See More

What Should You Do If You Missed a Bitcoin Crash?

3 mins
Updated by Adam James
Join our Trading Community on Telegram
From September 1-6, the Bitcoin price made an upward move from $9555 to $10,933 — a magnitude of roughly 14 percent. What followed was a rapid decrease of six percent in one hour.
Bitcoin Price Say that you were planning to sell, however, you missed the rapid decrease and are left holding BTC at a much lower price. What is the proper move? Should you sell at a lower price? Is waiting for a retracement the best way to move forward? Let’s analyze the possibilities and the rewards/risks presented by each opportunity

Finding Support

First, we have to find the first support area. This is helpful in determining the most suitable place for the beginning of a reversal. In BTC’s case, the closest area was found at $10,300. It can be identified by the price action on September 3 — most notably, the long lower wick that was the lowest point before the continuation of the move. The price does not always react to every support area. However, the very long lower wicks on September 6 were an indication that it will react to the $10,300 area. After a few hours, BTC began its retracement.

Fib Retracement

Now, we need to find a suitable place to sell. In order to do that, we will use a Fibonacci retracement tool. For the bottom, instead of using that achieved by the wicks, we will use the lower hourly close in order to smooth the price action by removing the extreme values of the long lower wicks. BTC Price A very common retracement area would be the 0.382, 0.5 or 0.618 fib levels. One way to sell would be to do so with 1/3 of your portfolio at the 0.382 level, 1/3 at the 0.5 and 1/3 at the 0.618. Another one would be to sell everything in the area starting from the halfway point of 0.382/0.5 to the halfway point of 0.5/0.618. For the purpose of looking at actual Risk:Reward values, let’s say that we sell exactly at the 0.5 fib level at $10,600. In BTC’s case, this ultimately proved to be the short-term top. BTC Price Using a stop loss above the 0.786 fib level and a very conservative target at the bottom of the lower wick, we still get an R:R ratio of 2:1 — making this a relatively profitable trade.

After The Retracement

After this, the price dropped all the way to the second support area, which was found between $9800-$9900. Before doing so, it made another final upward move on September 9, reaching a high of $10,557 before decreasing sharply. This was slightly above the original 0.382 fib level. Even if we missed the retracement, BTC gave us another out in which we could have sold. For the sake of the analysis, keeping the original sell price of $10,600 with a target in the middle of the second support line at $9850 gives us a very good 4.5 risk:reward ratio.

Summary

If you miss a crash, most often the proper move is to wait for a retracement before you sell. Selling at the end of a very big red candle will usually end in the market moving against your position, often meaning that you have sold the bottom. This is often called “panic selling” and is a major catalyst of exacerbating rapid decreases. While you should not be greedy in waiting for a the perfect sell price, waiting for a slight retracement usually gives a better sell price level and allows for the placement of a stop loss. Do you think it is better to wait for a retracement or sell immediately after a rapid crash? Let us know in the comments below. 
Disclaimer: This article is not trading advice and should not be construed as such. Always consult a trained financial professional before investing in cryptocurrencies, as the market is particularly volatile.  Images are courtesy of Shutterstock, TradingView.
Top crypto platforms in the US | March 2024

Trusted

Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate, unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult with a professional before making any financial decisions. Please note that our Terms and ConditionsPrivacy Policy, and Disclaimers have been updated.

Valdrin-Tahiri.jpg
Valdrin Tahiri
Valdrin discovered cryptocurrencies while he was getting his MSc in Financial Markets from the Barcelona School of Economics. Shortly after graduating, he began writing for several different cryptocurrency related websites as a freelancer before eventually taking on the role of BeInCrypto's Senior Analyst. (I do not have a discord and will not contact you first there. Beware of scammers)
READ FULL BIO
Sponsored
Sponsored