How To Prepare For The Next Bull Run By Avoiding The Hazards of Cryptocurrency Investment

Leaders in the cryptocurrency industry offer guidance on what may be learned from this downturn; frequent themes include limiting risk exposure and controlling greed.

When considering the cryptocurrency meltdown, the proverb “hindsight is 20/20” comes to mind. Regardless of how early they purchased, investors in cryptocurrencies are feeling the sting as the total market cap of cryptocurrencies has decreased in value by nearly 70% from the peak in November 2021.

According to the Financial Times (FT), Verena Ross, the Chair of the European Securities and Markets Authority (ESMA), urged investors to use the crash as a “cautionary lesson” before investing in unregulated assets such as cryptocurrency.

“I think there is a real question about whether many of these [cryptocurrency assets] will survive . . . I hope that some of these investors will see this and will take a cautionary lesson at least to think about how much of their money they invest in these kinds of assets.”

Ross emphasized that the ESMA had earlier this year cautioned retail investors about the serious risks associated with investing in cryptocurrencies, suggesting that financial losses resulting from the fall are self-determined.

Although there is some truth to that, it is oversimplified for a number of different reasons. One example is that currently, regulated assets are likewise heading downhill. Additionally, digital asset investing has a strong anti-authority vibe, which is more appealing than short-term price fluctuations.

However, the price remains the major metric for determining success or failure, and even the most ardent supporters of cryptocurrencies may experience pain in their portfolio tracker.

Michael Rosmer, the CEO and co-founder of DeFiYield, added his investor insight and stated that trying to time the market “is usually a fruitless endeavor.”

Rosmer emphasized that, unlike other cycles, the most recent cryptocurrency bull market did not end with a blow-off peak, reinforcing the maxim that past performance does not anticipate future moves. Consequently, this gives potential investors a false sense of security. The key takeaway from this is to disregard engrained market expectations.

“People also believed that we’d see a blow-off top, because that’s happened in previous cycles. But that thinking fails to understand that markets behave based on what people are anticipating and preparing for, so often what people expect to happen is not likely to happen.”

Rosmer brought up inflation, saying that investors had the wrong idea that rising inflation meant higher asset prices. However, as we can see right now, rising inflation prompted hawkish actions from central banks and subpar performance from cryptocurrency prices.

As a final piece of advice, Rosmer cautioned investors to watch out for price exuberance since he sees it as a sign of an overheated market. The wise move in such circumstances would be to reduce risk exposure.

“Learning to reverse the cycles and think risk on when the market is down and climbing, risk off when the market is up and at risk of declining, and notice the high correlation with the general stock market.”

The alternative cryptocurrency have generally performed worse than Bitcoin, which has lost nearly 70% of its value since its peak in November 2021. (ATH). Solana and Algorand, which are down 87% and 92% from ATHs, respectively, are two notable large-cap losers.

According to Max Keiser, there weren’t any significant lessons to be gained from the catastrophe in the sense that investors should have already absorbed them. But he cautioned that selfish people will still prey on “a new generation of naive, greedy, suckers.”

Keiser doesn’t support complicated, high-yielding DeFi products or alts in general because of this. Instead, sticking with self-custody Bitcoin and hodl is the best way to “escape the madness” and protect yourself, according to Keiser.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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