With the crypto market has grown quite exponentially over the last couple of years, an increasing number of investors are beginning to come across the term ‘panic selling’ quite frequently. Simply put, the term refers to a series of events that takes place when the price of a cryptocurrency dips heavily.
On a more technical note, panic dips are usually witnessed when an external event causes investors to rethink their outlook on a digital asset’s intrinsic value. For example, in the past some crypto projects such as GetGems, SpaceBit have failed to deliver on their milestones, causing their stock to dip quite rapidly. Otherwise, there are also unique instances — like the recent Gamestop/Robinhood saga — where short-term traders are able to coordinate their resources in order to trigger long-term stop-losses.
Panic Selling Presents Opportunities
The process of panic selling has been found time and again to create a variety of lucrative opportunities for seasoned investors, allowing them to set in motion a number of long positions, especially if the event behind the dump was largely speculative in nature.
For example, many times the opinion of prominent market movers (such as Warren Buffet, Michael Saylor, and Elon Musk) can have a massive effect on the movements of the market. Not only that, but sometimes the news of an investigation launched by the SEC can easily trigger a lot of unforeseen volatility. On the subject, Greg Griffiths, CEO and Founder of UCROWDME, is of the opinion that some of the reasons why retail investors panic-sell can be attributed to the herd mentality effect, adding:
“They react to people like Elon Musk’s tweets and do not take into account their motives. Not only that, more often than not, they tend to invest too much, at the wrong time, without any real research or plan.”
In essence, those individuals who have learned the art of understanding selling events — such as when they commence and conclude — have the opportunity to accrue massive benefits from the retracements/turnarounds that tend to happen after a dump. Using certain specialized Exhaustive Selling Models (ESM), investors can determine the best entry/exit points for themselves, potentially allowing them to avoid any costly mistakes.
A Closer Analysis
More often than not when a panic selling situation arises, there are enough people who are scared to present unfazed, balanced thinking investors with an array of lucrative buying opportunities. For example, during the crypto winter of 2018-2019, it is worth remembering that the value of a single Bitcoin slid down to around the $3k mark while Ethereum scaled down to an insane $88 per token.
To put things into perspective, if someone were to have realized the panic selling opportunity that was at hand at the time, they could have potentially accrued gains 16x and 40x respectively. Not only that, but similar opportunities were also available in relation to a large number of other assets at the time as well.
One of the main issues that arise when trying to profit from a token dump is that there’s no tangible way of really assessing when the panic has subsided or when the market may have bottomed out. And while a number of independent analysts have come up with their very own ways — like mathematical models — to figure out when a rebound is due, it should be noted that there is always a large element of uncertainty involved with such prediction systems.
If there are any key takeaways that anyone should get from reading this article is that there are two strategies that we can deploy in order to take advantage of a market-wide dip.
Try not to panic. In order to remain centered, it is best to learn some meditative techniques that can help you center your breath. It has been clinically proven that regulated breathing can greatly reduce an individual’s tendency to make impulsive decisions.
Try to invest as much as possible when the market is down if you are convinced of the product that you are actively acquiring. If one develops a hardened mentality in this regard, it can be quite easy to rope in substantial long-term gains.