June 8, 2023
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DeFi Rules of Thumb for Success


Everyone invests into cryptocurrency and DeFi for various reasons, but it’s safe to say that we all share a common goal in wanting to become successful investors! Of course, as we all know there are many paths to success and the path is not always clear. You might be looking for some easy answers… However, in this article we want to help you change your thinking!

What does that mean? Well, rather than telling you what to buy and what to invest in, at Crystl Finance we believe in empowering you with the knowledge and the kind of thinking that you need to make your own investment decisions! In this article, let’s cover a few tips and rules of thumb that can help you on your DeFi journey!

Disclaimer: The information on this article should not be interpreted as financial advice. Please only invest by your own judgement and take responsibility in your investment decisions!

Rule of Thumb #1

The number one rule of investing preached across every legitimate project is “Never invest what you cannot afford to lose.” Why is such a simple rule so difficult to follow? The answer probably lies in the fact that DeFi tokens and cryptocurrencies can at times be incredibly lucrative investments. It is not unheard of that a coin experiences a significant pump in price, leading to a return of 2x, 5x, 10x, or in some cases even 100x return on initial investment. The lure of such a possibility is difficult to resist. Unfortunately, such success is not guaranteed – and when an investment goes south, many users end up losing way more than what they are comfortable with – leading to stress, regret, general disappointment, and in some cases, financial ruin 😱.

Don’t be this poor guy.

Consider the Worst Case Scenario

If you decide to invest in DeFi, you should be certain that a worst case scenario would not financially ruin you. There are no guarantees in investing, especially in DeFi where things can spiral out of control even for the best projects and smart contracts. Hacks, exploits, market fluctuations and more are the persistent enemy of every DeFi investor. Before you put your funds anywhere, think twice about what situation you would find yourself in your life if those funds disappeared overnight 🤔. Please note that these words are not meant to scare you away from investing. Rather, encourage yourself to take care of your financial well being, and invest responsibly! That way if things ever do go south, you can always try again 😊!

Rule of Thumb #2

“Buy the low, sell the high.” A rule of thumb that can sometimes play in your favour. It is all too easy to fall into a train of hype while a token is going up in price, only to find out you bought at the top and suddenly your investment is reduced to ashes. As human beings we are much better at following the emotion of the market rather than going against it. However, many investors swear by taking risks and buying at a time of fear 🔴 (at the bottom), and selling in a time of greed 🟢 (at the top). As Warren Buffett once said, “be fearful when others are greedy, and greedy when others are fearful.”

The Secret of Dollar Cost Averaging

More often than not, in practice it is difficult to perfectly time either the highest or the lowest price in a given timespan because of the volatile nature of crypto in a global 24-hour market. A simple solution to this is the concept of Dollar Cost Averaging 🤑! If you are planning to buy or sell a token, a good strategy is to not to do it all at once but instead divide your action into multiple fragments.

Let’s suppose you plan to purchase $1000 of a token when you think it is at the local bottom, you decide to buy it immediately but shortly after you made your transaction the price falls further and you are left wondering “Why didn’t I wait?” Do yourself avoid and spare yourself the stress 😉! It can be beneficial to split up your purchase into multiple fragments, for instance 4 purchases of $250 throughout the day regardless of the market price. This way, you can be comfortable that you buy the “average” price of that timespan rather than worrying about a perfect timing 😌. 

Likewise, you can apply a similar strategy and sell your tokens in intervals when you are speculating about the price being at or near the top.

Rule of Thumb #3

“Hodl!” Or in other words, simply hold your coins and don’t sell. If you never sell at a loss, then how can you ever lose? Right 😅? If only it were so simple… Yet, there is no denying that refusing to sell, especially at a loss, can lead to you being a successful investor down the line in the long term. Consider the vast thousands of users who have sold their cryptocurrencies in the years past. If only they applied some patience, how many do you think could have walked away with a sizable bag at the peak of this year’s bull run? 

We can only speculate where cryptocurrency and DeFi are going as a whole in the long term. All we can say is that so far it has been very promising, and that #HODLing has proven itself a worthy strategy!

Rule of Thumb #4

“Take profits.” There may come a time when you either get lucky or your investment takes off because you had a good eye on an absolute gem of a project. You see your investment going up, and it keeps going. You will start to wonder whether it’s real, and yet it still keeps going up. You are already up 10x but then you start to get greedy… Could it go up even more? Suddenly – it’s too late! The worst case scenario happened and all your gains are gone. A complete nightmare!

Take Profits!

One of the best strategies you can have when investing is to take your profits. We cannot expect the unexpected, which is why locking in your profits is a fantastic way to manage your risk. If there comes a time when your gains are clear as day then it is important to consider the possibility that locking in your profits is the best decision that you can make. What if you are super confident that there is a chance your gains would go up even more? In this case, a good principle to go by is to pull out your initial investment. 

For example, if you invested $1000 and at some point it became $10,000 then what you could do is take out that $1000 and leave the remaining $9000 to ride as an investment. This way your mind will be free from worry of potentially losing your initial capital 😁👍.

Mix & Adjust Your Strategies

It is important to be flexible when approaching the topic of investing. There is no one single answer to being successful, at times it is best to stick to a plan, and at other times you must adapt and act quick for the sake of your investment. The most important thing is to form your personal investment plan and identify your goals and boundaries. 

Consider some of the tips we’ve given you on this article thus far.

  1. Do you need 80% of your salary to pay bills or add to savings? Good, identify that! Don’t risk your financial well-being. You’re much better off investing 20% than risking something you can’t handle. 
  2. You say you get paid every 2 weeks? Okay! Take that 20%, split it across those 14 days to buy-the-dip on your favourite token(s). 
  3. You bought them, now what? Hold! You chose to invest for a reason, was there something that made you believe in the project? Does it still have potential? Is the project led by a hard working team that you think can be successful given enough time? Steel your mind against the dips and don’t sell!
  4. Otherwise, if you still want to sell then be sure to set some targets for yourself. Just as you identify your initial financial situation, it is equally as important to know when to take profits as well as when to manage your risk. Knowing your exit price way in advance can help you to ensure that you do not make decisions in the spur of the moment that you might regret 🧐!

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