Every new cohort of users that enters the crypto markets count among their number starry eyed aspirants who have been seduced by success stories of taking $1,000 to $1,000,000 on one investment. The FOMO has them dreaming of winning big and achieving financial freedom. They are so drunk on hope that they drop all of their fiat into the latest flavor of the month token.
Reality check:
Getting rich quickly doesn’t happen for most people. You and the next 10,000 users are much more likely to get broke quickly. Especially if you run into the markets blind.
If you are not careful, the crypto market will chew up your savings and spit out nothing but a few JPEGs and a pile of shit coins worth less than the time it takes to price them.
In this article, I\’ll provide some common sense tips on how to survive any market and set yourself up to get rich, slow and steady. As always: NOT FINANCIAL ADVICE.
Diversification
The textbook way to protect your capital and improve your returns is to diversify your investments. This is because because a catastrophic loss on an overexposed asset can set your financial journey back years or more. For example, if an investor had all of their assets on the Terra network, they would be financially ruined today. By investing in a basket of uncorrelated assets, investors can reduce this risk.
In practice, there are a number of different ways you can diversify your portfolio:
- Investing in multiple different projects within an ecosystem. For example investing in both BOO and BEETS.
- Providing liquidity on multiple different protocols. For example on SpiritSwap and SpookySwap in case one of them has a security flaw.
- Investing in multiple different ecosystems or blockchains. For example, investing in projects outside of Fantom in case the chain doesn’t survive.
- Investing in a variety of crypto asset classes such as layer ones, DeFi, governance tokens, exchange tokens and NFTs.
- Investing in asset classes outside of crypto such as stocks, bonds, real estate and commodities.
What a well diversified portfolio looks like depends entirely on your own personal risk tolerance and financial goals. Try and keep these ideas in mind as you expand your investments.
Make Investing a Regular Habit
All too often, new investors buy the top of the bull market only to be mauled by the bear market. A classic: \\\”Buy High; Sell Low\\\” tragedy. When these burned investors withdraw totally from the market they miss the greatest opportunities to claim large gains: the accumulation period after the bear market.
In order to simplify investing and improve your odds of staying in the market you can dollar cost average into the market at regular intervals. By using a dollar cost average strategy you separate emotion from your market activity. This reduces the amount of the top you buy an maximizes how much of the bottom you buy. By automating the process, you also reduce emotional stress involved in making frequent decisions about your investments. Remember that time in the market is more important than timing the market.
On the website dcaBTC, you can use a calculator to see how much you would have made from DCA\\\’ing BTC. For example, if you had invested $10 a week for the last 3 years, you would have turned $1,570 into $4,379 or a 178% return. If you had invested the same amount into gold you would only have $1,642 (+4.59%) and if you had invested into the DOW Jones Index you would have $1,848 (+17.72%). Now if you had been DCAing into FTM you would have $28,669 (+1,726%).
Do remember: past performance does not guarantee future results.
Treat Leverage With Care
Many people turn to leverage to try to maximize their returns to get rich super quickly. What you need to remember is that when you use leverage, it multiplies the exposure to both the upside and the downside. Using margin trading can be a very quick way to watch your collateral disappear. And in the case that you win, how far do you let it go before locking in your gain?
If you don’t have a plan, you will watch your gains evaporate in front of your eyes. So, unless you have thoroughly researched leverage and created a plan, it is probably best to leave leveraging to the pros.
Instead, let the magic compound interest do the work for you. ;^)
