It is estimated that more than 130 million people have been introduced to cryptocurrencies since the end of 2021, and millions of investors may soon be looking at the first crypto bull run, with some suggesting that this could happen as early as 2024. Experts emphasize the importance of careful research before investing and diversifying one’s crypto portfolio, and they say that credit usage or leveraged trading should be avoided to reduce risks.
Have a Clear Investment Goal
According to Ben Simpson, the founder of the crypto education platform “Collective Shift,” newcomers to crypto should be aware that the bull market is “nothing like anything you have experienced before.”
“It’s complete and utter chaos. It’s just a hurricane.”
Simpson said that one of the biggest mistakes made by new crypto investors is holding their crypto assets for too long, often driven by the excitement of potentially earning more. Instead, Simpson said that it could be helpful for investors to write down a clear investment goal and understand what assets they have in their portfolios. Simpson said, “In a bull market, it really stops very quickly when the music stops,” suggesting that setting exit prices from the market could reduce the likelihood of losing money in an investment.
James Butterfill, the Research Chairman of CoinShares, said that implementing dollar-cost averaging can help reduce the average purchase cost and mitigate the impact of volatility on a person’s portfolio.
Invest in Established Assets
CK Zheng, co-founder and Chief Investment Officer of hedge fund ZX Squared Capital, advises investors to examine more established and well-known cryptocurrencies like Bitcoin and Ethereum. Butterfill argued that Bitcoin behaves similarly to other alternative assets and has significant diversification advantages compared to assets like gold, commodities, or real estate.
Deryck Graham, founder of crypto hedge fund Portal AM, said that balancing investments between speculative and mature cryptocurrencies is crucial. He added, “Consider tokenomics, the development team’s history, the inflow and outflow of whale investors, community size, market momentum, and liquidity.”
Markus Thielen, Research Chairman of Matrixport and author of Crypto Titans, supported the idea that Bitcoin always reaches a new peak in a developing market, but new themes drive new bull markets, and he advocated investing in new cryptocurrencies instead of the previous bull run.
Simpson also said that having a portfolio with a high conviction rate would help stay on target, as it is not feasible for most individuals to keep up with 80 different coins at any given time.
“The other day, I talked to a guy who had 80 altcoins in his portfolio. There’s no way an individual investor can fully know what 80 different coins are doing and stay in between them.”
Simpson, Zheng, and Graham warned against excessive exposure to crypto through borrowing to invest, investing more than one can afford to lose, or trading with leverage.
