Bitcoin’s price is updating historical highs daily, investors are caught in a wave of optimism, and capital is confidently flowing into the digital asset space. The mood in the community resembles euphoria. However, it is important to remember the potential risks. In the growing cryptocurrency market (often called a bull market), it is crucial to adhere to risk management principles, stay informed, and conduct one’s own research (DYOR). Markets are cyclical, so strategic thinking during uptrends will help prepare for changes and gain benefits without succumbing to risks. Diversification, avoiding excessive leverage, setting stop-loss orders, and locking in profits are key tools for protecting investments.
Risk Management: 5 Steps
- Diversification of the portfolio. Spread your assets among Bitcoin, Ether, stablecoins, and other promising tokens. This will help reduce risks associated with the volatility of individual assets.
- Avoiding excessive leverage. While this method can significantly increase profits, the risks also increase substantially. Do not count on an amount larger than you are prepared to lose.
- Stop-loss ordersA stop-loss is an automatic trading order that allows investors to limit their potential losses if the price of an asset begins to decrease. By setting a stop-loss, traders set a specific price at which the asset will be automatically sold.. Setting automatic sales can help limit losses during sudden market downturns.
- Rebalancing the portfolio. Regularly assess your assets and redistribute them to maintain the desired level of risk.
- Partial profit-taking. Withdraw part of the profit to protect earnings while staying in the market if it continues to grow.
DYOR — The Best Tool
In a consistently growing market, it’s easy to get swept up in popular projects, but not all will live up to expectations. Conducting your own research (Do Your Own Research) is a must.
- Research the team and technology: transparency, real use cases, and a roadmap are important markers of a strong project.
- Check the tokenomics: pay attention to the utility of the token, distribution mechanisms, and issuance.
- Evaluate the risks: even the most promising projects have their weaknesses.
- Join the community: active and constructive community interaction indicates trust in the project.
Source: Binance