6 Crypto Investment Rules for a Profitable Future in 2023

The year 2022 was a disaster for cryptocurrency investors. Bitcoin is currently trading more than 72% below its all-time high of over $65,000 reached last November.

The year ended with a “crypto winter”, triggered by the downfall of crypto exchange FTX and other major events, such as the crash of TerraUSD stablecoin, the collapse of Celsius Networks, Voyager Digital and others that took place earlier this year. All these events have made investors doubt the value of cryptocurrency tokens and their benefits.

2023 will still be a difficult year for the economy as the Federal Reserve tries to tighten monetary policy. However,  investors looking to make it big in the crypto landscape in 2023 should follow the six golden rules to stay safe and make profit.

Strong financial understatement

Before investing in cryptocurrencies, a person should ensure having a solid financial understanding of cryptocurrency volatility, risks, and losses that come with investing.

Investors should take time to research the different currencies offered and read the white papers of the tokens they are considering investing in. It is also important to have savings or emergency funds as a hedge. For example, it is sometimes recommended to deposit money into a retirement account such as 401(k) or IRA.

Find the right cryptocurrency platform or wallet

Users are advised to invest in cryptocurrency platforms with insurance programs, as this will help ensure that they are protected and compensated in case of cybersecurity breaches and theft. They should opt for platforms that offer non-custodial wallets so that they can own their coins directly, as this can help avoid situations of customer losses like the recent FTX saga.

Learn about different ways to invest in cryptocurrencies

While investing directly in crypto exchanges is a popular way to go, investors should also take advantage of other investment methods such as crypto futures, crypto funds, blockchain ETFs, and crypto stocks. Moreover, cryptocurrency cold wallets are considered to be more secure than hot wallets.

Diversify investments beyond cryptocurrencies

While many investors intend to invest in cryptocurrencies in 2023, the rule of thumb is that they should not invest a major portion of their portfolio in cryptocurrency tokens.

Cryptocurrencies are a very volatile investment tool and therefore should only make up a small portion of the total investment amount. Experts recommend limiting cryptocurrencies to 2 to 10 percent of the portfolio.

As the value of your crypto holdings increases, it is advisable to sell some of them so that your portfolio does not become too crypto-heavy. A portfolio that consists of 25% or 50% cryptocurrencies will get you into trouble when the market crashes.

Diversification can also help. It is a good idea to ensure the effective spread of risks and invest some of the funds in other financial instruments. 

Do not expect to get profits very fast

The general recommendation is that cryptocurrencies should be considered as another part of a long-term investment strategy and use a longer-term passive investment strategy for other parts of their portfolio.

Invest only what you can afford to lose 

Finally, investors should avoid putting the money they need into speculative investments. In other words, they should only invest as much as they are ready to lose.

Cryptocurrencies are highly volatile investments and can lead to significant financial losses. Therefore, a user should make a risk tolerance plan to determine the amount of risk they can afford to take and plan their entire portfolio.

To summarize 

Investors should be aware that cryptocurrencies will still be traded along with other risk assets in 2023. Therefore, if choosing to invest in cryptocurrency - do it responsibly. 

• First, investors should ensure that they have achieved other financial goals that enable them to take significant risks. 

• Second, investors should always do research before going on the cryptocurrency market and choosing the platform they want to invest in. 

• Third, never invest more than you are ready to lose and double check the platform the funds are invested in.