Here we give five steps to handle the current market fear and remind users to consistently take these precautions.
The recent systemic concerns to the crypto markets have rolled into fears of Binance’s insolvency and what that could cause for the whole market. I’ve felt some of this fear and taken time to reassess my personal crypto holdings and positions to figure out whether or not I am diversifying properly, not just according to assets but also by platform.
Here are a few key ways to protect yourself in times of uncertainty.
Important note: I do not personally believe Binance will have insolvency issues, but it can still be prudent to challenge your own beliefs and question, “what if.” If the scenario of Binance insolvency leaves you massively exposed, you may want to reassess your holdings strategy.
Five Steps to Handle Market Fear
Unless you are actively trading, exchange risk is something that you really don’t need to have. The FTX fallout has shown us that even the biggest players could be acting nefarious. Self-custody ensures that another’s actions will likely not impact your holdings, and your tokens are safe while you sleep. Trust Wallet, SafePal, and Ledger are all excellent modes of self-custody. Exchanges like Binance, Crypto.com, and Coinbase even have built-in services to help their customers offload their assets to a self-custody solution.
2. Live cross-chain
With all the competing blockchains in the space, there is no reason to keep yourself on just one. Each chain has its own wrapped assets, and each has its points of failure. This can be handled by utilizing only native assets, but those in the Decentralized Finance (DeFi) world will often utilize wrapped tokens. Likely, a DeFi investor can’t avoid wrapped tokens in their investment strategy, so diversifying funds across blockchains will ensure no single point of failure on a portfolio. This space is not for the faint of heart and is not yet easy or intuitive to navigate.
3. Get some funds out of crypto
There is absolutely nothing wrong with removing some or all of your assets from the crypto space. If the idea of losing your crypto investments keeps you up at night, you likely own too much. Perform an internal stress test on your individual financial position. What would happen if all of your cryptos were gone tomorrow? Could you eat? Have a place to live? If so, for how long. Now is not the time to listen to FOMO––you never should––but rather the time to reassess and protect yourself.
You can always re-enter the market.
4. Diversify your stablecoins
Stablecoin risk is real, and UST taught the market that there is a real need to diversify among stablecoins. Take time to research how each is backed. BUSD, USDC, and USDT all produce reports on their treasury backing. With the ease of access to all three big-name stablecoins, there is no reason not to diversify among them.
5. No market “guru” knows what will happen next
I don’t know what will happen next, nor does the person on CNBC or the large follower account on Twitter. I believe this space has a bright future, but I cannot predict tomorrow, next week, or next month. I aim to have exposure that satisfies my belief in the future of this space while also protecting my family’s financials if the worst-case scenario happens.
In conclusion, the simple thoughts are never to invest more than you can afford to lose, and when you do invest, diversify across 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 am working to position for both scenarios, and when the dust settles from the nonstop media engagement, I’ll be ready for what comes next.