The cryptocurrency sector has entered a downtrend following an October flash crash, with total market value now above $3.2 trillion. Bitcoin, dominating over half the market, has fallen below $90,000 from a high above $126,000. Investors face advice on preparing for a possible bear market.
Pessimism is growing in the crypto space after the October 10 flash crash triggered a broad decline. The overall market capitalization stands slightly above $3.2 trillion, reflecting a series of drops that have erased significant paper wealth. Bitcoin, which comprises more than half of the sector's value, has sharply retreated from its recent peak exceeding $126,000, breaching the $100,000 mark and dipping under $90,000.
Opinions differ on the trajectory: some view this as the onset of a bear market or a prolonged crypto winter, while others see it as a temporary halt before further gains, bolstered by rising adoption from major financial institutions.
To navigate a potential downturn, three strategies emerge. First, reduce exposure to altcoins, which span from established ones like Ethereum and Solana to speculative meme coins and small tokens. Over half of cryptocurrencies have already failed or gone inactive, making them vulnerable. Experts recommend halting new buys in unproven tokens under $5 billion market cap and easing purchases of majors like Solana, Ethereum, XRP, and Chainlink if funds are needed soon.
Second, secure profits from strong performers through planned de-risking, not panic sales. As one adage notes, 'nobody goes broke from taking profits.' Bitcoin's history shows drawdowns of 77% to over 90% from peaks, with recoveries spanning years, so locking in gains provides liquidity for future opportunities.
Third, establish predefined rules now to avoid emotional decisions later. Set a tolerable drawdown threshold, such as 20% or 40%, at the portfolio level to maintain discipline during shrinkage.