When the cryptocurrency market is on the rise, it’s easy to get caught up in all the buzz. New investors often find themselves lured in by tales of remarkable gains, eager to dive in and seize what seems like a surefire chance for success. While the world of crypto indeed offers a unique opportunity for impressive returns, it’s also infamous for its volatility and risks.
Having spent some time navigating the crypto realm myself, I’ve picked up a few tough lessons about controlling risk. Whether you’re just stepping into crypto investing for the first time or you’re a veteran in need of a quick refresher, these three tips should help you sail smoothly through the bull market.
1. FOMO is real
During a crypto bull market, it’s not uncommon to feel like you’re missing out. Prices can rise dramatically overnight, and social media is often abuzz with snapshots of huge profits made by those who got in early. The urge to jump on the bandwagon after seeing these figures can be overwhelming, but that’s also one of the fastest ways to see your money vanish.
Once a token captures the spotlight or headlines, it’s likely that the prime opportunity has already passed. Jumping into the hype often means buying near a peak, just before a pullback or sell-off occurs. This holds especially true in the crypto world, where the mood of the market can flip in a matter of hours.
Chasing after profits can also blur your judgment. Instead of assessing a token based on its fundamentals or its long-term potential, you may start making rash decisions driven by the fear of missing out. Seasoned investors know all too well that the best trades are usually thought out well in advance, complete with strategic entry and exit points.
The takeaway? Patience is your greatest ally. Rather than leaping at a runaway opportunity, look for cases where sound fundamentals align with promising price movement. Often, the wisest choice is to sit back, observe, and wait for the next wave. Keep in mind: In the realm of crypto, another opportunity is always just around the corner.
2. Know when to cash out
Choosing the right moment to take profits in crypto investing is one of the toughest calls you’ll face. It’s straightforward to get swept up in excitement when your portfolio is showing gains, daydreaming about how much more you could earn. Yet, markets have cycles, and what climbs often descends just as swiftly.
Nothing stings more than watching large gains disappear because you didn’t lock them in. This scenario, often called “round-tripping,” occurs when investors ride an asset up high, only to see it crash back to their starting point—or worse.
To avoid this, it’s crucial to establish a solid exit strategy before you even start. Determine beforehand the price points at which you’ll sell portions of your holdings, and stick to that plan. By taking partial profits along the way, you can ensure that you’ve secured something from the investment, even if the market turns unexpectedly.
It’s also important to align your cash-out strategy with your overall financial objectives. Are you aiming to clear debts, save for a significant purchase, or reinvest in other ventures? Having a clear goal for your gains can make it easier to act decisively when the time is right.
Finally, don’t be afraid to leave some potential gains on the table. Greed can be a compelling force, but investing should focus on growing your wealth steadily, not chasing every dime of a market surge. By taking profits strategically, you can mitigate risks while still enjoying some of the market’s upside.
3. Meme coins are fun, but value wins long-term
For many novice investors, meme coins and microcaps open the door to crypto. Often propelled by viral campaigns or online communities, these tokens can deliver eye-popping returns in very short timeframes. However, they are also wildly unpredictable and typically end up shedding most of their value.
Here’s a simple guideline: If you’re checking the price of a token multiple times a day, it’s probably too risky. Constant monitoring is a telltale sign that your investment lacks stability, and the stress of chasing quick profits can impair your decision-making.
Instead, direct your attention to assets with lasting value. These include projects with strong fundamentals, established track records, and applicable real-world uses. While they might not offer the thrill of meme coins, they provide something far more valuable: peace of mind. Bitcoin, Ethereum, and Solana are examples that have demonstrated utility and solid foundations.
By focusing on long-term value rather than fleeting hype, you can cultivate a portfolio that grows consistently and stands the test of time. Remember, the aim isn’t to get rich quickly; it’s to build sustainable wealth that endures.
RJ Fulton holds positions in Bitcoin, Ethereum, and Solana. The Motley Fool has positions in and advocates for Bitcoin, Ethereum, and Solana. The Motley Fool has a clear disclosure policy.
