Surviving market turbulence is like a rite of passage in the crypto world. So if you feel uncertain when staring at a sea of red, you’re not alone! Many new investors find themselves rattled by the rollercoaster ride, but there’s no need to jump ship just yet.
In this post, I’ll break down what happened with the latest dip and provide some much-needed context to help soften the blow. While it can be challenging for newbies to endure these dips, I’ll share why seasoned investors take these fluctuations in stride!
What’s behind the recent market dip?
Right now we have strong recessionary fears in the US which are coming into play, but the bigger development is coming from Japan.
Japan’s central bank has maintained an incredibly (and unbelievably) low interest rate of close to zero for well over a decade. But recently they made a move that no one was expecting – they raised the interest rate to 0.25%.
The Japanese Yen has been weak against the USD for a long time. Japanese traders and investors have been able to borrow Yen at virtually no cost and seek higher returns in other markets, particularly the US. In other words, they’ve been short-selling the yen and driving it into the ground.
Now that the interest rate in Japan has been raised, it’s essentially margin-called all the traders, forcing them to sell their assets (stocks, t-bills, crypto etc) to cover the interest payments on their Yen loans. This has triggered a wave of fear and speculation. Crypto was hit particularly hard because it’s known as a ‘risk-on’ asset class that attracts higher risk/higher reward investors. But in times of economic turbulence, those same investors can retreat to what they perceive as ‘safer’ assets – think gold and bonds.
Obviously, this news has had a ripple effect across global markets, but here’s what many people are forgetting.
Historically, crypto is the fastest asset to recover after an economic shakeup.
While this brings a heightened sense of caution, here is some additional context you might like to consider.
The bull market perspective
If the events of last week had taken place in a bear market, we could expect further and more extreme downside.
However, we’re not in a bear market – we’re in a bull market.
What does this mean? Essentially, it means dips like this will be bought up and any sharp correction or fear in the market will be relatively short-lived.
This is especially true now that traditional finance institutions are actively involved in crypto.
The truth is, dips and corrections are a known part of the journey to the next all-time high. In fact, dips of 20-40% are normal as we make our way closer to the exponential bull phase of the market. The situations that trigger them may change, but the overall pattern is the same.
How can you navigate bull market dips?
If you have the cash, dips like this are an excellent time to reinvest. You could even do what some DWG members have done and place standing orders for cryptocurrencies at particular price points to capitalise on moments like this. It’s also a great time to reflect on the stories each correction brings up for you, and your mindset in relation to this crypto and wealth-building journey.
I’ll leave you with this. If you’re worried, simply zoom out to the macro and ignore the micro. Remember why you’re invested in crypto, and stick to your financial plan. I still believe this will be the best wealth-building opportunity we’ll see in our lifetime, and it’s closer than you think.
Diamond hands, a bit of patience, and remember the long-term play. This is how we radically change our financial future, this is the price we pay for incredible, life-changing wealth.
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