Education 5 min read

How To Survive A Market Crash: The Dos And Don’ts

During a crypto market crash, it’s important not to panic sell or chase hype, maintain a long-term strategy, and identify if we’re still in a bull or bear market.

On the first week of February, US President Donald Trump announced tariffs on Canada, Mexico, and China, signaling a potential trade war. Immediately after, the crypto market crashed, with over $2billion liquidated on 3 February. Some reports suggest that the liquidations were underreported, and the total could exceed $10bn.

Although the market rebounded after tariffs were paused, this shows that the crypto market is currently vulnerable to political and microeconomic factors. Just a week ago, in late January, the crypto market also crashed briefly due to the DeepSeek AI hype. So, such market crashes can appear from time to time as we’re in a very volatile political and economic climate.

However, it’s very important for users not to panic during a market crash and to make strategic decisions. Here’s a detailed guide on how to survive a crypto market crash.

Understanding a crypto market crash

A crypto market crash means a rapid and significant drop in asset prices. This happens when investors lose confidence due to factors such as regulatory changes, economic downturns, or unexpected events. Recognize that crashes affect both seasoned investors and newcomers. Preparation and a level-headed approach help you navigate uncertainty.

What to do during a crypto market crash

1. Do stay informed

  • Monitor reliable sources: Follow trusted crypto news outlets and official project updates. For example, during the 2022 market decline, reputable sources like CoinDesk and CryptoSlate provided actionable information.
  • Review market fundamentals: Analyze market trends, trading volumes, and project updates. Understanding these metrics helps you make informed decisions.

2. Do maintain a long-term strategy

  • Develop a plan: Set clear long-term goals and determine your risk tolerance. Create a strategy that you follow regardless of market noise.
  • Diversify your portfolio: Spread your investments across different assets and projects. Diversification minimizes risk when one segment faces a downturn.
  • Consider stable assets: Allocate a portion of your portfolio to stablecoins or assets with lower volatility. This can protect your overall investment during a crash.

3. Do practice risk management

  • Use stop-loss orders: Implement stop-loss orders to protect your investments. This strategy automatically sells your assets at a predetermined price, reducing potential losses.
  • Keep an emergency fund: Maintain a reserve in cash or stablecoins. An emergency fund gives you the flexibility to take advantage of opportunities when prices are low.
  • Use dollar-cost averaging: Invest fixed amounts at regular intervals to smooth out entry points. This method reduces the risk of market timing.

4. Do educate yourself

  • Learn from past crashes: Study previous market crashes, such as the 2018 downturn, to understand how markets recover. This historical context can build your confidence during tough times.
  • Engage in community discussions: Join reputable crypto communities and forums. Peer insights can provide practical tips and cautionary advice.

What not to do

1. Don’t panic sell

  • Avoid emotional decisions: Market crashes trigger stress, but selling in panic locks in losses. Remain calm and stick to your long-term plan. For instance, on 3 February, Bitcoin dropped to $92,000 early morning but rebounded to $102,000 later in the evening. So, panic sellers might lose significantly in such brief crashes.
  • Don’t rush to exit: Take time to evaluate whether a price drop reflects a temporary market sentiment or a long-term shift in fundamentals.

2. Don’t over-leverage

  • Avoid borrowing excessively: Using borrowed funds can amplify your losses during a crash. Invest only what you can afford to lose.
  • Steer clear of high-risk trades: High leverage increases volatility in your portfolio. Stick to investments that match your risk profile.

3. Don’t chase hype or rumors

  • Verify information: Always confirm news from multiple reputable sources. False or exaggerated claims can mislead you into making risky decisions.
  • Don’t buy without analysis: Avoid buying assets solely because prices are low. Analyze the underlying technology and market potential before committing funds.

4. Don’t neglect security

  • Protect your assets: Strengthen your account security using strong passwords and two-factor authentication. Crypto markets remain targets for cyberattacks, especially during turbulent times.
  • Stay alert for scams: Scammers often exploit market downturns. Verify every offer and deal, and steer clear of unsolicited investment advice.

Additional tips

  • Rebalance your portfolio: Use market downturns to rebalance your investments. Focus on assets that align with your long-term strategy and show strong fundamentals.
  • Document your strategy: Keep a written record of your investment strategy and review it regularly. This practice helps you stay disciplined and track your decision-making process.
  • Consult a professional: Consider talking to a financial advisor familiar with crypto markets. Professional guidance can tailor risk management strategies to your needs.

How to identify a bear market? 

You can identify a bearish crypto market by tracking several key indicators that signal a shift in sentiment and price trends. Here are some practical ways to assess whether the market has turned bearish:

  • Lower highs and lower lows: When asset prices consistently register lower highs and lower lows, it indicates a downtrend.
  • Moving average crossovers: Watch for the short-term moving average (such as the 50-day) crossing below a long-term moving average (such as the 200-day). This ‘death cross’ often signals a bearish trend.
  • Increased selling pressure: Higher trading volumes on price declines suggest that sellers dominate the market.
  • Divergence between price and volume: If prices fall while volume remains high or increases, it confirms strong bearish sentiment.
  • Relative Strength Index (RSI): An RSI consistently below 30 can indicate that the market is oversold and may continue its downward trend.
  • Crypto fear and greed index: When this index consistently reads in the ‘extreme fear’ zone, it reflects widespread pessimism among investors.
  • Market news and regulatory announcements: Negative headlines, regulatory crackdowns, or macroeconomic events can shift sentiment and reinforce a bearish market.
  • Correlation with traditional markets: If traditional markets, such as equities or commodities, are declining, crypto markets often follow suit.

By monitoring these indicators and combining technical analysis with market sentiment, you can develop a clearer picture of when the crypto market turns bearish. This approach helps you make informed decisions based on concrete signals rather than reacting to short-term price fluctuations.

Final thoughts

Surviving a crypto market crash requires preparation, discipline, and continuous learning. Stay informed, manage risks effectively, and adhere to a well-thought-out strategy. Avoid impulsive decisions and keep your long-term objectives in sight. With these dos and don’ts, you can navigate market downturns more confidently and position yourself for recovery when the market stabilizes.

  1. 01.

    What causes the crypto market to crash?

    Market crashes typically occur when regulatory shifts, macroeconomic uncertainty, or systemic vulnerabilities trigger widespread investor panic and liquidity issues.

  2. 02.

    Will the crypto market remain bullish in 2025?

    The outlook for 2025 depends on evolving adoption trends, regulatory clarity, and global economic factors, leaving analysts divided on whether bullish momentum will prevail.

Mohammad Shahid @ CryptoManiaks
Mohammad Shahid

Mohammad is an experienced crypto writer with a specialisation in cybersecurity. He covers a wide variety of topics spanning everything from blockchain and Web3 to the retail crypto space. He has also worked for several start-ups and ICOs, gaining insight into the mindset and motivation of the founders behind the projects.

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