In the unpredictable landscape of cryptocurrency, protection is a prime concern. With fluctuations in digital assets like Bitcoin, there are bold decisions to be made. Should you hold onto your assets for extended periods or actively trade the market? Should you self-custody or delegate the holding of funds to a trusted exchange?
Experts have put forth varying views. For instance, Brock Pierce, co-founder of Tether and Block.one, emphasizes the importance of understanding the basics before diving deep into heavy investments. He champions patience and self-education. Coupled with this, he iterates the saying, “Not your keys, not your coins,” stressing the possible vulnerabilities of relying on exchanges that can be hacked.
Self-custody, which essentially functions like holding cash under the mattress, may seem unorthodox but comes recommended by Itai Avneri, the deputy CEO and COO of INX Limited. This form of asset holding may give the user control, but it also carries associated risks, such as scam-induced losses, without the potential for recourse through centralized financial authorities.
Then there are those like billionaire Tim Draper, of Draper VC, who trust institutions like Coinbase to hold their funds, even as they show less faith in traditional banking in the face of political instability and inflation.
Investors such as these often stress on diversification to nullify the risks associated with heavy investments in volatile coins like memecoins that might aggravate losses during market downturns. This diversification often extends outside of crypto assets.
Intriguingly, Andrew Latham, director of financial website SuperMoney.com, suggests that successful investing should be boring, requiring long-term focus over short-term market fluctuations.
High conviction bets on tried and tested coins like Bitcoin and Ethereum also find favor among enthusiasts. Lakov Levin, co-founder of DeFi investment platform, Locus Finance, advises staking Ethereum for earning consistent yields and revealing its distinct potential.
Safety tools include stop losses, a risk management provision that auto-sells a token if it reaches a specific value limit. Market volatility is seen as an inevitable feature of trading which allows for great wealth creation. It is important to note that the crypto market is not for the faint-hearted; it can often feel like an everyday rollercoaster ride.
The strategic use of options – contracts which provide the right or obligation to buy or sell a specific security on a specific date at a specific price – is another safety feature. These have been used since 1973 to price risk and volatility.
Protocols like Bumper integrate stop losses and options to provide a more efficient safety mechanism. Bumper’s simulations showcase a 46.2% yield improvement over options pricing during the 2022 bear market.
At the end of the day, holding onto large-cap cryptocurrencies is possibly the safest route. Experts propose using hardware wallets to provide secure long-term storage. Hodling requires conviction and timing since it only works when you pick cryptocurrencies that don’t flop.
Source: Cointelegraph
