Top tips for investors navigating the current crypto winter

The crypto market has experienced a lot of turbulence in 2022 – and we are barely over the halfway point. From Luna’s extraordinary fall from grace to Bitcoin falling below the $20,000 mark for the first time since late 2020, investors have been riding a financial rollercoaster in recent months.

Despite the doom and gloom of many, there is still confidence amongst investors as we head into a ‘crypto winter’. Last investigations from Bank of America, which included findings from 160 of its clients—indicates that blockchain technology and the digital asset ecosystem are here to stay, and investors are undeterred by the state of the market. As a result, unsurprisingly, the bank’s management is optimistic about the mainstream adoption of digital assets in the future.

While interest in crypto is steady and investors are still keen to buy in, it is imperative that anyone looking to invest their hard-earned capital in crypto – especially retail and newbies – exercise caution.

Here are some practical tips for those looking to enter the current crypto market.

Don’t throw money at a tweet or post your message rate

Social media is a melting pot of crypto talk, groups and influencers. Although there are many informed and authoritative people on social media, as in any industry, there are also “experts” who can be ill-informed and unreliable. Social media also moves at a million miles a minute, which can create a sense of urgency to buy into something – and this is not the right headspace to be in when your capital is at risk. There is no reason to rush to invest money in a project just because it has a lot of noise around it. Conducting your own risk assessment using multiple credible sources before committing to a specific crypto project is essential to avoid a catastrophic loss.

If your outlook is to invest in a coin’s base price and pray for it to multiply by thousands, you are taking a very short-term approach. Just because a coin appears to have good value doesn’t necessarily mean it will take off in value – avoid catching falling knives. Always ask questions posted online promising fast, easy money generated by crypto before committing.

Never invest beyond your financial means

Investing, whether in crypto or traditional stocks and shares, always carries a level of risk and involves a degree of uncertainty. Prices go up and they go down. For many, it’s all part of the appeal and par for the course in investing. The crypto market has rewarded financial freedom to people, but at the same time has the power to inflict financial stress on others.

As we all saw with the price of Luna, coins can dive in an instant. The market can be a volatile place for everyone. So, if you are financially overexposed or have not spread your risk, the market can inflict heavy losses on investors.

Ideally, no one would invest more than they can afford – or can afford to lose. In fact, in traditional investing, the advice is that people should only start investing when they have a nest egg of three to six months of expenses set aside. The same goes for crypto. This ensures that you have the funds you need to invest in the first place, and a “Plan B” in case something goes wrong with your investments. Additionally, people considering investing money they can’t afford to lose should remember that crypto isn’t going anywhere. The alternative to investing will be here today, tomorrow and far into the future – so don’t rush. Always invest what you can afford to lose and never jeopardize your financial security.

Due diligence and patience are key

When crypto winters hit, many investors panic and sell, especially if they are newer to investing or haven’t experienced a severe market downturn yet. Money is an extremely emotional resource, and so much depends on financial success or loss, so it’s no surprise that when hard times hit, they can hit hard for anyone who had dreams tied to the hottest crypto project that is now defunct. But what they need to remember is that this is not the first, and certainly won’t be the last crypto winter. Yes, Bitcoin is hovering around the $20,000 mark now, but compare it to just two years ago, and you can see that Bitcoin has made significant gains overall.

Conduct due diligence and ask yourself as an investor,’What will I get out of this? is important, and often overlooked. Trying to catch a cheap coin at the floor price and hope it rockets? Or are you reading about long-term, progressive projects currently underway in the crypto space? Understanding the differences between a legitimate investment versus gambling your money is the key difference between success and failure in this market.

Never lose sight of your goals

For any investor, crypto winters can be an unnerving and trying time. But it’s important to remember that crypto is still a young and largely unregulated market, so volatile crypto winters will come and go.

Crypto is largely driven by the online community, but with that buzz comes a lot of noise and the potential for fraudulent activity. When navigating the market at any time, but especially in the current bear market, being patient and doing your homework is critical to your success. Always invest within your means, don’t throw away money on a Tweet, and always remember why you got into crypto – never losing sight of your goals will improve your chances of achieving financial freedom.

About the author: Jesse Brown is the managing director of Himalayas and is an accomplished fintech executive and leader with extensive experience driving innovative crypto infrastructure solutions, developing founding teams, establishing strategic partnerships and building compelling products.