Bitcoin’s meteoric rise in price has made it one of the most talked-about investment options over the past year. However, with prices dropping throughout January and February, some investors may be feeling uncertain about what to do next. Therefore, trading the bitcoin price drop is a risky endeavour, and it is not for the faint of heart. The volatility of the cryptocurrency has made it difficult for traders to find an ideal strategy to reap profits from these markets. Here are four easy steps for how to trade the bitcoin price drop:
- Decide on your sell strategy
In a bitcoin price drop, the first thing to do is make sense of what’s going on. Many reasons could have led to the recent price drop in Bitcoin. From regulations, security threats, hackers, or just a natural decline in prices from the record highs reached earlier this year.
All of these reasons might be valid for the current decline in prices, but realistically there’s no way we can know for sure. We know that many traders are taking advantage of this situation by shorting Bitcoins or going long or trading them against other cryptocurrencies like Ethereum or Litecoin using trading bots like Bitcoin Trader.
So how should you decide on your sell strategy?
One good suggestion would be to cut your losses if you were a holder. The selling strategy is also essential to decide when trading the bitcoin price drop. Understanding the levels of risk and return is crucial as well.
Moreover, in a bear market, you should be cautious about taking on any high-risk trades because they can result in heavy losses of your account equity. It may take a while to recover your losses and would be difficult if not impossible in some cases.
Spotting trends with careful observations can help you better understand the market conditions, enabling an informed decision when trading bitcoin price drops. Moreover, it gives you an edge over other traders who are less focused on following trends closely.
We recommend that you go for high-return but low-risk trades in this market environment to have a higher chance of maintaining your current equity for a more extended period.
2. Sell your bitcoins at the right time.
Selling bitcoins at the right time is not easy for many people. Buying and selling bitcoin daily is often a risky task because trading Bitcoin can lead to huge profits or losses.
What you need to do when bitcoin prices drop is to decide whether you want to sell your bitcoins or wait until there’s a recovery. The following tips will help you understand how best to be able to sell your bitcoins at the right time and Trade the Bitcoin Price Drop.
Monitor the different cryptocurrencies and their markets so that you can find a way to profit from arbitrage opportunities.
- Keep a close eye on the bitcoin price premium, which will help you predict any impending drops or rises in bitcoin prices.
- Find out what drives demand and supply in order to capitalise on the change in market trends.
- Diversify your portfolio so that you are not too exposed to any single risk factor or investment strategy.
3. Take a look at what are your options
Bitcoin price has been dropping for a while now, and some people are looking to trade it. So, what are your options to trade the Bitcoin price drop?
One option is to short sell Bitcoin. This is when you borrow Bitcoin from somebody else and sell it immediately. You hope the price will drop to repurchase it at a lower price and give it back to the person you borrowed it from. Another option is to buy a put option. This is when you agree to buy a certain amount of Bitcoin at a set price in the future.
If you’re worried about the current state of the market, you can always sell your bitcoins and wait for the prices to go back up. This is a relatively safe option, but you might not get as much money as you would if you waited for the prices to rebound.
4. Convert your proceeds back into your chosen currency
Bitcoin is a volatile asset. The value of a bitcoin can drop significantly in a brief period of time. For example, on November 14, 2017, the value of a bitcoin was $7,146. On December 8, 2017, the value of a bitcoin was $12,411. That’s a 73% increase in value in just over a month!
If you’re someone who has invested in bitcoin, or you’re just curious about the digital currency, it’s essential to know how to trade the bitcoin price drop. When the value of a bitcoin starts to drop, you can convert your proceeds.
Summing it up!
With Bitcoin prices going up and down, it can be tough to know when it is right to sell or buy. Bitcoin is constantly fluctuating in price with no end in sight. It becomes more challenging to know if it’s an excellent time to sell or buy because the price changes quickly. These tips will help you make an educated decision when trading bitcoin prices to get the most of your investment.