Crypto is a volatile place. Money can be as easily lost as made through the ups and downs of Bitcoin and the wider market, and there are massive decisions to make. Should you just hodl \u2014 invest and do nothing \u2014 or actively trade the market? How many coins should your portfolio hold? Self-custody or keep your funds on an exchange with pre-determined stop losses?<\/strong><\/p>\n Basically, how do you protect your stack from the million and one things that can go wrong? We asked Bitcoin OGs<\/a> and experts in the space for their advice and opinions.<\/strong><\/p>\n When faced with the question of how best to protect your crypto, OG<\/a> Brock Pierce is circumspect. The former presidential candidate and co-founder of Tether and Block.one points out that not everyone is in the same place.<\/p>\n \u201cEarly noobs looking to begin their journey might go to Coinbase and purchase their first $20 or $50 worth of crypto, and it\u2019s not an investment in crypto, but an investment in yourself. However, the moment you have a material investment \u2013 and that is a different amount for everybody \u2013 then it\u2019s important to understand the basics of hodling and investing in crypto,\u201d he says. <\/p>\n \u201cIt\u2019s always better to walk before you can run, to walk in baby steps and don\u2019t let FOMO (fear of missing out) cloud your judgment. This is a marathon, a long game, so take you time and be informed.\u201d<\/p>\n<\/blockquote>\n Pierce repeats the mantra, \u201cNot your keys, not your coins.\u201d This is one of the most widespread pieces of wisdom in the world of crypto, where people are encouraged to take responsibility for holding their own crypto rather than outsourcing it to an exchange that can get hacked. <\/p>\n But there are dangers with this approach, too, and if something goes wrong, there is no centralized bank authority to reset the passwords or refund money lost to scams. It\u2019s like holding cash under the mattress \u2014 the entire responsibility rests with you \u2014 and is referred to as self-custody in crypto.<\/p>\n Self-custody is the key to safe trading, according to Itai Avneri, deputy CEO and chief operating officer at INX Limited, the first and only fully regulated, end-to-end platform for listing and trading both SEC-registered security tokens and cryptocurrencies.<\/p>\n \u201cSelf-custody is the key here. Especially when thinking about digital securities and not just crypto. Trading on a centralized exchange that provides the confidence and protection of regulation and, at the same time, trading in a decentralized manner when the customer holds his \/ her own assets. Generally speaking, your wallet, your keys, your assets. This is the best way to protect yourself from a sudden hold on withdrawals or other events we witnessed in the past year,\u201d Avneri says.<\/p>\n But Bitcoin billionaire Tim Draper of Draper VC<\/a> says that while that\u2019s true, institutions aren\u2019t keeping funds on a Ledger in a drawer.<\/p>\n \u201cI no longer believe that my dollars in the bank are very safe. They are subject to political winds and inflation,\u201d he says. <\/p>\n \u201cThe safest personal money is BOL\u2014Bitcoin on Ledger. The safest institutional money is BAC\u2014 Bitcoin at Coinbase,\u201d Draper continues.<\/p>\n Pierce points out that people advanced in sophistication can look at investigating yield farming or decentralized finance. This allows people to not only protect their crypto but also to look at increasing it through earning yields \u2014 but again, this involves risk.<\/p>\n He emphasizes the importance of investing in your own education and notes the importance of diversification.<\/p>\n \u201cIf you are participating in those markets, then you by necessity take on the counterparty risk associated with those platforms, and how you mitigate those risks is through diversification, but not having all your eggs in one basket. If any one asset fell, it won\u2019t wreck (rekt) your entire portfolio.\u201d<\/p>\n Diversification in crypto is tricky, as Bitcoin and the rest of the market tend to move up and down at the same time. But Pierce warns against putting too much money in more volatile coins, for example, memecoins, in case of a downturn where the pain will be magnified.<\/p>\n Andrew Latham, a certified financial planner based in Rolesville, North Carolina and the director of content for financial websiteSuperMoney.com, echoes Pierce\u2019s restraint and suggests looking outside of crypto as well.<\/p>\n \u201cThe key to surviving market downturns is diversification and a disciplined approach. Don\u2019t put all your eggs in one basket. Spreading your investments across various asset classes can help cushion against volatility. Keep a disciplined approach to crypto investing, focusing on long-term goals over short-term market fluctuations.\u201d<\/p>\n And while crypto investing is often a little bit too interesting for its good, he says successful investing is often the opposite.<\/p>\n \u201cAs the old adage goes, \u2018Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas,\u2019\u201d Latham says.<\/p>\n Sometimes, it makes sense to be overweight in a blue chip, market-leading token though, as Warren Buffett\u2019s 50% portfolio allocation to Apple shows. There are plenty of Bitcoin-only hodlers, but Lakov Levin, the co-founder of the new DeFi investment platform Locus Finance, leans heavily on Ethereum.<\/p>\n Levin suggests: \u201cEthereum is the blockchain, which is used as the fundament for the financial evolution of the 21st century. It is a hub for hundreds of protocols that build value for its users. Holding Ethereum is similar to holding a fraction of the internet and value it provides to users. It is truly a remarkable financial opportunity.\u201d<\/p>\n Levin notes that Ethereum\u2019s hodlers can stake their assets and receive 5% APR in ETH itself and points out the \u201cEthereum blockchain burns fees for each transaction made on the blockchain, which makes Ethereum a deflationary asset.\u201d<\/p>\n \u201cI do not think that ever in human history we saw a deflationary asset that generates consistent yield and has potential for such innovation,\u201d concludes Levin.<\/p>\n Pierce is sanguine about overall market dumps if you are positioned properly.\u00a0<\/p>\n \u201cIf the market falls by 10%, take the hit using something like a stop loss, and try to recover in the next run.\u201d<\/p>\n<\/blockquote>\n A stop-loss is a risk management tool that automatically sells a token once it reaches a certain floor \u2013 predetermined by the user. It is designed to limit losses but can be a blunt tool in the crypto world, where movements of 10% are common and could see all assets dumped as a result.<\/p>\n Levin is cautiously bullish on stop losses, which basically allow traders to close a trading position at a specific price.<\/p>\n \u201cThe effectiveness of any tool lies in the hands of those who use it. The most important thing about \u2018stop losses\u2019 is the feeling of control, which protects from the anxiety of being in the market.<\/p>\n One of the scenarios that stop losses is the management of hypotheses on market behavior. When entering a trade, a trader has a hypothesis of the behavior of the market, which leads to opening a trading position.<\/p>\n \u201cStop losses allow you to pick the price where your thesis is rejected by the market and limit your loss, which is a must thing to have for long-term trading. But \u2018stop losses\u2019 do not save from cognitive biases, which heavily affect trading. In this case, a trader may re-enter trade a few times, breaking his own rules under the influence of greed or fear. It is important to have discipline to follow your own rules.<\/p>\n \u201cOne of the rules that I used when trading is when hit by stop loss, I take a break from trading this asset,\u201d says Levin.<\/p>\n Pierce is not an active trader and sees himself more as a long-term participant in the market. He appreciates that market volatility is not a negative thing and that tremendous wealth is made in volatile markets \u2014 the more movement, the more opportunity.<\/p>\n \u201cBut it\u2019s not for the faint of heart. You know, you\u2019re riding a roller coaster ride almost every day,\u201d says Pierce.<\/p>\n Read also<\/p>\n Can Crypto be Sweden\u2019s Savior?<\/p>\n <\/a>\n <\/div>\n Best and worst countries for crypto taxes \u2014 plus crypto tax tips<\/p>\n <\/a>\n <\/div>\n<\/div>\n<\/div>\n All-time highs \u2013 and all-time lows. Recent reports in The Wall Street Journal point to SpaceX writing down the value of its Bitcoin holdings by $373 million. It is currently unclear whether SpaceX sold or merely reduced the value of its digital assets in its accounts. This may cause difficulty in the future, as U.S. accounting rules dictate that once written down, the value of Bitcoin on company balance sheets cannot be adjusted upward, even if its price rises.<\/p>\n The subsequent downward movement took many by surprise \u2014 established investors and newbies alike. What other tools are available to users to protect their crypto? Well, a 50-year-old model created by Nobel-prize-winning professors could be an option.<\/p>\n Options trading gives the trader the right or obligation to buy or sell a specific security on a specific date at a specific price \u2013 it\u2019s a contract that\u2019s linked to an underlying asset such as a stock or security. Since 1973, options have been priced using the Black-Scholes model originally authored by two university professors. This mathematical equation estimates the theoretical value of assets based on implied volatility, taking into account the impact of time and other risk values. It is to this day regarded as one of the best ways to price an option contract.<\/p>\n In 1973 two finance geeks, Black and Scholes, created a financial model used to price risk and volatility.<\/p>\n It gave birth to the $13tr options market and won the Nobel Prize for Economics.<\/p>\n 50 years later, Bumper brings it up to the age of DeFi, a breakthrough in risk management. pic.twitter.com\/ZxNqROwQPV<\/a><\/p>\nWalk before you can run<\/h2>\n
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Self-custody for safety<\/h2>\n
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Diversification: Don\u2019t just buy eggs<\/h2>\n
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High-conviction bets<\/h2>\n
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A tool to stop losses<\/h2>\n
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\n Features<\/span><\/p>\nOptions can protect against extreme volatility<\/h2>\n
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