Throughout most of the first half of 2021 and even the last half of 2020, the direction of the Bitcoin trend has been “only up,” according to the crypto community. That is until recently when the crypto market made a sharp turn downward, and more than 50% of valuations bled out in an instant.
With Bitcoin now dropping in 2021, what should the average investor or trader do to prepare? We’ll explain what to look for when a trend change is coming, how to protect against risk, and even how to profit during a downtrend.
Elon Musk, Joe Kennedy, And The Shoeshine Boy
US President JFK’s father, Joe Kenney, famously made his fortune by spotting the exact top of a major stock market correction. How? All because he received advice from a shoeshine boy while getting his shoes shined.
Realizing that money was coming too easy to the point where even the shoeshine boy was offering stock tips, it was a sign to Joe that things would soon turn around. As soon as he left with his shoes shined to a gloss, he aggressively shorted the market and became a millionaire.
Today, the Kennedy name is synonymous with power in the United States, and it all came from one trade. The same sort of top signs have been everywhere in crypto, with profits flowing into meme coins, scams, and worse.
A correction and cleansing can turn greed into fear in a flash, which is precisely what happened recently with Bitcoin, Ethereum, Litecoin, and the rest of the market. All it took was a few indecisive tweets from Elon Musk to send the crypto market tumbling even faster than it took to rise in the first place. As the saying goes, bulls take the stairs up, while bears take the elevator down.
The crypto market fear and greed index also can be used to time the market, but there’s no greater indicator of sentiment than social media. It was here where so-called diamond hands were bragging to their friends, urging them to buy or be left behind. Now everyone is afraid to buy the dip after the devastating selloff that hit crypto.
How To Short The Crypto Market And Profit From Crashes
As so many have learned the hard way, trading cryptocurrency can be challenging, which is why the right tools at your disposal can make a world of difference between losses and gains, profits and pain.
Whether it is spotting peak exuberance in sentiment or using technical indicators, there are always signs the top is near if you care to look hard enough. However, it is easy to get blinded by easy money in a bull market, which is why all traders and investors alike need to stay prepared at all times.
Cryptocurrencies like Bitcoin and Ethereum are speculative assets that are notoriously volatile – they just have been only volatile toward the upside for some time. But when that same volatility releases to the downside, the impact can be destructive.
Billions of dollars worth of BTC were liquidated in the collapse, except traders on PrimeXBT were prepared with stop-loss orders in profit on their longs and hedged any positions with a properly placed short trade.
Survive The Storm And Prepare For Volatility
Those like Kenney mentioned above who happened to short the top of crypto could have made even more money on the way down than they did when it was “only up” season. Bear markets or even short-term corrections in a bull market don’t have to be harmful or result in significant losses when stop losses are used. With the right strategy and tools, and a little bit of skill, anyone can survive even the worst storm in crypto.
Not only can you survive, but users of some platforms can come out the other side even stronger and potentially more profitable to boot. Bears get a lousy reputation in bull markets and are forced to go into hibernation. However, when they get a chance to come out and swat bulls back down, they tend to gather even more gains than their bull counterparts and then go back to their slumber.
The question is now whether or not the bull market structure has been broken and a bear trend is coming or if it is back to the races as soon as support is found.