I’m a Crypto Expert: 7 Rules Every Crypto Investor Should Follow
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
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The sentencing last week of FTX founder Sam Bankman-Fried is helping put the debacle the crypto ecosystem has endured in the rearview mirror. This — coupled with the bull run the space has been experiencing lately, largely driven by Bitcoin breaking its previous all-time high record last month — as well as the popularity of recently approved Bitcoin spot exchange traded funds (ETFs) is making many investors take another look.
Yet, whether you’re a newbie crypto investor or a more experienced one, experts said there are a slew of rules one should follow.
Do Your Research
Learn about the purpose of the token or blockchain before investing.
Just like corporate stocks, many crypto tokens serve a specific technological or business purpose, said Thomas Hogan, economist with the American Institute for Economic Research.
For instance, Filecoin (FIL) facilitates online file storage. Helium (HNT) supports a WiFi and mobile data network.
“In contrast, meme coins like DOGE and PEPE serve no purpose and are purely for speculation. Are you investing because you like the product or just for ‘number go up?’ Think about it before you buy,” added Hogan.
Other steps in conducting thorough research are to know who the team behind the project is, understand the use case and technology — and to analyze market trends to get a feel for what the larger community thinks about said product.
“Look out for whitepapers, roadmaps and existing use cases. Be wary of meme coins and stay clear of those without a clear purpose,” said Guy Sheetrit, CEO at Over The Top SEO. “Don’t believe everything you read online or hear from influencers.”
Know Your Appetite (and Tolerance) For Risk
Some experts argued that if you’re just getting started, it’s probably best to stick with the bigger, high-liquidity tokens — like BTC, ETH and SOL.
“And then from there, you can start looking further along the risk curve and at trending narratives and future potential use cases,” said Brian D. Evans, CEO and founder of BDE Ventures. “We’re still very early, just like AI [artificial intelligence] is early, so it’s important to take caution when investing in the space. You need to be careful with how to deploy funds.”
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Evans added that it’s better to invest strategically and according to your own risk profile.
Jeff Owens, co-founder of layer1 blockchain Haven1, agreed, noting that if you’re just starting out, make sure to start small and only invest what you can.
“Even with all of the success stories out there, crypto investments shouldn’t be viewed as a “get rich quick scheme,” he said. “Treat it as you would any other investment prospect and remember, there’s always risk involved.”
Don’t Invest More Than You Can Afford To Lose
Another key piece of advice: Don’t invest what you’re not prepared to lose, as crypto is inherently volatile and tends to experience massive swings.
“Never invest any money that you aren’t prepared to lose or lose access to. If you have an immediate need for this money in the next 12 months, you should absolutely not be investing into anything risky,” said Stephen Kates, CFP and principal financial analyst for Annuity.org.
Other experts echoed this sentiment, saying it’s best to start small and not expect prices to move in a straight line.
“Trying to time the market is akin to gambling, so just make sure you have a long-term horizon and plenty of liquidity — emergency funds — before diving in,” said Vijay Marolia, co-founder of The Cash Square.
Beware of FOMO
Rebecca Liao, CEO of Saga, stressed how important it is to not FOMO into projects with more money than you’re willing to lose.
“It’s critically important not to overextend yourself,” she said. She noted that the key, like a wise venture investor in any industry, is to make calculated allocations to projects and not go all in on one because you have a hunch or you saw some influencer on X raving about it.
“There are many solid projects in crypto, and the key is to do the necessary research and then invest with an amount of money that fits into your individual risk profile,” added Liao.
Dollar Cost Averaging (DCA) Is Your Friend
Dollar cost averaging means that you invest a pre-decided amount of money at regular intervals in your chosen crypto asset, regardless of its price.
“This averages the cost over a period of time. In fact, recent research from Fidelity Investments showed DCA to be a great strategy to lower volatility, particularly in your first year of crypto trading,” Sheetrit indicated.
Make Volatility Your Friend
Marolia also noted that, as Warren Buffett learned from Benjamin Graham, “The market acts like your lunatic business partner — offering you wildly different prices for the same businesses throughout each and every trading day.”
“So cryptocurrencies are the best asset to ‘buy when others are fearful and sell when others are greedy,'” he said, adding that people getting rich fast en masse is almost always a sure sign that you’re near a market top.
“But timing is more difficult than anything in this business,” he added.
Protect Your Crypto With a Reputable Wallet
Hacking and scams are common in the cryptocurrency world.
In turn, several experts underscored the importance of avoiding holding crypto on exchanges.
Instead, invest in a safe, self-contained wallet, said Sheetrit. He added that the most secure wallets are hardware wallets, but these also require a somewhat high degree of technical knowledge.
“Think up a plethora of solutions according to your needs and how competent you are technologically,” he said. “Remember, these are only starting points. Investing in cryptos requires learning through, and keeping up with, the continuous changes.”
