It is not smart to put all your money into a single cryptocurrency as there are certain REAL dangers you are going to expose yourself to.
1. Extreme Volatility
Cryptocurrencies are famous for their price fluctuations.
A tweet, a government regulation or a hack can cause prices to drop by up to 50% in a single day.
If your money is in a single cryptocurrency, you are completely exposed to this risk.
2. Risk of Project Collapse
If you rely on just one crypto, you could face a total loss.
Real examples like Terra (LUNA) or FTX Token (FTT) have shown that even popular cryptocurrencies can collapse and lose all their value.
3. Technological Problems
Cryptocurrencies rely on blockchain technology, which is not without risks.
For example, a bug in the code, hacker attacks or network vulnerabilities can lead to a massive loss of value.
4. Regulatory Risks
Governments around the world are regulating cryptocurrencies.
A specific ban or regulation could negatively impact a project, as happened with Ripple (XRP) following the SEC lawsuit in the US.
5. Lack of Opportunities
By putting everything into one cryptocurrency, you lose the possibility of benefiting from the growth of other projects that could perform better.
What Would Be Smart To Do?
1. Diversify your Portfolio
Invest in multiple cryptocurrencies with different purposes and use cases.
For example:
Bitcoin (BTC): To store value.
Ethereum (ETH): For the smart contract ecosystem.
High-cap altcoins: Like Solana (SOL), with growth potential.
Stablecoins: Like USDT or USDC, to reduce risk and maintain liquidity.
2. Allocate Funds According to Your Risk Tolerance
Divide your money into:
Stablecoins (low risk): 40-50%.
Solid and well-known projects (moderate risk): 30-40%.
Emerging altcoins (high risk): 10-20%.
Memecoins (high risk): Recommended 0% (If you still want to expose yourself, it should not exceed 5-10%
3. Maintain an Emergency Fund in Fiat or Stablecoins
Never invest all your capital!
* Keep a percentage in cash or stablecoins to take advantage of market opportunities or cover unexpected expenses *
4. Research and Evaluate Projects
Before investing, evaluate:
The team behind the project.
Its usefulness and use case.
Its history and market adoption.
The associated regulatory risks.
5. Take advantage of Risk Management Tools
Consider staking or yield farming part of your portfolio to generate passive income.
Take advantage of Stop-Loss and Take-profit parameters if they apply to your betting/investing style.
* The smart thing to do is to diversify, research and adjust your investments to your risk tolerance, always keeping an emergency fund.
This way, you protect your capital and maximize long-term growth opportunities*
