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Bitcoin up or down? How to react to a volatile market


By Bitpanda


Should I buy or sell Bitcoin? Should I care about Elon Musk’s tweets? These past few weeks have been crazy in the crypto market, so here are some things to consider before making quick decisions or changing your investment strategy.

If you’ve read the news about Elon Musk and Bitcoin, you are probably wondering what the hell is going on? Don’t worry, so are we! To be honest, no one can definitely tell you what’s going on (and if they say they do, be careful). However, you can make wise and informed decisions even when the markets are going crazy.

Investing driven by FOMO

The crypto market is infamous for its high volatility compared to other asset classes. Recently, Bitcoin and other currencies have been getting more attention from the media and well-known people like Elon Musk or Paris Hilton. When the stock market crashed at the beginning of the pandemic in 2020, lots of people took the opportunity to get started with investing. So with the investment boom of the past year, there are many novice retail investors who have experienced the first phase of volatility in their portfolio just now – and this can be scary.

Remember the basics of investing

What hasn’t changed despite this mayhem are the principles of investing. Before getting started, we strongly advise you to create an investment strategy based on your age, disposable income and risk. You can learn more about the basics of investing in our Bitpanda Academy. When things are going crazy, it is tempting to stray away from your set strategy and make spontaneous decisions driven by the fear of missing out, also known as FOMO or by fear of loss when prices are crashing. And let’s be honest, we all felt trading FOMO before. But in these unprecedented times, it is important to stick to your plan or at least reevaluate it before making buying or selling decisions based on someone else’s tweets or at the spur of the moment.

Think long-term rather than short-term

Legendary investor Warren Buffet famously said that his favourite holding period of stocks is forever. This is a really nice thought experiment not only for stocks but for any asset, including cryptocurrencies or precious metals, as their long-term performance makes short-term volatility seem  unimportant. Of course, especially crypto is a very young asset class, but looking at Bitcoin, the classic “HODL” approach worked best so far. A nice way of taking out the emotion and really focussing on a long-term wealth-building strategy is setting up a savings plan, which is already possible starting from 25 euro a month on Bitpanda.

Stay informed and consider diversifying

So how you react to the market is up to you, but please remember to not make quick financial decisions because you feel put under pressure. The more you know, the more secure and confident you are going to be. You can’t control the markets, but you can control how you react to developments in the markets. And times like these are also a great opportunity to explore new asset classes and diversify your portfolio. A great way to diversify your crypto portfolio is the Bitpanda Crypto Index. And if you are interested in fractional stock investing*, check out Bitpanda Stocks.
Lastly, to help you stay focused and expand your crypto knowledge, here are some educational pieces:

Don’t forget that it is up to you how you invest and which decisions you make.

Start your investment journey now!

*Bitpanda Stocks are contracts replicating an underlying stock or ETF. More information is available at bitpanda.com. The information contained in this article is for general information purposes only and is not investment advice in any form.