Crypto 101 : Your Guide to Enduring Volatile Markets

Investing in cryptos is early-stage investing with liquidity.

If you’ve ever participated in an angel investment or helped fund a startup, your contribution is locked up for years. Once you write that check, that money is gone until the company experiences a liquidity event such as an IPO or acquisition.

Like early-stage investing, crypto is one of the riskiest bets you can make, and most of these bets will go to zero. 

Unlike early-stage investing, though, crypto provides you (and me, and everyone else) with a 24/7/365 scoreboard showing how your bet is doing. Constantly available prices, should you choose to pay attention to them, forces a decision:

“Should I stay put or should I sell?”

Patience is forced in early-stage investing (you can’t sell even if you want to), and patience is learned in crypto.

Here are four main factors you should consider when investing in crypto, and I hope it helps you make that “should I sell?” question less pervasive:

1. Lack of regulatory clarity

Unlike traditional stock markets, which are regulated by governments and central banks, the crypto market is decentralized and largely unregulated. 

This means that prices can fluctuate rapidly in response to a wide range of factors, including news events, changes in investor sentiment, and shifts in the supply and demand for different cryptocurrencies.

Whether the SEC, CFTC, OFAC, or other government organization ultimately governs crypto as as whole or certain portions of crypto, uncertainty makes for a difficult environment. Once regulatory clarity is established, confidence in crypto will grow and adoption will increase.

2. Liquidity issues

The relatively small size of the crypto market compared to traditional stock markets can make it more susceptible to price swings.

Some stocks have very little volume each day, and that leads to large movements in their prices. Market makers offer both a buy & sell price for shares people may wish to acquire or dispose of, but thinly traded stocks will have a large range .

Cryptos follow a similar pattern. This is called slippage, and it’s the spread between the buy and sell prices. Slippage occurs frequently in cryptocurrency since myriad liquidity pools (the amount of cryptos available to buy/sell) exist, and narratives can change investor sentiment very quickly.

3. Be prepared for your crypto to go to zero

Start small and diversify your portfolio. Don't invest more than you can afford to lose, and consider spreading your investments across a range of different cryptocurrencies to reduce your overall risk. This will help protect you against the potential loss of any single investment.

And please, please DYOR (Do Your Own Research). Before investing in any cryptocurrency, make sure to carefully research the project and its team, as well as the market conditions and potential risks. 

Look for cryptocurrencies with strong technology, a solid development team, and a clear use case. This will help you avoid potential scams and make informed decisions about which cryptocurrencies to invest in.

Keep an eye on the news. The crypto market is highly sensitive to news events, so it's important to stay up-to-date on the latest developments. This can help you make informed decisions about when to buy or sell different cryptocurrencies. 

Sign up for crypto news alerts and follow industry experts on social media to stay on top of the latest developments. Maybe subscribe to this newsletter if you haven’t already? 😀

4. 24/7 impatient market

Be prepared for volatility. It's important to remember that the crypto market is inherently volatile. This means that prices can fluctuate rapidly, and your investments can go up or down in value quickly. 

Be prepared for this volatility, and don't make investment decisions based on short-term price movements. Instead, focus on the long-term potential of the cryptocurrencies in which you invest, and hold onto them for the long haul.

Remember, just because the score is available, you don’t need to check it.

Start small, diversify your portfolio, do your own research, and stay informed.

Would you like a training session for your organization?

Whenever you’re ready, there are 2 ways I can help you

1.) I can give a presentation for your company, conference or event, educating on crypto topics.

I average about a half-dozen presentations on all things Web3 per month, and would love to help you.

Just shoot me a LinkedIn message and let me know the topic(s) you’d like to learn.

2.) Be sure you subscribe to this free weekly newsletter on LinkedIn. If you haven't, scroll to the top of this article, and just click "subscribe."

Thanks for reading! - Spence - spencerXsmith.eth

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