Crypto is a volatile place, with the potential for both gains and losses. To navigate this unpredictable market, individuals must make important decisions about their investment strategies, portfolio diversification, and where to store their funds. We reached out to Bitcoin OGs and experts in the field to gather their advice and opinions on how best to protect your crypto assets.
Brock Pierce, former presidential candidate and co-founder of Tether and Block.one, suggests that beginners start by investing a small amount of money in themselves. By purchasing a small amount of crypto through platforms like Coinbase, individuals can begin their journey and gain an understanding of the basics of hodling and investing. Pierce emphasizes the importance of taking baby steps and not letting FOMO cloud judgement, as crypto is a long-term game that requires time and education.
One of the most popular pieces of wisdom in the crypto world is “not your keys, not your coins.” Itai Avneri, deputy CEO and chief operating officer at INX Limited, stresses the importance of self-custody for safe trading. By holding your own crypto assets, you take responsibility for their security instead of relying on central exchanges that can be vulnerable to hacks. However, there are risks involved in self-custody, as there is no centralized authority to reset passwords or refund lost funds. Avneri suggests that trading on a centralized exchange that is regulated can provide confidence and protection, while also holding your own assets for decentralized trading.
Crypto billionaire Tim Draper adds that institutions are not simply keeping funds on physical Ledgers. He acknowledges that traditional banking systems are subject to political winds and inflation. According to Draper, the safest personal money is Bitcoin on Ledger (BOL) and the safest institutional money is Bitcoin at Coinbase (BAC). This highlights the importance of using trusted platforms to store crypto assets securely.
Diversification is a key strategy for protecting your crypto investments. Pierce recommends looking into yield farming and decentralized finance for advanced investors. These strategies not only protect investments but also provide opportunities to increase holdings through earning yields. However, diversification in crypto can be tricky, as the overall market tends to move in sync. Pierce warns against putting too much money into volatile coins, such as memecoins, as they can magnify losses during downturns. Andrew Latham, a certified financial planner, advises spreading investments across various asset classes to cushion against volatility and suggests looking beyond crypto for diversification.
While it may be tempting to make high-conviction bets on specific tokens, Lakov Levin, co-founder of Locus Finance, stresses the value of Ethereum. He believes that Ethereum is the blockchain that will drive the financial evolution of the 21st century and holds a remarkable financial opportunity. Levin highlights that Ethereum hodlers can stake their assets and earn a consistent yield through transaction fees burned on the blockchain.
To mitigate losses in a market downturn, Pierce suggests using a stop-loss tool that automatically sells a token once it reaches a certain price floor. However, Levin advises caution with stop losses, as their effectiveness relies on the user’s ability to control emotions and follow trading rules. Cognitive biases can lead traders to re-enter trades multiple times, breaking their own rules out of fear or greed. Levin recommends taking a break from trading an asset if the stop loss has been triggered to maintain discipline.
In conclusion, protecting your crypto assets requires a combination of education, self-custody, diversification, and risk management. It’s important to start with small investments and gradually increase knowledge and exposure to the market. Holding your own crypto assets and using trusted platforms like Coinbase can provide security. Diversifying investments across various asset classes helps cushion against volatility, and high-conviction bets can be made on tokens like Ethereum. Risk management tools like stop losses can help mitigate losses, but discipline and emotional control are key to successful trading in the crypto market.
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