How to Avoid Panic Selling in Crypto

Published 9:03 am Thursday, May 16, 2024

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If you’re new to crypto and haven’t heard of Panic selling, let us bring you up to speed. Panic selling is when the market crashes, followed by so much fear and chaos that you sell all your crypto as fast as possible before the prices drop even more. It’s selling at the worst possible time when you’re driven by fear rather than smart thinking.

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So pay attention, because these tips could be the difference between crying into your keyboard as you sell at the bottom, or laughing all the way to the bank when you withstand the storm and reap the gains. 

Understand That Volatility Is Normal For Crypto

The number one thing you need to accept is that the crypto market is just plain volatile. Both ups and downs are completely normal – it’s not some anomaly to freak out about every time. Even the bluest of blue-chip cryptos like Bitcoin experience regular pullbacks of 20% or more all the time.

When you first start investing in crypto, seeing your portfolio value dropping hundreds or even thousands in a day can be terrifying. But the more experienced you become, the more you realize that those kinds of dips are par for the course. 

Only Invest What You Can Truly Afford to Lose

This is crucial: never, EVER invest more money in crypto than you can realistically afford to lose entirely. Because yes, as fun and profitable as crypto can be, there is an actual risk of losing everything you put in.

If the only money you’ve invested is what you’d be fine with seeing go to zero, it removes so much of that panic during dips and crashes. Panic stems from being overleveraged with money you need for rent, food, or other critical expenses. That’s what causes weak hands.

Have Set Rules – And Stick to Them No Matter What!

Put some simple rules in place ahead of time to govern your buy and sell decisions, and then follow them like a robot no matter how crazy the market gets. Decide on things like:

  • What percentage gain will you take profits at? (E.g. selling 25% of my Bitcoin if it doubles)
  • What percentage drawdown will you AutoSell to prevent bigger losses? (E.g. selling if my Ethereum drops 40% from my entry point)
  • How much of your portfolio will you invest in any single asset?

Use Reputable, Reliable Trading Platforms

Speaking of executing buy and sell rules seamlessly, you want to be using trusted, battle-tested crypto exchanges and trading platforms – especially during periods of peak volatility and volume.

Places like Coinbase, Immediate Next Gen, Gemini, Kraken, and Binance are veterans in the crypto trading arena. Their platforms are designed and built to handle insane traffic spikes during market turbulence without glitching on you.

So do yourself a favour and stick to the major exchanges and platforms like Immediate Next Gen. Pay a little bit more in fees if needed – it’s well worth it to prevent panic induced by being unable to trade or view pricing when you need it most. Not having a reliable platform during crashes will exacerbate panic-selling impulses.

Stay Insanely Calm and Zoom Out

Sometimes the best antidote to panic is simply taking deep breaths and zooming out – both mentally and on your trading charts/portfolio overview. During dips and crashes, your mind can easily get locked in a cycle of obsessive short-term zooming that amplifies feelings of dread.

When you’re hitting that refresh button every 30 seconds, watching the second-by-second pricing fluctuations, and hyperfocusing on your temporary unrealized losses, you’re feeding the emotional frenzy that leads to panic selling. At some point, you cross over from monitoring the market to perseverating over it unhealthily.

That’s when it’s time to take a total break – close your trading view, put your phone down, and walk away for a bit to clear your head. Getting some fresh air, calling a friend, or taking a shower can completely reset your mindset in as little as 15-20 minutes.

Don’t Go Through It Alone – Talk to Others

Finally, you don’t have to white-knuckle your way through reeling in panic all by yourself. Having a crypto buddy, a great online community, or even just one trust voice of reason you can turn to can massively help you keep your chill when prices are going haywire.

I have a couple of investing buddies like my man Jack that I’ll call whenever I’m feeling sketchy about the market. He and I have been through plenty of crashes together, so he’s an amazing guardrail whenever panic starts to take hold. A few reassuring words from Jack about having a long-term outlook instantly snaps me out of any irrational trance.

In Conclusion

If you can remain calm, collected, and rational by applying those tips, you’ll avoid joining the panicked masses taking heavy permanent losses right before the tide turns back upwards. What strategies have worked for you to avoid panic selling? Any other tips you’d add from your experiences weathering crashes?