Three tips for crypto investors amid bear market

by NURUL SUHAIDI / pic by BLOOMBERG

TOKENIZE Malaysia, a local digital asset exchange, has shared a few tips for crypto investors to reduce the risk exposure, given the current crypto bear market.

It said while recent events have affected many in the market and resulted in losses in crypto, reviewing the risk management strategy can help reduce risk and ensure investors are always on track.

Malaysians, in general, are affected daily by the failing of the ringgit and increase in inflation.  

In mid-May, Bank Negara Malaysia announced the Overnight Policy Rate increase to 2% to better curb inflation and ease Malaysians’ burden.

Given the volatility of digital assets and its likelihood for an extreme price movement as compared to other asset classes, the first tip Tokenize suggested is to follow the Do Your Own Research (DYOR) and not the fear of missing out (FOMO) approach to buy the “dip”.

CEO of digital asset manager Galaxy Digital, Mike Novogratz (picture) warned against trying to predict a bottom to the recent crypto crash.

In response to the recent crash, Novogratz said trying to pick a bottom is an extremely elevated risk, stating that the market could crash further.

“Alts are down over 80% from the highs. Picking bottoms is dangerous and if you do, scale in slowly,” he said in a statement recently.

Investors are reminded that they can never time the markets and know what the real “dip” is, which might cause them to end up making a bad trade if they do not conduct both fundamental and technical analysis before making a trade.

It is important not to blindly follow outside opinion before first fact-checking it, as the cryptocurrency space is rife with speculation, Tokenize Malaysia added.

To minimise exposure during these uncertain market conditions, investors can consider adopting the dollar cost average strategy to spread the risk and lower the potential loss during investment.

The phrase “Do not put all your eggs in one basket!” is a piece of common trading advice from experts and is found for a good reason.

Secondly, Tokenize Malaysia advised investors to stay focused in the long term.

“Remember that the markets in general move in a cycle and positive macro events might be able to improve market conditions in the future,” the firm stated.

It is important to know that certain factors affecting current market conditions might not have a lasting impact in the future when the next bull market occurs.

Investors can consider asking whether they can make it to the finish by putting money aside and preparing to invest for years.

Governments and institutions are seen to adopt cryptocurrencies, for example in the UK and US where national plans and regulations are in place to outline crypto safe adoption.

All these further strengthen the case for this sector’s long-term development, although this will take some time and robust pricing is yet to be observed in the current price trend.

Another important tip to remember is to always review risk tolerance and do investment planning.

Investors could also channel and reallocate their funds to another investment option rather than hold it in a losing position or look out for other cryptocurrencies that may have strong fundamentals for diversification opportunities.

This is because checking back the crypto portfolio and the wider market can help identify mistakes in the portfolio and attempt to rectify them.

However, Tokenize reiterated that in the end, each investor has their own investment strategies and risk appetite when making investments in different asset classes.

Having a risk management strategy is also important as it reduces the risk of investors falling into emotional trading, which often leads to losses.

“If you find yourself becoming overly stressed, you can consider taking a break from the markets and return when ready, both mentally and physically,” Tokenize said.