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Here we provide five steps to deal with the current fear of the market and remind users to consistently take these precautions.
Recent systemic concerns for the crypto markets have turned into fears of Binance’s insolvency and what it could do for the entire market. I felt some of this fear and took the time to re-evaluate my personal crypto holdings and positions to understand whether or not I was diversifying properly, not only by asset but also by platform.
Here are some key ways to protect yourself in times of uncertainty.
Important note: I personally do not believe that Binance will have insolvency problems, but it may still be wise to challenge your beliefs and ask the “what if” question. If the Binance insolvency scenario leaves you heavily exposed, you may want to re-evaluate your ownership strategy.
Five steps to dealing with market fear
1. Self-preservation
Unless you are actively trading, exchange risk is something you really don’t need to have. The FTKS fallout showed us that even the biggest players can be mean. Self-protection ensures that the actions of others are unlikely to affect your holdings, and your tokens are safe while you sleep. Trust Wallet, SafePal and Ledger are great ways to protect yourself. Exchanges like Binance, Cripto.com, and Coinbase even have built-in services to help their customers move their funds to a self-monitoring solution.
2. Cross chain live
With all the competing blockchains in the space, there’s no reason to stick to just one. Each chain has its own wrapped assets, and each has its own points of failure. This can be solved by using only native funds, but those in the decentralized finance (DeFi) world will often use wrapped tokens. Arguably, a DeFi investor cannot avoid wrapped tokens in his investment strategy, so diversifying assets across blockchains will not ensure a single point of failure in the portfolio. This space is not for the faint of heart and is not yet easy or intuitive to navigate.
3. Take some of the cryptocurrencies
There is absolutely nothing wrong with removing some or all of your assets from the crypto space. If the thought of losing crypto investments keeps you up at night, you probably own too much. Perform an internal stress test on your financial position. What would happen if all your crypto-cards disappeared tomorrow? can you eat Do you have a place to live? If so, for how long. Now is not the time to listen to FOMO – you never should – but the time to reassess and protect yourself.
You can always re-enter the market.
4. Diversify your stablecoins
The risk of stablecoins is real, and UST has taught the market that there is a real need to diversify among stablecoins. Take the time to explore how each is supported. The BUSD, USDC and USDT all report on their Treasury support. With the ease of access to all three big-name stablecoins, there’s no reason not to diversify among them.
5. No market guru knows what will happen next
I don’t know what’s going to happen next, and neither does a person at CNBC or a large Twitter follower account. I believe this space has a bright future, but I cannot predict tomorrow, next week or next month. My goal is to have exposure that satisfies my belief in the future of this space while also protecting my family’s finances should the worst-case scenario occur.
In conclusion, the simple thoughts are to never invest more than you can afford to lose, and when you do invest, diversify your assets and platforms. This current period of fear will eventually end, and either Binance will be stronger than ever, or the market’s worst fears will materialize. I’m working in a position for both scenarios, and when the dust settles from the constant media engagement, I’ll be ready for what comes next.
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