Top tips for investors looking to navigate the current crypto winter

The crypto market has experienced a lot of turbulence in 2022 -- and we’re barely over the halfway mark. From Luna’s extraordinary fall from grace to Bitcoin dipping below the $20,000 mark for the first time since late 2020 -- investors have been riding a financial rollercoaster in the past few months.

Despite the doom and gloom outlook of many, confidence remains amongst investors as we head into a 'crypto winter'. Latest research from Bank of America, which included findings from 160 of its clients -- indicates that blockchain technology and the digital asset ecosystem are here to stay, and investors aren’t deterred by the state of the market. Unsurprisingly, as a result, the bank’s leadership remains optimistic for mainstream digital asset adoption in the future.

While interest in crypto is steady, and investors are still keen to buy in, it’s crucial that anyone looking to invest their hard-earned capital into crypto -- particularly retail and first timers -- exercise caution.

Here are some practical tips for those looking to enter the current crypto market.

Don’t throw money at a tweet or post

Social media is a melting pot of crypto chatter, groups and influencers. While there are plenty of informed and authoritative figures on social media, like in any industry, there are also 'experts' who may be ill-informed and untrustworthy. Social media may also amplify messaging exponentially, which can create a sense of urgency around buying into something -- and this isn’t the correct headspace to be in when your capital is at risk. There is no need to rush into investing money into a project, just because it has a lot of noise surrounding it. Conducting your own risk assessment using multiple credible sources before committing to a specific crypto project is crucial to avoiding a disastrous loss.

If your outlook is to invest in a coin’s floor price and pray it multiplies by thousands, you are taking a very short-sighted approach. Just because a coin appears to be good value, does not necessarily mean it will take off in price -- avoid catching any falling knives. Always question schemes posted online promising fast, easy cash generated by crypto before committing yourself.

Never invest above your financial means

Investing, whether in crypto or traditional stocks and shares, always carries a level of risk and involves a level of uncertainty. Prices go up and they go down. For many, that’s all part of the appeal and is par for the course in investing. The crypto market has rewarded financial freedom to people but at the same time, has the power to inflict financial stress on others.

As we all saw with the price of Luna, coins can nosedive in the blink of an eye. The market can be a volatile place for anyone. So, if you are financially overcommitted or haven’t spread your risk, then the market can inflict heavy losses upon investors.

Ideally, nobody would invest more than they can afford -- or can afford to lose. In fact, in traditional investing, the advice is that people should only start investing when they have a nest egg of three to six months’ worth of expenses set aside. The same goes for crypto. This ensures you have the funds you need to invest in the first place, and a 'plan B' in case anything goes wrong with your investments. Additionally, people who consider investing money they can’t afford to lose should remember that crypto isn’t going anywhere. The option to invest will be here today, tomorrow, and well into the future -- so don’t rush. Always invest what you can afford to potentially lose and never jeopardize your financial security.

Due diligence and patience are key

When crypto winters hit, a lot of investors panic and sell, especially if they are newer to investing or haven’t experienced a serious dip in the market yet. Money is an extremely emotional resource, and so much hinges on financial success or loss, so it’s no surprise that when hard times hit, it can be hit hard for anyone who had dreams pinned on the hottest crypto project that’s now in disrepair. But what they need to remember is that this is not the first, and certainly won’t be the last crypto winter. Yes, Bitcoin is hovering around the $20,000 mark now, but compare it to only two years ago, you can see Bitcoin and the industry in general have made significant gains overall.

Conducting due diligence and asking yourself as an investor, 'what do I want to gain out of this?' is important, and often overlooked. Are you trying to catch a cheap coin at its floor price and hope it rockets? Or are you reading about long-term, progressive projects currently going on in the crypto space? Grasping an understanding of the differences between a legitimate investment versus gambling your money is the key distinction between success and failure in this market.

Never lose sight of your goals

For any investor, crypto winters can be a nerve-wrecking and testing time. But it’s important to remember that crypto is still a young and a mostly unregulated market, so volatile crypto winters will come and go.

Crypto is largely driven by its online community, but with that buzz comes a lot of noise and potential for fraudulent activity. When navigating the market at any time, but especially during the current bear market, exercising patience and doing your homework is crucial to your success. Always invest within your means, don’t throw money at a Tweet, and always remember why you got into crypto -- never losing sight of you aims will improve your chances of achieving financial freedom.

Image credit: Wit Olszewski / Shutterstock

Jesse Brown is CEO of Himalaya Exchange. The company aims to change the financial world with a pioneering digital system using blockchain technology to deliver innovative, affordable, and secure services. As the world’s only blockchain ecosystem consisting of the Himalaya exchange, a stable coin (HDO), a trading coin (HCN), a payment App (Himalaya Pay) and various merchants, the Himalaya Exchange aims to establish a new inclusive future by revolutionizing the financial technology industry and bring financial freedom to everyone in the world.