Crypto Winter: What should investors do?

Crypto investors must stay away from spot trading for a while and should be wary of discounted selloffs

The volatile market and sell-off trend are expected to continue. Experts suggest that it may be wise for retail investors to stay away from spot trading for a while.
The volatile market and sell-off trend are expected to continue. Experts suggest that it may be wise for retail investors to stay away from spot trading for a while.

It has been a very bad year for crypto investors till now. The global market cap of these digital assets has shrunk below $1 trillion and prices of almost every coin have dropped over 50% from their all-time highs, with no immediate recovery in sight amid the ongoing bear market.

While the Terra (LUNA) debacle last month marked the first major assault on crypto investors’ aspirations, brewing troubles at large crypto lenders, exchanges and companies are threatening that a far bigger collapse may be just around the corner.

Starting from Bitcoin and Ethereum, all major cryptos are struggling to rise as selling activities in most of these tokens have spiked in the last few weeks. Those who have not invested in crypto yet may remain safe staying out of it. However, for those already invested in crypto, industry experts suggest many steps that can be followed.

Stay away from spot trading

The volatile market and sell-off trend are expected to continue. Experts suggest that it may be wise for retail investors to stay away from spot trading for a while.

“Crypto winter chills have forced even bitcoin miners to sell their holdings. Market volatility will be around for some time, and sell-offs can’t be ruled out. Long-term investors can explore crypto products such as crypto fixed deposits and Crypto SIPs. Retail investors should stay away from spot trading,” said Sharat Chandra, Sharat Chandra, VP, Research and Strategy at blockchain-based identity management platform EarthID.

Save for better times

Investors must opt for more risk-averse approaches. Johnny Lyu, CEO of crypto exchange KuCoin, said investors should also be wary of discounted selloffs, as short-term market rebounds can be signals of an impending greater collapse.

“Such market conditions make it clear that many projects, including large ones, will not survive to see a rebound or even a correction. As such, the best approach is the wait-and-see one that bears little risk and safeguards available capital for better times,” said Johnny.

Do more research

Investors must reevaluate their existing strategies and identify new opportunities. It is always advisable for investors to keep researching to find opportunities that may yield good returns if the markets recover.

“One should read more about different crypto coins, and their movement and learn from the experts to make informed investment decisions before buying any coin, and stay wary of impulse buying,” said Prashant Kumar, founder and CEO of Bengaluru-based crypto startup weTrade.

Don’t invest more than your disposal income

Crypto is a high-risk, high-reward game. So you should invest only that amount you can afford to lose. Experts say retail investors should only use their disposable income and have the patience to run through various phases before plunging in, just like any other investment.’

Crypto winter is a part of the assets’ market cycle and nothing new that one should fear. “Yes, we are in a crypto winter but it is not as dramatic as people are claiming it to be. With adoption heavily increasing and regulations being made, this was more or less expected to happen,” said Jeetu Kataria, CEO of Croatia-based crypto trading platform DIFX.

Some experts even think that the crypto winter may augur well for the industry, specially in India.

“We believe that crypto winter will form a more stable base for the crypto ecosystem in India. Projects with actual use cases of token will thrive once the Indian crypto ecosystem emerges stronger,” Vineet Budki, Managing Partner at Cypher Capital, a blockchain-focussed VC.

Points to remember

  • Stay away from spot trading for a while because of volatility
  • Beware of discounted selloffs as short-term market rebounds can be signals of an impending greater collapse
  • Reevaluate your existing investing strategies
  • Invest only the amount you can afford to lose
  • Stay away, in not already invested in crypto

(The article was first published on July 1, 2022. It has been updated on July 21, 2022 for a factual error.)

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