Strong emotional stress and its consequences can be safely classified as professional risks for traders and investors. When working with digital assets, the situation is aggravated, since we are talking about a young, extremely capricious and poorly predictable market. This greatly affects not only the results, but also well-being.
How trading affects the psyche
Not to be nervous if the BTC to ETH exchange rate is moving stubbornly against you, it’s really difficult. Emotions are not a computer, pressing a button does not turn off. A chronic stressful state will sooner or later give its bitter fruits, for example:
- Craving for unjustified risk.
- Increased irritability.
- Trade addiction.
- Problems with socialization.
And sadly, some people have suicidal thoughts in the face of failure. The appearance of even one symptom from the list is already a good reason to be wary and consult a psychologist.
How to deal with emotions
Alas, there are no simple and universal recipes. Moreover, it is objectively undesirable for people with an unstable psyche to enter the cryptocurrency market. To mitigate the impact of crypto-investing and trading, work planning, the use of automated trading systems and good money management help to some extent. If mental and physical health is dear to you, never invest all your savings and more, borrowed funds in crypto. Operate only with those amounts that are not afraid to lose.
Prepare for the worst
The market trend in the cryptocurrency market is set by Bitcoin. When the flagship starts to grow, popular altcoins follow it and vice versa, the fall in the price of BTS provokes large-scale falls in the market as a whole. Accordingly, crypto investors are closely monitoring the behavior of this coin.
Sometimes Bitcoin reacts very sharply to the news. On positive news, the coin often shows growth, on negative news, a fall may begin. However, neither the timing of the news release nor the reaction of the market can be predicted.
The pace of price recovery after a fall is very different. Sometimes it’s hours and days, sometimes it’s months and years. That being said, it is important to remember that Bitcoin is designed to be a deflationary asset. About once every 4 years, the network is halving, reducing block rewards. This event creates a shortage of the coin in the market and serves as a reminder of the depletion of supplies. Usually, after halving, the price of the coin rises.
Those who have not managed to cope with emotions often hastily sell their assets. Such impulsive actions are called panic sales. According to CryptoVantage experts, at least 8% of investors have sold their cryptocurrencies at least once on a wave of fear.
Experts consider this behavior the most common and typical mistake of crypto investors. However, the validity or invalidity of a panic sale is finally clarified after the fact and not immediately after the wave fades. By the way, crypto whales use such moments to purchase assets cheaper.
Diversification above all
Another common mistake is to invest all the capital in one coin. If the exchange rate falls, the investor risks losing all funds. Allocation of capital, on the contrary, reduces this risk, since not all assets react in the same way to the same events.
Verification and analysis of information
The skills of searching and analyzing information are really very important. And this requires a deep understanding of the market. For example, in the spring of 2021, miners began to leave China en masse, and the network lost a significant part of the hashrate. At that time, about 70% of the Bitcoin hashrate was concentrated in China. This created the risk of over-centralization of the network and the possibility of blocking it.
As a result of the outflow of miners, several mining centers appeared at once, and the largest of them are located in the USA, Kazakhstan and Russia. That is, in the medium term, these events benefited the network, the hash rate, and then the coin rate recovered in a matter of weeks.
That is, those who managed to evaluate possible positive changes and adhered to the optimistic scenario, managed to earn. Those who succumbed to panic suffered losses.
Market knowledge does not come immediately. All beginners are nervous at first, but as knowledge and experience accumulate, emotional stress can be reduced.
Every situation is a lesson
The crypto market is unpredictable and it is naive to expect that each sale of USDC to BTC will definitely bring profit, and even more so quickly. From the point of view of acquiring wholesale, defeats are no less valuable than victories. By analyzing unsuccessful trades, you can identify mistakes and avoid them in the future.