6 Simple Rules to Protect Yourself and Profit in a Volatile Crypto Market

Sep 02, 2022

The crypto markets are unlike any other in history.

Never before have ordinary investors had the opportunity to make truly life-changing gains from such relatively small investments. In fact, data shows that cryptos are actually the highest performing asset class in history, even with the recent market movements.

Yet, this dramatic upside potential comes with far greater risks than you’ll find in more established, traditional assets like stocks and bonds. There are countless ways unsuspecting crypto investors can lose their hard-earned savings.

That’s why I asked our resident crypto expert Joe Shew, the senior crypto analyst behind our new Crypto Strategist Advisory, to share some of his best advice for protecting yourself in the volatile crypto markets.

If you have any money in cryptos – or are considering a new investment today — I urge you to heed Joe’s six simple rules below.

As always, if you have any questions or comments on today’s editorial, you can contact me directly at [email protected]. I can’t respond to every email, but I read them all.

Now, here’s Joe…

Joe Shew’s Top 6 Rules for Crypto Success

Hi everyone — Joe Shew here. 

Wealth is created by making good investment decisions AND avoiding unnecessary mistakes.

And in this special edition of Money Talks, I’m going to show you some of the most common mistakes I see most new crypto investors make, so you don’t have to.

Rule No. 1: Don’t Leave Your Crypto Investments on Exchanges

Many crypto investors leave their investments on the exchanges where they buy them, such as Coinbase or Binance.

It seems harmless enough. After all, you typically leave stocks and other traditional investments in your brokerage accounts where you buy them.

But this is one of the many ways crypto markets differ from traditional markets.

Crypto investors have probably lost more money through exchange hacks and wrongdoing than any other single cause. By my count, there have been well over three dozen such cases to date. I’m sure you’ve probably heard some of the horror stories yourself.

Crypto investors simply don’t have the regulatory safeguards investors in other markets do. If your investment is stolen or otherwise lost, you generally have no recourse to get it back.

However, the fact is that this problem is easily avoidable by simply taking the time to move your crypto assets to a self-custodial wallet. 

You wouldn’t store your savings in a complete stranger’s house and then wonder why it suddenly went missing, would you? Why take an easily avoidable risk? 

Rule No. 2: Don’t Try to Day Trade 

Day trading can be hugely seductive. Who wouldn’t want to work from home and make a living in a few hours a day? However, the truth is day trading is unbelievably difficult to do successfully.

Trading is a full-time profession that takes years of experience and discipline to do proficiently. Only a tiny fraction of established day traders can make money consistently. For most folks, when you break down the gains from your trades, you’d be better off stacking shelves at your local supermarket.

I’ve experienced this firsthand. It’s easy to feel elated after some small wins. And I myself started dipping into my long-term investment funds because I had gone through my disposable cash. I thought I was somehow different from everyone else.

In the end, I got lucky. I realized it was a slippery slope, but many people don’t. They become consumed by trading and end up risking more and more capital in a futile attempt to recover their losses.

This kind of “trading ” is little more than gambling. And if you want to gamble, your odds are much better at the casino.

Rule No. 3: Don’t Follow the ‘Herd’

Following the “herd” is one of the worst mistakes you can make in any market, and crypto is no exception.

Unfortunately, the overwhelming majority of retail investors do precisely that. In particular, they often succumb to “FOMO” (fear of missing out) and take on excessive risks when assets are popular and expensive.

For example, during the roaring crypto bull market of 2017, untold numbers took out loans and mortgaged their homes to buy more cryptos near the market’s peak.

Do not be one of those people.

My rule of thumb: When you hear everyone talking about Bitcoin (BTC) and hyping up crypto — friends, family, coworkers, strangers at the gym, etc. — it is often a great time to take some profits.

Conversely, when the majority of investors have lost interest in crypto, or those same friends and family give you the side-eye when they hear you’re a crypto investor, it can often be a great time to initiate or add to positions.

Rule No. 4: Don’t Depend on Online ‘Experts’

Social media — including YouTube, Facebook, Twitter, and online forums — is a terrible source of investment advice.

Much of what you’ll hear is incorrect, confusing, or intentionally misleading. 

I can’t tell you how often I’ve seen videos that “analyze” a particular crypto and then explain why it will go up 1,000x. These videos are meant to confirm your existing biases and get you to “engage.” It makes my blood boil now. 

Who actually benefits from this information? Is it you? Or is it created to garner more ad revenue for their channel — or get you to sign up for a scammy subscription service? 

At the peak of the last crypto bull market, many investors happily took investment advice from strangers on the internet. When the “music” stopped, they lost heartbreaking sums of money.

The same thing is still happening today. And it’s generally the people who can least afford it who lose the most. They are naturally more desperate for a better life and are more willing to listen to those who promise huge returns. 

Getting scammed is terrible. It happened to my friend and business partner early on, and he felt tremendous anger toward himself for falling for it. I don’t want that to happen to you.

So please, don’t rely on online “experts” for crypto advice. If you’re looking for more guidance, stick to reputable sources with proven track records.

Rule No. 5: Don’t Overcomplicate Things

Contrary to popular belief, successful investing does not need to be complicated. And I’ve found there are a few common ways crypto investors tend to go wrong: 

  • Trying to Time the Exact Top or Bottom of the Market
    Catching a falling knife or selling the euphoric top of a market is incredibly difficult. And even if you’re successful, it can be overly stressful. You’ll find yourself glued to your computer or smartphone, morphing into a sleepless creature that friends and family won’t recognize.
  • Over-Diversification
    Diversifying your portfolio across multiple assets is often a smart move. But if you’ve spread yourself too thin, you’re unlikely to earn life-changing returns. Owning too many assets adds unnecessary complexity, increases your risk exposure, and makes it much harder to manage your portfolio properly. 
  • Listening to the “Noise”
    You can have the best investment plan in the world, but if you’re easily influenced by others, you’re unlikely to do well. It’s not uncommon to hear of investors who have sold profitable long-term crypto positions to take advantage of a new “Ethereum Killer” or “The Next Bitcoin” they heard about from a friend or coworker. Investing based on “tips” and rumors always ends in tears.

Rule No. 6: Don’t EVER Use Leverage

Last but not least, I urge you to avoid using leverage with your crypto investments. It’s the single surest way to lose money in the crypto markets.

Leverage can allow you to dramatically amplify the potential returns you can earn in your investments. The problem is that the downside is LIMITLESS. One bad leveraged trade can wipe out your entire portfolio and more.

The vast majority of those who dabble with leverage end up losing money. And people have literally lost their homes and their entire life savings from being over-leveraged.

Using leverage is an absolute minefield you must avoid if you do not know what you’re doing.

I hope these simple rules help you on your crypto investment journey. If you’re looking for more hands-on guidance, I would love to have you join me at Crypto Strategist Advisory. You can learn more about a 100% risk-free trial subscription right here

My best until next time,

Joe Shew
Senior Crypto Analyst, Crypto Strategist Advisory