The warning bells of a cryptocurrency market crash began to ring since the beginning of the year. Sadly, warning bells turned into sirens today after Russia sent troops into eastern Ukraine and opened fire. Markets around the world tumbled like a deck of cards, wiping out most of the gains made last year. For many, the current price appears to be profitable as most coins are down -60% from all-time highs.
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The ‘buy the dip’ brigade has mushroomed on social media, urging investors to seize the opportunity. While it is true that most tokens are now on sale, one should not blindly buy the dip.
Here’s what you need to avoid doing when the market is going down:
Cryptocurrency Lesson: Never Ignore Your ‘Risk Appetite’
Every individual has his own risk appetite and fears investing anything beyond what he can afford to lose. The rule is a built-in natural defense mechanism that saves us from harm that cannot be undone. However, sometimes people tend to push their risk appetite a little to reap bigger rewards. Sometimes it works and sometimes it ends with regret.
However, when an investor sees his portfolio suddenly shrinking, the mind casts a shadow. The ability to think wisely takes a beating and this is where people end up making bad decisions.
Also Read: Main Reason Bitcoin and Cryptocurrency Market Dropped Today
To fully understand how the human brain works during a crisis, read here for a detailed explanation. He highlights the fact that the poor often make the wrong financial moves, but the rich rarely do.
While everything is at a loss and many cryptocurrencies are at an unbelievable discount, the mind automatically starts calculating ‘If I invest big now, I can get big returns when the market is up’.
Also Read: 3 Reasons Why You Need to Remain Cautious Despite Cryptocurrencies Showing Gains
As long as the calculation is true (if it doesn’t fall further), risk appetite takes a beating. Never ignore your risk appetite during the cryptocurrency market crash, as a -50% loss can also turn to -90% in less than a week, especially during a war.