogecoin is down by 92 percent Polkadot is down by 87 percent
So, what are the lessons to be learned from the latest crypto crash?
HODL Is Not a Good Strategy
HODL (Hold On for Dear Life) is a popular concept in crypto investing. It means that you should never sell your crypto — especially Bitcoin.
People say that if you buy Bitcoin and then never sell it, you will become very rich!
Bitcoin has gone from almost $69,000 (roughly Rs. 54 lakh) to $21,000 (roughly Rs. 16 lakh) in seven months!
Do you still think HODLing is a good strategy?
While it is impossible to ‘time’ the market, savvy investors know that all markets have bull and bear phases and you need to ‘enter’ and ‘exit’ the crypto market from time-to-time.
Buying the Dip Is Not a Good Strategy
I hate the concept of ‘buying the dip’. This means that every time Bitcoin prices dip, you should buy more Bitcoin!
This is an extension of HODLing.
It means that you believe that Bitcoin prices will keep rising forever. So every time prices dip, you buy more.
This is a very bad strategy. There is no asset that keeps increasing in value all the time — not even gold or shares or real estate.
Now that Bitcoin has gone from almost $69,000 (roughly Rs. 54 lakh) to $21,000 (roughly Rs. 16 lakh) in seven months, imagine if you were buying the dip all the way down from BTC’s last ATH.
You would have ended up making massive losses. Like I said before, it is impossible to ‘time’ the market. But savvy investors know that all markets have ups and downs. So you should never blindly ‘buy the dip’.
Don’t Blindly Follow Influencers
In a bull market, most cryptos go up. Even the bad projects!
So when social media influencers advise you to buy some crypto and the price actually goes up, you may think they are super clever. No, they are not.
Crypto is a very tricky market. There are no ‘experts’ who always get things right.
While I had advised my community to sell before March 31, 2022, I did not see the Terra crash coming.
In fact, I had posted about why I was bullish on Terra! And then Terra crashed and burned!
So do not blindly follow influencers. Always do your own research and remember that even the best projects can crash and burn in a bear market.
And when analysing crypto projects, use the ROHAS method — check the Revenue, Organisation, History, Algorithm, and Social community of the project.
I don’t think that this is the end of the entire crypto sector.
Cryptos will bounce back, but not all cryptos. Many weak projects and over-valued cryptos will fail.
There are over 20,000 crypto projects and over 4.5 million crypto assets. I expect 1 percent of them to bounce back strongly and 99 percent to fail.
If you are new to crypto, now is the time to take part in airdrops and learn and earn projects. This will get you free crypto and help you learn the basics.
New crypto startups use airdrops as a marketing strategy. They give free cryptos in return for promoting their website and social media accounts. You can get a list of the latest airdrops from sites like coinmarketcap.com and airdropalert.com
Many cryptos run small courses to build awareness about their project. You need to watch a small video and take a small quiz and you get free cryptos.
This is called Learn and Earn. You can also earn free cryptos by playing online games (Play to Earn) or even by walking (Move to Earn).