The Q4 of 2024 marked a positive turnaround for the crypto industry as institutional interest grew and sentiments turned optimistic. It kicked off the bull phase, however, all of a sudden in February end 2025, we saw one of the major downturns in the crypto space.
The global crypto industry has noticed a pattern of history repeating itself every four years. The past cycles of 2017 and 2021 saw major pullbacks before entering a massive bull run. Now, in 2025, we are witnessing the same pattern unwinding.
Bitcoin, the largest cryptocurrency by market cap, dipping below 77k, a 4-month low. This decline showcases a substantial drop of nearly 30% from its all-time high of $109,114, marked on January 20, 2025.
The broader market just followed Bitcoin’s trajectory, where major altcoins like Ethereum (ETH) and Solana (SOL) have experienced a notable fall. This sudden market crash raised concerns over the ongoing bull run. Many traders and investors were witnessing getting anxious and opting for panic selling.
In this article, we will understand the steps to be taken during a crypto market crash, strategies to be applied, and whether selling crypto is a good option or not in that situation.
Is Selling Crypto during Market Crash a Good Option?
When a market crashes, we see a significant drop in market values. The first step that comes to an investor’s mind is to sell assets to avoid huge losses. But, it is not a good option because it leads to substantial losses as a result of liquidating assets at extremely low prices
This move can undermine the long-term viability and benefits of holding crypto. If we look into history, we have experienced various crypto market collapses. However, later we realized that it settles down after a period, and we start noticing recoveries. Hence, it is suggested to avoid selling in that scenario.
For example, in 2018, the prices of cryptocurrencies fell drastically, with Bitcoin dropping by 65% between January and February. Most of the investors who sold their Bitcoin incurred losses. Whereas, those who survived that crash witnessed a massive rise in their returns when Bitcoin crossed $100k mark in late 2024.
What to Do when Crypto Market Crashes?
The cryptocurrency market is cyclical, where highs are followed by lows and recoveries. During a decline, the market may be preparing for a news upward cycle. Therefore, when a market suffers a dramatic decline, instead of getting panicked, an investor needs to think wisely and make strategies and decisions accordingly.
Here are some tips and techniques to survive the market collapse in the crypto industry.
Evaluate Your Portfolio
When there is a significant downturn, you must reassess your investment portfolio. You should shift your focus towards low-risk assets that can provide high stability. For example, during 2018, many crypto investors reallocated their funds from high-risk altcoins to established cryptocurrencies like Bitcoin and Ethereum, which reduced their losses.
By reducing holdings in volatile cryptocurrencies, investors can protect their portfolio. During market correction, assets with weak fundamentals suffer a sharp fall, while projects with a strong use case and development team can enhance portfolio resilience.
Analyze Undervalued Cryptocurrencies
When there is a sudden market crash, some cryptocurrencies that are not very popular show good buying potential because of their strong use case. Though they are temporarily undervalued, but may offer high returns once the market stabilizes. For example, during the market crash in 2020, some investors purchased Ethereum at a low price, which benefited them when the DeFi ecosystem became attractive and the need for the Ethereum blockchain increased.
To find this type of cryptocurrency, you need to focus on factors like technological advancements and community support. For example, a project that focuses on scalability solutions can give high returns when the market rebounds.
Understand Market Psychology
When a market slumps, sometimes, the best option is to do nothing and just observe how the market responds. It helps investors to make informed decisions. The prices of cryptocurrencies may recover after initial panic selling. Because of this, users can avoid unnecessary losses.
Monitoring and calmly studying the market is very important for making strategies. This will help to understand the reasons behind the crash and hence prepare yourself for the future.
Adjust with Capitulation Phase
Though panic selling is not a good practice, there are certain situations when you need to consider various factors and make rational investment decisions. Usually, this type of selling is done when your losses exceed your risk tolerance level and start impacting your financial stability.
Hence, it becomes essential to liquidate those positions. For example, if the value of the investment goes beyond your set risk limit, then selling assets can prevent further losses.
However, it is always suggested to do your own thorough research and market study before you reach any conclusion. Setting stop-loss orders or defining maximum acceptable losses can help manage your portfolio during market volatility. This approach ensures that decisions are based on predefined criteria rather than out of anxiety.
Avoid Leveraging
Sometimes during the market downturn, some users borrow funds on leverage to trade and reduce their losses or increase their profits. However, using leverage in the volatile market is not a good decision as it can lead to rapid and substantial losses, which can potentially exceed your initial investment. In such market situations, these leveraged traders may face margin calls, which force them to liquidate their positions at low prices, resulting in huge debt.
By focusing on unleveraged or minimally leveraged investments, investors can preserve capital during market crashes. It is a conservative strategy but allows you to withstand volatility without the added pressure of amplified losses.
Also Read: Bitcoin, Ethereum, and XRP Price Prediction: How Low Will Crypto Market Crash?
Conclusion
The crypto market is very unpredictable, and when there is a sudden crash, it requires traders to have patience and take strategic decisions to avoid significant losses.
Selling your crypto assets during a market collapse can lead to high losses, while adjusting portfolios, identifying new buying opportunities, and observing market conditions can help investors to effectively deal with the situation.
Further, using proper risk management strategies such as limiting exposure to risky crypto assets and setting stop-loss orders can also protect your investment.
