Market correction is a difficult time for investors. When cryptocurrency rates plummet, panic sets in, which inevitably leads to rash transactions. Now that the Bitcoin rate has dipped significantly, and the entire altcoin market has followed it, it's time to think about minimizing losses. It should be noted that the situation is further aggravated by the fact that usually stablecoins were a haven for investors, which made it possible to avoid losses on volatility, while not withdrawing funds to fiat. However, the recent UST crash has shattered investor confidence in stablecoins, as even Tether lost its dollar peg at the moment.
In order not to lose money, it is better to listen to the advice of experienced people. We ask experts how investors can survive a period of significant Bitcoin drawdown with minimal losses, even if there are some problems with the once reliable stablecoins.
Buy bitcoin and wait for growth
Everyone knows the traders’ maxim: “While everyone is selling, you need to buy”. In some cases, it makes sense to go against the crowd to end up making a profit. Anton Yakovlev, an expert in finance and investor, thinks exactly so. According to him, the situation with stablecoins is non-relevant, and it is wrong to talk about the crisis of all stablecoins. Investors can continue to save in major digital dollars. Since the world has been experiencing stagflation since the beginning of November 2021—a reduction in GDP and an increase in inflation—this has directly affected the value of bitcoin. Investors are now protecting their capital by transferring money into protective assets. Historically, cryptocurrencies have been a high-risk asset. This is not what international investors need now.
According to the forecast, stagflation will last until the end of 2022. Therefore, investors need to prepare for the fact that the prices of altcoins will continue to decline, but not at a dramatic pace. The best advice in this situation would be to buy more bitcoin and ether as they decrease. Until optimism and faith in the growth of the economy returns to the market, altcoins will not be in demand by investors who look for increased returns and are ready for increased risk.
Ivan Petrov, professional technical trader and macroeconomist, Founder of the profitable investment school "Eco Investments", says,
“It must be remembered that the cryptocurrency market is a speculative market, and external factors, including fundamental ones, do not primarily affect it. This market is ruled by large capitals—‘manipulators’—which have significant volumes. It was they who created the system crisis in this market, and it was they who provoked the ‘technical collapse of the stablecoin UST’. They are now supporting panic through the media. What should a crypto investor who wants to earn money do under these conditions? The same as ‘smart money’ is already doing—‘buying fears’ at local lows of valuable assets.”
Diversify your portfolio
Another traders’ maxim goes, "Don't put all your eggs in one basket." Diversification is the simplest and most reliable risk hedging technique. Some experts advise to reallocate the portfolio in order to avoid significant financial losses.
Evgeny Pavlyukevich, Co-Founder and head of the blockchain division of Atras studio, researcher at Lomonosov Moscow State University, says,
“What should you do now? If you have not withdrawn your funds yet, you should not withdraw them. The rate has already dropped seriously, and it will not fall far from the current level. Withdrawing money now will mean only losses even within 3 months, without a chance for a return on investment. It is better to redistribute funds between more or less reliable cryptocurrencies—Bitcoin, Ethereum, Cardano, Solana, Binance Coin, FTX. Also, for the next 2-3 months, you can purchase a GMT token for the STEPN game. While the game has not begun to collapse (the fall might probably begin at the end of this year), you can hold their token.”
Vladimir Gorgadze, head of the Blockchain Master’s Program at MIPT, head of Tokenization Projects at MMC Norilsk Nickel, head of blockchain solutions developer Newity, says,
“This problem seems to me somewhat exaggerated. Many stablecoins remain quite stable. As always, you need to invest wisely. Do not put ‘all your eggs in one basket’. Those investors who rely solely on the growth of crypto assets may also need to consider other, less risky financial assets in the market to diversify their portfolio.”
Increase knowledge of fundamental and technical analysis
If you want to do something well, do it yourself. According to some traders, the period of market decline is a great time to analyze your work and identify weaknesses. The best thing an investor can do to minimize risks is to engage in self-education, because knowledge of technical and fundamental analysis allows you to predict the behavior of crypto assets and thereby not only save money but also increase them.
Vadim Tsarenkov, a leading cryptanalyst at Vekus Mining Development, believes that in order to minimize risks in a period when there are some problems even with stablecoins, one must act as always. If an investor wants to minimize the loss, they need to have knowledge of technical and fundamental analysis, make decisions on the acquisition of an asset on their own, and not because of news or hype. One can get trained, hire an experienced consultant, or work with a company that has been doing this for many years.
Regarding the situation with stablecoins, the expert adds that the case with UST is more an exception than a pattern. Today, when the panic has subsided, we see stability in this area. No one is in a hurry to give up USDT or BUSD. Do not forget that investments are always risks, especially in the cryptocurrency industry. You can really lose a lot, as in the case of LUNA investors. Or you can diversify risks, be patient, and every year be surprised at what incredible income opportunities the cryptocurrency market opens up.
Alexander Belenov, head of the blockchain laboratory of the Idea Research Center, says,
“How can one survive this period? As to traders, experts can trade in any market, both growing and falling. As to long-term investments, nothing has changed here either. It is necessary to conduct a comprehensive analysis of the investment project, involve experts in the analysis, and thus you can minimize the risks associated with scams or the inability of the project team to achieve technological or business goals.”
Dmitry Zamolotsky, an analyst in the banking and cryptocurrency sectors and a successful businessman, notes that, as in traditional finance, the well-being of an investor's portfolio depends on its management. It pays to make less fuss and obtain more financial literacy.
Convert funds to stablecoins
Despite the situation with UST, many experts believe that stablecoins should not be disregarded. They have always been a reliable tool for saving funds during the time of fluctuations in the rate of cryptocurrencies.
Vasily Kudrin, Partner and Investment director of the Lybrion International Group, emphasizes that the largest stablecoins have shown robustness recently. With the collapse of the Terra ecosystem, pressure was placed, on the one hand, on individual second-tier stablecoins, and partially, on the other hand, on Tether (USDT), which is the most popular stablecoin. Therefore, some panic movements were levied at it. BUSD, USDC and DAI sometimes even felt a push up because many exited USDT into these top stables. Now it is necessary to approach the choice of investment objects with reason. Crypto investors should diversify their portfolios with an increase in their share in strong market assets, in the top 30 crypto ecosystems in particular. However, it is worth paying attention to mature, developing projects that are at a low price base, with real prospects for organizing a decentralized business: crypto asset trading, financing, services in the financial sector, replacement of sectors of the traditional business world. Perhaps, in the near future, projects in insurance and international trade finance will work out. These sectors in the traditional economy occupy huge shares, but they do not yet have a huge background in digital finance.
Crypto investor Ilya Sdobnikov also believes that stablecoins should not be abandoned and says,
“First, you need to ask yourself, ‘What is my strategy and goal?’. The next steps will depend on the answer. However, as for short-term investors, I would withdraw funds to stablecoins backed by physical assets (BUSD, USDC), and I would wait for signs of upward movement. Stablecoins are different. Or I would withdraw funds in fiat. Buying bitcoin 5-10% more expensive than current values is not as scary as losing another 30–40% of your capital.”
Have a break
Sometimes, the smartest decision is to do nothing. You can always take a brief break to consider your investment strategy. Moreover, the wait-and-see attitude can give a profit, since it is better to act when the unrest subsides than to make hasty decisions.
Dmitry Noskov, an expert at the StormGain crypto exchange, believes that now one should refrain from active actions. If there are bitcoins in the investment portfolio, one should not get rid of them actively. It makes sense to get through the fall and wait for the resumption of growth of this asset. If there are no crypto assets on hand, it is better not to enter this market yet. It makes sense to do this when Bitcoin reaches the bottom at $20,000.
Yuri Gusev, Founder and COO of Zam.io, agrees with the previous expert. He says,
“If we talk about how investors can survive this period, I would give the first piece of advice—not to panic. If you did not manage to exit the asset when the BTC price was around $50,000, then there is no point in doing it now. Just wait for the rebound. Now is the period of accumulation, and after it, it will be clear in which direction the market will turn. One can also transfer some part of the assets to more stable coins, such as PAXG, whose price is directly linked to the price of gold.”
Anton Efimenko, consultant on tokenomics and tokensales, advises Russian citizens to withdraw money from all cryptocurrencies, except for Bitcoin, but not to add. Now it is much more profitable to invest in rubles until the end of the year. Closer to December there will be a peak of the crisis. At the end of the crisis, you can return to the crypto and buy tokens at their minimum level. You need to understand that the current financial crisis involves all finances, and crypto is no exception.