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Diamond Hands - How to HODL Through Volatility

When the crypto market falls, most people fall into two categories: the buy the dip crowd, and mass hysteria. It’s easy to say that a market recovery was predictable with hindsight, but when you’re caught in the heat of the moment, you can be overcome by fears that this time will be different.

After reaching all-time highs in late 2021, the crypto market started to drop, and many cryptocurrencies reached their lowest point since the crash of summer 2021. Since then, prices have remained volatile for most coins — but here’s why you should stay strong and continue to HODL.

Resist the urge to sell

For better or worse, humans are wired to have a strong psychological reaction to the possibility of losing money. In behavioral economics, the phenomenon of loss aversion is well-known: people prefer to take risks to avoid a loss than to take risks to receive a gain.

In the context of the markets, this means that it takes a lot to persuade us to put our money on the line by investing it in the first place — and if we invest but see our funds fall in value, we’re quick to make hasty decisions.

But here’s why you should resist this urge.

Past Examples of Volatility

Have a Plan

When in Doubt Zoom Out


Past examples of volatility

As those in the investment world like to say, past performance doesn’t guarantee future results. However, the fact that the crypto market has trended upward in the past is a reasonable indicator that it will continue to do so in the future.

You only have to look at the price of bitcoin. In December 2017, bitcoin surpassed the $19,000 mark for the first time — but shortly after, it crashed, and failed to reach the same price point until late 2020. That’s right — a whole three years. You could hardly blame someone for selling their bitcoin after multiple years of sustained losses.

Yet as you no doubt know already, bitcoin went on to break the $60,000 barrier in 2021. Bet all those investors who sold are kicking themselves now (if you’re one of them, my condolences).

Have a plan

If you buy cryptocurrencies believing that they’ll only ever increase in value and fail to mentally prepare yourself for the possibility the opposite will happen, you’re setting yourself up for trouble. The market is famously volatile, after all.

If you make your original purchase with the knowledge that there’s a good chance the value will fall at some point, you can plan for that gut-wrenching moment when you see the market is crashing. Decide in advance what you’ll do. Will you commit to HODLing for three years? Forever? Will you promise yourself not to check the price every day when there’s a bear market?

If you know you struggle with volatility, you should also be smart about how much to invest in crypto. Knowing that 1% of your net worth is invested and not 90% should help you sleep at night.

Make all these decisions when your brain is in rational mode and not in the heat of the moment.

When in doubt, zoom out

Crypto and volatile markets aren’t for everyone, but once you’re committed, prepare to HODL. If past returns are anything to go by, your future self will thank you.

Need to increase your confidence? Start by educating yourself — and for that, Bitcoin First Steps provides free guides and more. We’ll be with you every step of the way.

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