During this current bear market, we’ve seen several catastrophic events occur around some of the biggest names in Crypto. CeFi companies like Celsius, Voyager, and BlockFi have had significant problems while trying to navigate this market condition, and are now struggling to stay afloat. Not to mention that crypto hedge fund three arrows capital has filed bankruptcy.
The most common reason these companies fail is that they FOMO during the bull market, and they fail to conduct a proper risk assessment before allocating their clients’ assets.
In crypto we don’t have a central government backing us, ready to turn on the printing machine and flood the market with fresh dollars in moments of desperation. We are 100 % responsible for our actions, and this comes with great responsibility. What angers me the most is that when these companies fail the way they did, they take down the dreams and savings of a lot of investors, who believed their assets would be much better-taken care of. , Sure, nobody wants to lose money, but as the great Ray Dalio usually says, “pain + reflection = progress”.
The following is a list of what I consider some common healthy habits that should be embraced when it comes to investing.
- Avoid leverage. Probably the most common shortcut in the crypto markets. Certain platforms allow you to trade ridiculously high-leverage positions. People fall into the mental trip because most of the time they only want to see the positive outcome in their trades as quickly as possible. But guess what? Behaviors like this will make you lose all your money in the long run.
- Don’t FOMO in. It doesn’t matter if you’re seeing everybody making money on “X” coin or NFT, don’t let the FOMO kick in. Study closely every project in which you are willing to invest. In crypto markets, knowledge is the most powerful tool you can possess. Always stick to the fundamentals! Investing is not copying and pasting what other, so-called “experts” or “gurus”, are saying on Twitter.
- Get ready for a 90% drawdown. This is true for Bitcoin, Ethereum, and the most prominent NFT projects alike. We are still super early in the development of this space. This means volatile times will eventually come and we need to be prepared.
- Don’t invest more than you can afford to lose. You can take this reasoning to the extreme, and think that 100% of your positions in crypto will go to zero. You don’t want your next meal to depend on the floor price of your JPEG.
- Hegde your positions. For example, if most of your portfolio is in crypto, in what other sector of the economy could you invest in case all of crypto disappears overnight? Maybe it’s time to allocate a portion of your portfolio to less risky assets like real estate, gold, or bonds.
- Have a trading plan set up in advance, and take profits on a regular basis. Read this again, and stick to it.
- Manage your liquidity so you never become a forced seller. We have heard the phrase “cash is trash” many times by now but having some percentage of our portfolio in cash will prevent many headaches in the future. Would you sell your ETH at $1000? Probably no, most likely you’d like to save it for the future because you think it will go up in price. Don’t put yourself in a position of liquidating due to leverage of credit risk.
- Time in the markets beats timing the markets. This is one of my favorite mantras in the investing space. Always embrace long-term thinking. Wealth is not something that can be achieved overnight.
I hope you find this information useful, some of the tips are easier to follow than others. Make yourself accountable and WAGMI.
Edited by Jelly Bean
Nacho is a writer for The Pulse. He is mostly involved in NFTs, Bitcoin and Ethereum ecosystem. Freedom advocate.
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