Crypto is becoming more correlated with Forex trends. How to take advantage of the downturn

Crypto is becoming more correlated with Forex trends.  How to take advantage of the downturn
Crypto is becoming more correlated with Forex trends.  How to take advantage of the downturn

It has been a relatively challenging past few months for the cryptocurrency industry. After over a year of mostly bullish moves where investors continued to cash checks and smile to the bank, coin prices have essentially fallen and the gains have been wiped out.

For several reasons, crypto has now essentially become a minefield. Investors feel more scared than ever to get in, and even some of the best platforms in the market have now been rendered vulnerable – if not outright bankrupt.

The Crypto-Forex Correlation

The recent movement in crypto prices has also become incredibly reminiscent of forex and stock prices in recent months. A little over two years ago, when the coronavirus pandemic was at its worst and everyone was forced to stay indoors, crypto had basically served as a safe haven for most of these investors looking for gains now.

Secure, Bitcoin BTC/USD began the endemic trade at a low of $3,600. However, in the months following the shutdowns and the entire pandemic, the crypto market managed to rise to a new high, with coins breaking records and becoming more valuable than ever before.

On the flip side, the forex and stock markets saw only small jumps – although they also rose. Investors who bought crypto during the pandemic made the biggest gains of all, and it became quite clear that digital assets were indeed the best option for anyone looking for safety.

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Compare that to this year, and that belief appears to be sorely mistaken now. Against the backdrop of struggling economies and the possibility of widespread recessions, cryptocurrencies – as well as other markets – have fallen flat.

If we look at the stock market, several of the high-growth technology stocks that have delivered gains for investors are now trading down. In fact, several highly rated tech companies have seen their shares fall by over 50 percent as they continue to deal with the worst economic situation.

Energy stocks are also down, with the current conflict in Ukraine leading to a volatile market that several top energy companies have been unable to properly navigate.

As for forex, the Ukraine conflict has also dealt a major blow to the space. This, as well as the fact that several top economies appear to be slowing down and preparing for recessions, has meant that their currencies are more volatile than ever before.

Make money on the downturn

It is a basic principle in any market that downturns are a good time for money to be made. In crypto, this law is certainly no different. The best way to navigate the current market is to keep the long game in mind, as the last thing you want to do is get crushed in your search for quick, short-term profits.

With that in mind, here are some things to keep in mind:

Know your brokers

When shopping, one thing to keep in mind is to confirm that a chosen broker is right for you.

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This is particularly important because we have seen several brokers locking customers’ funds and preventing them from withdrawing in recent weeks. Obviously, you don’t want to be kept in this situation while shopping.

Just as you would do this when entering the forex market, having the most ideal crypto broker for you will also play a huge role in your success as a crypto trader.

Consider value above all else

Trading in the crypto market right now can be difficult. However, this is also a good time to remember the fundamental truth about the market – cryptocurrencies with value ultimately do well in the long run. To be on the safe side, invest in these.

Valuable cryptocurrencies are simply assets that are looking to solve a real problem. These are coins whose developers want to bring actual solutions and which play perfectly into those solutions themselves.

Instead of investing in the typical assets that only provide short-term profits, let these value-driven coins form a large part of your portfolio. In the long run, they are the ones who will deliver the most value.

Of course, this is not to say that meme coins and other assets do not necessarily have value. As the market works to turn bullish, even these assets will also see gains. However, given that we are in a downturn, investors looking to play it safe may want to lighten up on most of these assets for the time being.

Trading the news

Keeping an eye on current market events and trends will also help you in your quest to make money in crypto right now.

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Since we are in a bear market, there will be more breaking news that will rattle investors. As much as you can, you want to keep an eye on them to know when to enter the market and when to stay away. Fundamental analysis becomes much easier in a bear market because there is so much news to sift through. When the shoes keep dropping, be ready to move accordingly.

Interestingly, the news does not have to be related to crypto alone. When the US government released inflation data for June, which showed the metric had jumped 9.1% year-on-year, the crypto and currency markets took a big hit. Cases like these show that big news tends to affect all markets, regardless of where you play. So try as much as possible to keep your ears to the ground across the board.

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