This post contains affiliate links. We may be compensated when you click, sign up for, deposit, or spend on a given platform. Learn more.

Attention New Cryptocurrency Investor: Every few weeks (if not less) Bitcoin corrects by 5% – 20%, as do other cryptocurrencies. Often they all do at the same time. Don’t let that worry you.

TIP: It is a lot easier not to worry if you don’t invest too much of your investable income into cryptocurrency. Consider building an average position and keeping a good chunk of your investable funds in a fiat currency like the dollar. This will help you weather the inevitable bi-weekly storms. Otherwise, this isn’t investing advice. See the disclaimers.

Here is the deal with Bitcoin (and cryptocurrency in general) in terms of volatility and “holding”:

  1. If you get shaken and sell Bitcoin every time it loses 5% – 20% of its value you won’t make it one month in the crypto space (you could actually not last a day or week).
  2. If you get shaken every time it loses 50% of its value, you might not make it a year (likely not even six months).
  3. If you get shaken every time it loses 80% of its value, you won’t make it for the long haul.

That is, unless your strategy involves setting stops and buying dips (in that case you are rolling the dice, but that is a fine strategy if you can pull it off), you literally won’t last in the crypto space long term.

I’m not saying that losing 80% of your investable income is a good idea. Clearly. That is gnarly, and let’s face it, if and when the bubble pops, there will be people in that position (holding Bitcoin and a few tears for a few weeks, months, years as they try to explain that someday Bitcoin will be the future again; brace for that potential relatity).

This is to say, I’m not saying holding during a potential bubble pop will feel good or will be smart. I’m saying that part of investing in Bitcoin has to include watching the world crumble down around you to some of extent.

If you want your friends and families to be green with jealously on some holidays, you need to be willing to hear the “I told you so” remarks on other holidays.

If you are holding during the bad times, you can say to others “we will see.” If you sold for a loss, then you’ll have to tuck your tail between your legs and tell them they were right (then you’ll also need to face them that next holiday when Bitcoin has potentially doubled in value or more and explain the story to every person who congratulates you).

Sometimes Bitcoin goes from $5k to $20k in a month, sometimes it goes from $20k to $13k in a week.

Which week or month is it? Are you selling at $5k to “recover your losses?” If you do, then you shouldn’t think “I wish I bought Bitcoin at $100” or “I was so close to buying Bitcoin” or whatever.

You wouldn’t have made it to this point if you are the type who will sell for a loss during a correction. Thus, you didn’t miss out on anything by not buying Bitcoin in the past.

The only people who have held Bitcoin since the early days until now are people who can watch 5% – 80% of their investment disappear without panic selling (or can quickly admit they were wrong and buy again, or have a strategy that includes buying the dips).

With Bitcoin taking profits is sensible, holding long is sensible, buying dips, setting stops, etc. All that makes sense.

What does not make sense with Bitcoin is buying high and then selling low in a panic when it dips. As, Bitcoin will dip. It will dip hard. And it will make you feel uneasy. If you don’t account for that before hand, you will be in trouble.

The Bitcoin bears are a nasty bunch and they do their best to drop the market on a weekly basis (they 1. make money by shorting Bitcoin and 2. buy more coins while others panic sell).

If you let them shake you, then you are letting them shake your Bitcoin out of your wallet and into their wallet essentially.

The more people who get shaken, the more people who make a run on the Bitcoin bank, the more people get added to the long list of names who exclaim “I had like X Bitcoins, I am so upset I sold them back in Y.”

If the bears were getting out of Bitcoin forever, they wouldn’t be sitting around on the exchanges taking profits and hunting for a lower price.

And why would a bear get out forever at this point in Bitcoin’s life? Why with futures just launching, with ETFs likely on their way, with the new wave of adoption, with all this and more… why would a bear with enough coin to crash the market pack up and go home?

The bottom line here is this: If you are a normal person, and you risked a conservative portion of your investable funds in Bitcoin (what you can afford to lose), then you need to also be willing to grit your teeth and hold through a downturn. Downturns are too frequent to not have this be part of your strategy.

Now, if you want to avoid this and still invest, then you need to take profits, set tight stops, buy the dips, and an build average position. So far that sort of tactic has been less profitable than holding, but it is notably a little more comfortable.

No tactic is fully going to avoid some emotional drama in the crypto space. However, investing a conservative portion of your income and preparing yourself to hold through the dips really helps.

The biggest mistake I made in the crypto space was when I first started investing seriously (I had been a crypto hobbyist before that). I let the 50% correction shake me. I took a loss and said “Jamie Dimon you are right, if only I had bought Bitcoin when it was $100! I was so close!” Yeah… that is the wrong attitude to have in this space. When the bears come for your Bitcoin, set a sell order for at least 50% the current price and wait. For example, when the market dips from $17 to $15, set a sell for $20k – $25k.

Likely you won’t have to do more than not look at charts for a few weeks to feel pretty darn good about yourself.

I mean, that or we enter that long term bear market and… well, this is why we want to invest conservatively and make sure we have investable income left for a rainy day (true for all investable assets). That way you can play the bear market later if need be.

Earn $5 in bitcoin after your first trade on Coinbase.

What do you think?

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Carl Raw Ross on

I am in very much love when reading this. wisdom oozing …

chris on

great advice.. i jumped in at ath and am prepared to hold.. using the anxiety energie to learn learn learn .. and work double shifts to buy back more coin at dips – this tech is here to stay and we are a long way from finished

Thomas DeMichele on

That is the way to do it, that attitude is very likely going to pay off (no one knows the future, but in the past that is the type of attitude that has paid off). If you think the technology will stick around, which I do and so do many others, then the common and sometimes distressing corrections are really just opportunities to accumulate and reaccumulate.

I started getting into crypto right after the 2014 crash, assumed it would never come back at that point so I didn’t invest heavily. I was just interested in it as a concept. We started the site in that time. At that time I cautioned people not to take too many risks on $225 BTC and $1.50 LTC. Probably fine advice at the time, as we had a long bear market, but in retrospect. FACEPALM.

Later, in 2017 I started investing as more than a hobby. Fast forward and I ramped up my investing when everyone else did. The result was I had a bunch of $5k buys last summer, right at the top (and the equivalent for other coins).

The worst mistakes i’ve made along the way were not buying low because I had already bought high and selling to try to limit losses or to offset them. After weeks or months of being down on paper, it can be really attractive to sell just above your buy price. Likewise, after you buy high it can be tempting to just give up and not to add to your position low. However, historically, it has been better to add a position low and then hold past your highest buy price (I mean, look at the charts, we can see this has generally been true every time, but we don’t know about this time).

The main lesson i’ve learned is to dollar cost average, hold, and focus on the top coins I believe in. Ok, so I believe in Ether and it does nothing for months while BTC dominates. My $400 Ether seem like they will be bags forever. But fast forward until today and those bags are now worth $1.1k. There was so much room to get psyched out, but that was also a time in which $300 ETH accumulation was possible. In retrospect, both the $400 bags and $300 accumulation ended up being attractive.

Some day it may all crash and burn and we may regret being in crypto. However, we can say that about any investment. So, for those of us who do commit to the crypto space: dollar cost and don’t over extend, and hold with a years long view in mind, not a moment to moment one.