At its peak in early January 2018, the total market cap of the crypto economy was valued at about $830 billion—and then it all came crashing down. This year has seen a massive wave of new investors fall victim after FOMOing in (fear of missing out), where they bought cryptocurrency at prices significantly above 1st and 2nd quarter 2022 levels.

Many of these new investors have now been left with catastrophic losses, devastating life savings, and seeing as much as an 80 percent decline in their investment. History suggests that there may be another recovery, but whether that happens or not may depend on the actions taken by governments, regulators, and other influential parties.

In the meantime, there are some steps that you can take to protect yourself from further losses. If you have a significant amount invested in cryptocurrency or plan to invest more shortly, here’s what you need to know.

Should you still invest in crypto right now?

Cryptocurrencies were still down by mid 2022. If you’re a crypto investor or enthusiast, you’ve probably been asked the same question: “Should I still invest in crypto right now?” The answer is more complicated than yes or no—it depends on who you are. And it depends on what your goals are.

Just like any other investment, there are no guarantees. Crypto is a highly volatile market. But for those willing and able to accept the risk, then, strategies such as dollar cost averaging may be attractive.

Keep in mind, when discussing the concept of volatility, it means there is the possibility of losing your entire investment in a single market crash. In fact, this is exactly what happened to Terra Luna investors. It’s possible for someone who invests $10,000 in crypto to wake up the following day and find that those funds are worth only $4,000 or even less. It’s also possible for them to wake up the next day and find that their $10,000 was worth $20,000. In other words, it’s akin to a crapshoot. Investors who shoot only for short-term gains with a time horizon of less than one year, are more likely to lose money than those with longer time frames. So, if you choose to leap crypto right now, keep issues like this in mind. 

What does the future hold for crypto?

Many experts predict that certain types of cryptocurrencies will become a mainstream currency. Some of the more popular coins are Bitcoin, Ethereum, Solana, and Poly. A lot of excitement surrounds the idea of a universal currency that anyone can use anywhere. However, keep in mind there are critics who believe this is just another bubble and surrounding enthusiasm is mere hype.

On the surface, cryptocurrency seems like a great idea. The concept is relatively simple and easy to understand: a digital asset that’s fully secure and encrypted, that is transferable from one party to another without going through a financial institution. This means no central authority is involved, so there’s less risk of corruption and no fees or wait time for transactions to clear, making it a fast and cost-effective medium of exchange. It all sounds pretty good so far!

But for cryptocurrency to reach mainstream popularity, it must overcome the hurdles of regulation and widespread consumer adoption. Regulation poses an issue because if we look at how other markets have been handled in the past, such as securities, strict regulations have indeed protected investors from malicious practices in many cases. Even so, they have in many instances restricted opportunities as well. 

Five things to do when cryptocurrencies plummet

When a cryptocurrency plummets, there are things you can do to mitigate your losses.

Assess the situation

There are many reasons why cryptocurrencies might further drop in value: hacks, regulatory changes, or even global economic events could all affect prices negatively. To decide whether it’s worth investing more now or waiting for better times ahead, you need to assess whether the promise of future potential outweighs the still ongoing risks faced by the sector. Not always easy.

Consider diversifying

If you decide to ‘hodl’ your coins, perhaps consider diversifying so that if one particular coin tanks further, it won’t bring down all of your investments. You can do this by spreading out how much money you invest in each coin and investing in different types of coins. 

A Highly Unpredictable Market 

Cryptocurrency has been one of the most unpredictable markets in recent years. Foreseeing what will happen next in the volatile world of cryptos is just not possible. However, as time goes on, we may see cryptos stabilize and recover from their recent crash as markets embrace their innovative qualities.

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