If you’re wondering why the crypto market is crashing – and what that means for your investments – you’re definitely not alone. While no one knows exactly when the crypto market will go up again, we can provide the best practices to protect your assets. 

From secure storage to crafting a long-term investment plan, keep reading to discover some of the biggest players’ simplest strategies. 

It’s hard to pinpoint one specific cause of 2022’s crash: Global politics, economic instability, supply chain issues, and runaway inflation were just some of the “big-picture” forces that affected all markets.

There were also a number of high-profile collapses in the space that triggered “crypto contagion”, including a cascade of bankruptcies, collapses, and destabilization that ended with FTX’s downfall. 

While the reasons for the broader economic downturn are complex, things were a bit simpler in crypto: A bubble was created by unsustainable business models that were reliant upon huge amounts of uncollateralized debt to keep going. When things turned sour due to macroeconomic factors, the house of cards came tumbling down.

While the market is generally believed to ebb and flow in cycles, each upturn (and subsequent downturn) differs from the next. Because nothing happens in isolation – and there are too many reasons to list about why markets act the way they do – analysts focus on macro factors. 

In order to survive a crash and come out of a successful bull run with most of your winnings, you need to accept a simple truth about any market: What goes up, must come down (eventually). And the catalysts of collapse are often more obvious than expected.

If you invest long enough, you’re bound to experience significant uptrends and serious corrections. They’re completely normal for all markets – not just in crypto. 

You’ll need to be prepared for both situations, not blinded by what’s happening at the moment. Both scenarios present unique opportunities to profit and yes: You can protect your assets during volatile times.

When crypto markets crash, damage control is on everyone’s mind and people start withdrawing their money from exchanges in droves. As we saw multiple times in 2022, this can lead to the bankruptcies of mismanaged businesses – especially overleveraged crypto exchanges. 

Take Your Crypto Off Exchanges Beforehand

During times of instability, centralized exchanges (CEXs) see massive outflows of assets. This can create some very nasty situations, like a crisis of liquidity. If that were to happen to your exchange of choice, your funds could end up stuck there for a long time (sometimes forever). After all, if it’s not your keys, it’s not your crypto. 

To avoid this, we recommend never keeping large sums of cryptocurrencies on CEXs. It’s better to store your funds on a secure hardware wallet that only you have control of. 

Convert Crypto to Stablecoins

For the most part, crypto is a speculative asset. This means it’s often volatile and isn’t a particularly safe store of value. 

If you don’t want to cash out and want to be ready to “buy the dip” at a moment’s notice (more on that below), converting your existing crypto to one of a number of stablecoins might be a good idea. 

Many experts talk about crypto crashes presenting an “incredible” buying opportunity – and you may feel compelled to invest as soon as you see a dip in the charts. Not so fast!

What appears as a small downturn now could, in reality, be a multi-year race to the bottom. There are no guarantees in trading and investing, and any “price floor” can be broken. Take a step back, assess the situation, and plan ahead. 

1. Look at Macro Factors

Simply put: If the global economy isn’t doing well, neither is crypto. No matter how much some diehard crypto fans don’t want to admit it, crypto is intertwined with the economy at this point. If one moves up, so does the other (and vice versa). When you feel a crash coming on, your first order of business is to look at what’s happening outside of the industry. 

2. Create a Plan & Stick to It

Investing is a marathon, not a sprint. If you invest without a strategy, you’re bound to stumble. The mark of a good investor is their ability to hit that “sell” button at the right time without looking back. 

Since luck can only take you so far, make a plan: Decide when and under what conditions you’ll cash out of your current investments. Stick to this strategy, revising only if you have new information to work with. 

3. Never Do Anything in a Panic

If you have “FOMO” or panic sell every time the charts dip a little bit, you’ll get burned.  Always think about the bigger picture and only act once you consider the current situation and your long-term plan. 

4. Never Invest More than You Can Afford to Lose

While this goes without saying, people still do it because they’ve become convinced that their latest investment is a “sure thing.” Don’t overextend your budget and only invest what you can comfortably afford to lose. Save yourself sleepless nights and poor judgment calls: 

1. It keeps you in the game longer, increasing your chances of long-term success (if you’re diligent and organized).

2. It protects you from feeling overwhelmed every time there’s some price movement. If you’re overinvested, you’ll always feel concerned about your finances. 
   
   

5. If It’s Too Good to Be True, It Is

Avoid being swayed by hype and beware of “fake” experts promising you big returns if you follow their investment strategies. Be aware when things start looking like they’re too good to be true. Of course, it’s very difficult to see this when everything is going up and you’re making money. 

6. Don’t Chase the Bottom or the Top

Invest when you see strong signs of a trend reversal. Spotting these takes years of practice, and even the best in the industry can get it wrong. Good investors stick to their plans and invest wherever they see real value in a product. And if you want to be a successful investor, sustainable long-term gains should be a top priority.

7. Make Up Your Own Mind

Like anything in life, crypto requires you to make your own decisions and chart your own path. Learn as much as you can about how crypto works and why and then seek out the investments that make sense to you. By doing this, you should set yourself up for success come the next bull run. 

As we mentioned earlier, analysts look at the big picture to determine future market moves, but nothing is ever certain. Nobody can tell you when the crypto market will go up and if they do, they’re only pretending to know. 

To put things into perspective: There have been a dozen crypto crashes over the years and the market has recovered and grown substantially after each one. While nothing is for sure, chances are this will happen again. We can’t say when it will happen but all cycles see their individual phases repeated. 

Seek out opportunities to invest in strong, valuable projects while everyone else is concerned with damage control. 

It’s an age-old question with a slightly complicated answer: Should you start buying when prices go down?

On its own, “buying the dip” won’t bring you tons of success, but it’s a good start. That said, it only works when coupled with a strong resolve to hold through hard times as well as a clear reason for buying that particular cryptocurrency. Depending on their origins and severity, it’s important to remember that crashes can take months (or even years) to play out. 

Plan everything ahead of time and stick to your guns: What’s a good target “buy” price for the crypto you’re looking at? Plan to buy that asset once it reaches that price, then hold it in hopes of making a profit in the future. 

If you’re buying something just because it’s trading at a discount, it’s far from value investing. 

To protect yourself in the next crypto crash, focus on the following: 

1. Learn as much as you can about crypto, the industry, and the projects you’re thinking of investing in.

2. Spend time crafting a solid investment strategy. 

3. Use non-custodial wallets to hold your funds. 

4. Never overinvest.

You can do all these things using Sonar’s range of products. To manage and analyze your investments, we’ve developed a beginner-friendly, next-generation crypto wallet and an entire suite of analytics tools to help you on your path. We also have a large resource of crypto educational materials to help you become a better investor.