How To Weather The Storm Hitting Crypto and US Stock Markets?

The start of the year has been difficult for US stocks. The tech-heavy Nasdaq composite – which was already in correction territory by the middle of last week – plummeted further as tech stocks dragged it down.

In yet another drop, the Dow Jones Industrial Average fell more than 300 points below its 200-day moving average. The S&P 500 index suffered a significant drop, resulting in its worst weekly performance since 2020.

As a result, the recent risk-off attitude and selling pressure in the global crypto market showed no signs of abating, with Bitcoin falling 4% and Ether falling 7% in late afternoon U.S. trading following a brutal week.

Bitcoin’s market value fell to $34K on Saturday, a drop of more than 50% from its all-time high in November of last year.

Because of the accelerating rate of inflation, investors are becoming increasingly nervous and withdrawing large amounts of money from riskier financial assets in response to credible reports that the Federal Reserve will raise interest rates even more aggressively than economists expect this year.

Ether, the second-largest token, and newer coins have outperformed Bitcoin this week as traders reacted to hawkish Fed signals and new regulatory hints from the White House, prompting investors to reduce exposure to Crypto and growth stocks in favor of cash and its equivalents.

What You Need To Know

When financial markets fall in this manner and your portfolio value falls dramatically, it is easy to feel tempted to withdraw money from the stock market.

That makes sense, but it’s probably not the best approach. Instead, consider asking, “What should I not do?”

You don’t need to be concerned. People frequently panic sell when stock prices fall and the value of their portfolios plummets dramatically.

During a bear market, it is critical to play the long game. Rather than withdrawing your investments when they begin to fall, consider the long-term consequences of riding out the bear market.

Before investing, you should be aware of your risk tolerance and how price fluctuations—or volatility—will affect you.

Diversifying your portfolio with investments such as real estate, high yield savings accounts, and those with a low correlation to the stock or cryptocurrency market is a more effective way to mitigate market risk.

Long-term investing acknowledges that the market and economy will eventually recover, and long-term investors should plan for such a recovery.

The financial market in the United States crashed in 2008, causing many investors to sell their holdings.

After bottoming out in March 2009, the market eventually recovered and even exceeded its previous highs. Long-term investors who stayed in the market over time eventually recovered and outperformed panic sellers.

When the market returns to normal, add diversified investments to your portfolio. Investing in a diverse portfolio of stocks, bonds, cash, and other assets will protect you if the market falls.

Don’t wait for the market to fall to start diversifying, and always invest in diversified options before the market falls.

As a result, you have the best chance of benefiting from growth in a variety of markets while reducing your exposure to the negative effects of declining markets.

Furthermore, you should not be concerned about experiencing drawdowns in your portfolio. True, too many losses are simply abhorrent, but they can also be an opportunity waiting to be seized.

As a result, before selling financial assets that have lost money in your own portfolio, you should be patient.

If your original analysis is correct, it may be time to hold steady, or even buy more, as Warren Buffet, a well-known investor, advises: “When there is blood on the street, buy.”