A few months ago, I was listening to a panel of top cryptocurrency experts discussing the future of digital assets and giving advice about some Golden rules of cryptocurrency. Even though they came from various backgrounds, some being long-term Bitcoin holders and others being DeFi innovators, they all agreed on one thing: Most people end up losing money in crypto because they ignore the basics.
One expert, Anthony Pompliano, put it this way:
“The difference between those who succeed in crypto and those who fail comes down to discipline. If you follow a set of rules, the market becomes an opportunity, not a gamble.
That conversation stuck with me. No matter how much the market changes, whether Bitcoin is soaring to $100,000 or crashing to $20,000, the people who follow the core principles always come out ahead and stronger after a market downturn.
So, thought I would share the Golden rules of cryptocurrency that most successful crypto investors swear by. These are not get-rich-quick tricks; they are tried-and-true guidelines that can keep your investments safe and sustainable in both bull and bear markets.
1. Never Invest More Than You Can Afford to Lose
This principle may seem straightforward, but a 2023 Binance Report revealed that nearly 40% of retail crypto investors admitted to investing more than they could comfortably handle during bull markets, leading to severe losses when the market took a downturn.
So, why is this rule so crucial? In a discussion on the widely-followed Bankless podcast, Michael Saylor, Chairman of MicroStrategy, highlighted that Bitcoin is a highly volatile asset and should be viewed as a long-term investment. While he supports incorporating BTC into a company’s treasury, he cautions against betting with money that you can’t afford to lose.
- A safer approach is to limit your investments in cryptocurrency to about 5-10% of your total savings.
- Diversifying the remainder into more stable and safer assets like index funds or government bonds can help shield you during turbulent market conditions.
2. Secure Your Assets: Use a Cold Wallet
Cryptocurrency is decentralised, meaning you, not a bank, are responsible for your funds. And if your assets aren’t properly secured, you could lose everything.
Vitalik Buterin, the co-founder of Ethereum, once said, “Not your keys, not your crypto.” This means that if your funds are in an exchange, you don’t really own them, but the exchange does. If that platform gets hacked, goes bankrupt, or freezes withdrawals, your hard-earned crypto could be gone in an instant. The importance of this truth is so clear, even in Chainalysis’ 2023 Crypto Crime Report, that over $3.8 billion was stolen from crypto platforms in 2022 alone.