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What Should You Do When The Crypto Markets Are Up?

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Key Takeaways

  • Risk and reward are intertwined in investing, especially in the crypto markets.
  • Cryptocurrencies are cyclical. While they may experience crashes, they tend to recover over time, especially for projects with real-world use cases.
  • Don’t hesitate to cash out your profits, which might lead to losses during market downturns.

When it comes to investing, risk and reward go hand in hand. Between 2022 and 2023, both the crypto and stock markets were hit by devastating crashes. However, it’s important to note that these crashes were influenced by major shifts in the economy, such as rate increases implemented by the Federal Reserve, increases in inflation, and changes in how interest rates are determined. Despite these challenges, the crypto market has also shown tremendous growth potential, which can generate optimism for investors.

Some investments have become riskier and face larger downward pressures during challenging and alarming periods. In such times, people seek less risky options, increasing volatility for riskier asset classes.

We also witnessed the dollar strengthening due to rising interest rates in the US, leading investors to view the dollar as a safe haven. Thus, there are asset classes deemed safe and preferred by individuals seeking to minimize risk during uncertain times.

Markets Are Cyclical

Despite the projections of a recession in 2023, something interesting has occurred in the markets today. Instead of experiencing a massive drop, the crypto market has somehow priced in the recession and continued to rise.

In simple terms, riskier assets’ performances are cyclical. Sometimes, these asset classes experience crashes along the way. But eventually, these assets will recover and rise again, except for those projects that lack potential or fail to deliver.

Good Investments Always Recover

During times of fear and uncertainty, it becomes an opportunity to identify undervalued assets, whether stocks or cryptocurrencies, as they remain cheap and at their lowest points.

As the market begins to recover, more people start returning. The narrative shifts, and money flows from less risky assets to those with higher risk potential, bringing more volume and demand to the markets.

The psychology behind this is that investors willingly enter the market when things improve, even if they miss capturing the bottom.

Always Follow Your Plans

When considering crypto projects, buying at lower prices allows you to accumulate more. Alternatively, you can diversify your portfolio by mixing risky assets with safer ones. This will allow you to shift towards safer assets during challenging times and allocate more to riskier assets as sentiment improves.

Most investors still believe in Bitcoin’s halving cycle. Looking back at previous cycles from 2017 to 2020, we witnessed BTC drop to $3,000 before recovering to around $13,700 in 2019. Although it did not reach its all-time high, it still illustrated a recovery.

However, as the market rises, it will not continue to increase indefinitely; corrections and downward movements will occur at various points and times.

Take Profits, It Is Okay To Sell

It is okay to cash out some of your investments’ gains at certain points in the process. Taking profits is not intrinsically wrong, provided it is carried out according to your established plan and criteria. Always remember that if you don’t take your profits, the market will take it away from you.

Final Thoughts

As we move into the second half of 2024, it would be best to closely monitor inflation levels and how the US government addresses interest rates in the coming months. Additionally, Bitcoin’s entrance into the next halving cycle adds bullish speculations to the market.

As we reflect on 2022 and 2023, the numbers indicate a more positive outlook than many had anticipated, proving that maintaining a steady approach to investing is important to achieving the best outcomes.

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