As the effects of the coronavirus came into focus in early March, global markets were plunged into turmoil.
On March 12th, Black Thursday saw the FTSE 100, Dow, and S&P 500 drop more than 10% in the worst day for the stock market since 1987. Even bitcoin, which some considered to be immune to economic unrest, became subject to the swings of the stock market as traders ditched everything in a mass run to the dollar.
The leading cryptocurrency shed 50% of its value over 24 hours — shocking even seasoned traders, and leading newcomers to ponder what legendary stock picker John Templeton said were the four most dangerous words in finance — “this time is different” — and conclude that the cryptocurrency markets would never recover.
But while newcomers were rage-quitting; writing bitcoin another obituary, and preparing to leave the market forever, experienced traders saw a buying opportunity amid the chaos.
Just a few days later, the market was swinging back upwards, leaving inexperienced traders on the sidelines, and netting a healthy profit for those that knew how to take advantage of the volatility.
Innocence vs experience
The difference between panicking and responding appropriately to market turmoil often comes down to experience.
With the guidance of more seasoned traders in a community, newcomers can fast-forward the learning process and build a strategy of their own to act as a firm anchor when sudden turbulence hits the market.
This is especially important when ‘black swan’ events like coronavirus come along, and the dominant narratives are overturned at a moment’s notice: One minute bitcoin is behaving like a safe haven asset — moving with gold in response to geopolitical strain in Iran, and the next acting as a risk on asset that moves in lockstep with stocks.
Navigating market turmoil
To stay on the right side of the market, traders on eToro can sift through market news alongside social commentary, and even mirror the moves of top-performing traders.
For traders in established markets like stocks and commodities, being able to gauge sentiment and monitor the movements of other traders can be useful. But for the fledgling crypto market which is only a decade old, it could mean the difference between successfully navigating market turmoil and being dashed against the rocks.