Bitcoin remains the most widely adopted cryptocurrency. But recent events make investors like you ask, “What happens if bitcoin crashes? Could I lose it all?”
Bitcoin was the first-ever, encrypted, digital currency. Despite its volatility, it leads the market in popularity, traded value, and market cap. Even in a crash, there’s no reason to panic.
If you own bitcoin, decide on a strategy before a crash. Familiarize yourself with bitcoin’s history. And trust in bitcoin’s trending growth for your long-term investment strategy.
Is Bitcoin Going to Crash in 2019?
Throughout March 2019, bitcoin has been just under $4,000. Analysts say price action trading is almost identical to early November 2018. Bitcoin also traded sideways before crashing last year.
Prominent analysts have concerns about bitcoin’s current valuation. Many feel that a price drop is coming soon. The psychological barrier created by the number of $4,000 may be a factor.
How to Profit From a Crash
For experienced investors, a value on the decline doesn’t always mean bad news. Even bearish stocks, markets, and economies hold out the opportunity for profit. Follow some of the following strategies to profit from a bitcoin crash.
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Hold Onto Your Bitcoin
First of all, if the bitcoin market crashes, hold onto your butt– uh, bitcoin. Now isn’t a time to panic. Your bitcoin is an investment, and you should hunker down until the winds abate.
Bitcoin has recovered from 90% price drops. You can’t ever be sure that the market won’t rebound. If you end up selling at the bottom, it may be impossible to recover your investment.
As investors start to buy up more bitcoin, prices will rise. Because of the limited bitcoin, prices could quickly surpass where the crash began. Hanging on to your bitcoin could make you a lot of money.
Buy More Bitcoin
A second way to profit from a bitcoin crash is to buy up more bitcoin. Research industry news, analyst projections, and historical comparisons. Try to figure out when the crash is close to bottoming out.
Then pounce on the opportunity! Even if you have to hold onto your bitcoin for a long time, your investment is safe. Once the market rebounds, you’ll benefit the most.
You can also sell off your bitcoin with the intention to buy more bitcoin once the crash bottoms out. This is tricky because many crashes happen fast. Don’t make hasty decisions when attempting this strategy. Hasty decisions can be very, very costly (we’re talking thousands of dollars in losses) when dealing with financial instruments like Bitcoin.
Short Sell Some Bitcoin
Short sales are a third way you can win big with bitcoin crashes. With a short sale, you borrow bitcoin from a broker. Then you return the bitcoin at an agreed upon date.
Here’s how it works:
- Borrow a bitcoin (or more) from a broker
- Sell it for its current $4,000 price
- Buy (1) bitcoin for $2,000 when the price falls
- Return (1) bitcoin to the broker
- Profit $2,000!
Short selling has great potential in a market that is in a downturn. Lenders who would normally hold onto the bitcoin anyway lend them out. They hope that bitcoin prices could go up while you have the loan, leaving you with the loss.
What Happens If Bitcoin Crashes?
In June 2011, investors celebrated bitcoin’s high of $39. Five months later, many wallowed in despair as bitcoin hovered around $2. Then bitcoin slowly worked its way up to $259 on April 10, 2013. However, it shed 83% of its value in three days and on April 13, closed at $45.
In November of the same year, hackers attacked Mt. Gox, a Japanese bitcoin exchange. Mt. Gox handled 80% of bitcoin transactions at the time. Bitcoin plummeted from an all-time high of $1,151 to $177.
Bitcoin experienced an unprecedented boom in 2017. But in the first quarter of 2018, it lost about $342 billion in value. It started the year at almost $14,000 and ended at less than $4,000.
So what happens if bitcoin crashes? History shows us that it will likely make a rebound. Bitcoin enjoys status as the original, most popular, and most widely used cryptocurrency.
Bitcoin’s Growing Popularity
Square began accepting bitcoin payments in January 2018. They earned $24 million in revenue along in Q1. In Q3, revenue from bitcoin grew to $43 million.
The Lightning Network has enjoyed similar positive growth. The network now holds $1.7 million in bitcoin capacity. One 30-day period alone posted a 307% increase.
More businesses, banks, and governments add bitcoin to their portfolio every day. Major companies like Overstock.com, Subway, and PayPal all take bitcoin payments now. The German National Tourism Board recently started accepting bitcoin.
Cryptocurrency Trends in 2019
2018 wasn’t a great year for bitcoin’s performance on stock exchanges. It didn’t make most analysts’ lists for best cryptocurrency to invest in for 2018. But its popularity continues to grow.
Cities across the United States are rolling out bitcoin ATMs. After adding 30 new machines, Chicago now rivals Philadelphia, each with almost 100. The familiarity of the ATM encourages first-time users to try out cryptocurrency.
Central Banks Getting Involved
Central banks have started supplementing their gold reserves with cryptocurrencies. In areas of the world challenged with conflict, bitcoin is an attractive option. Bitcoin pioneer Nick Szabo predicts more countries will start using cryptocurrency in 2019.
Bitcoin and Tourism
When traveling, tourists have to deal with exchanging their cash for local currency. And sometimes they run into outrageous fees from currency exchanges. More tourist-friendly cities now offer bitcoin options for payment.
At some point, investors will start to worry again about bitcoin’s future. But history proves that bitcoin often recovers from crashes. You can still profit if you buy more bitcoin, short sell bitcoin, or even just hold onto your bitcoin.
Profit During Panics
Visit trusted blogs, follow experienced analysts, and read respected industry news about bitcoin. You don’t have to wonder, “What happens if bitcoin crashes?” when you’re properly informed. New England Network Solutions offers frequent, free blog content to keep you in the know.