- According to Davis, shrewd investors exit their positions when circumstances surrounding the project change.
- He also advised people to think like investors, not gamblers.
The recent market bloodbath caused by the unusual confluence of bearish fundamentals has drastically wiped away the portfolio value of many investors. In response to this, Lark Davis, a popular crypto influencer and a YouTuber has shared important tips to avoid losing money in crypto investment.
Planning is key
The fear of missing out makes the emotions of most new investors cloud their sense of judgment. Davis advises investors to have a plan before they enter the market.
Having a plan means you know what you are doing.
As part of the plan, investors should have a target to sell. Also, they should study the asset, have a reason to buy, understand what it is about, know its use-cases, partnerships and read about its roadmap. These factors can influence plan formulation, and provide a good reason to exit the market at the right time.
According to Davis, investors with good plans will exit their positions when circumstances surrounding the project change.
Investors with enough time to research and formulate plans can go for smaller cap assets. If not, they can go for the big assets like Bitcoin, Ethereum, Cardano, ETC.
Understand the crypto time-frame
It is important to understand that some cryptos have long-term potential, while others have short-term potential. Most of the leading cryptos backed by important technologies like Ethereum fall under long-term prospects. Altcoins like some of the popular and upcoming meme coins usually have short-term potential.
Davis suggests that investors should consider the dollar-cost averaging strategy for longer-term assets to avoid losing money. When assets with long-term potential are spread to diversify portfolios, investors could have money aside for rare dip situations. He suggests that assets backed by important fundamentals with about a 30% to 40% fall in value should be bought.
Minimize the risk
Crypto is one of the riskiest asset classes in the world. Many financial gurus like Andrew Bailey, the governor for the Bank of England have said that cryptos have no intrinsic value, and so investors should be prepared to lose all their investments. However, Davis believes that the risk can be minimized. Investors should understand that the lower the asset on the market cap ranking, the higher the risk.
When investors get into super-high speculative coins, they should keep their positions low, like up to 5% of their portfolio.
He cautioned that going all out on meme coins can wipe away an entire investment portfolio.
Think like an investor, not a gambler…To be safe, always buy on spot. Leverage is for experienced traders.
Protect your capital
Making a profit in crypto investment is vital, but protecting your capital is equally important.
According to Davis, investors should cultivate the habit of taking their capital out of a position after making a substantial profit. Also, they can protect their capital by going back to their plans.
Usually, when the fundamentals of the asset change, or the team fails to implement a technological feature as promised earlier, it is important to sell to prevent a crash. However, investors should never exit their positions when there is a major correction.
The plan is to buy low, and sell high.
The are many opportunities in the market for investors to have multiple sources of income. To avoid losing money, it is important to take profits and put them into a centralized platform or even decentralized finance to earn about 15 % or 16% on USD stablecoins. In other options, profits can be lent, or staked if assets are staking coins like Polkadot, Cardano, or Elrond.
Only a few people take advantage of the incredible opportunities in the crypto market to make huge returns.