Here we give five steps to deal with the current market fear and remind users to take these precautions consistently.
Recent systemic concerns surrounding the crypto markets have fueled fears of Binance’s bankruptcy and the potential fallout for the broader market. I felt some of that anxiety and took the time to reevaluate my personal crypto holdings and positions to find out whether or not I was properly diversifying, not only by asset but also by platform.
Here are some important ways to protect yourself in times of uncertainty.
Important note: I personally don’t think Binance will have bankruptcy problems, but it can still be wise to question your own beliefs and question “what ifs”. If the Binance bankruptcy scenario leaves you massively exposed, you might want to reconsider your investment strategy.
Five Steps to Overcoming Market Anxiety
1. Self Custody
If you’re not actively trading, exchange rate risk is something you really don’t need to have. The FTX fallout showed us that even the biggest players could be nefarious. Self-custody ensures that the actions of others are unlikely to affect your holdings and your tokens are safe while you sleep. Trust Wallet, SafePal, and Ledger are all excellent forms of self-custody. Exchanges like Binance, Crypto.com, and Coinbase even have built-in services to help their customers move their assets to a self-custody solution.
2. Live cross-chain
With all the competing blockchains out there, there’s no reason to limit yourself to just one. Each chain has its own packaged assets and each has its weaknesses. This can be managed using only native assets, but those in the world of decentralized finance (DeFi) often use wrapped tokens. Likely, a DeFi investor cannot avoid wrapped tokens in their investment strategy, so diversifying funds across blockchains does not ensure a single point of failure in a portfolio. This area is not for the faint of heart and is not yet easy or intuitive to navigate.
3. Get some money from crypto
There is absolutely nothing wrong with removing some or all of your assets from the crypto space. If the idea of losing your crypto investments keeps you up at night, you probably own too much. Carry out an internal stress test on your individual financial situation. What would happen if all your cryptos were gone tomorrow? could you eat Do you have a place to live? If so how long Now is not the time to listen to FOMO — you never should — it’s the time to reevaluate and protect yourself.
You can re-enter the market at any time.
4. Diversify your stablecoins
Stablecoin risk is real, and UST taught the market that there is a real need to diversify between stablecoins. Take the time to research how each is supported. BUSD, USDC and USDT all report on their treasury support. With easy access to all three popular stablecoins, there’s no reason not to diversify between them.
5. No market guru knows what will happen next
I don’t know what’s going to happen next, nor does the person on CNBC or the big following account on Twitter. I believe this room has a bright future but I can’t predict tomorrow, next week or next month. I’m aiming for an exposure that satisfies my belief in the future of this field while protecting my family’s finances should the worst-case scenario occur.
In summary, the simple thoughts are to never invest more than you can afford to lose and when investing, diversify across assets and platforms. This current period of fear will eventually end and either Binance will be stronger than ever or the market’s worst fears will come true. I’m working to position myself for both scenarios, and when the dust from the non-stop media exposure has settled, I’ll be ready for what’s next.
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