The same risk-management principles that apply across investing and trading are especially relevant in cryptocurrency markets, given their historical volatility.
Position sizing
Given the potential for sharp price swings, allocating only a portion of a portfolio that you could tolerate losing entirely is a commonly cited principle among educators covering this asset class.
Diversification within crypto
Concentrating exposure in a single digital asset carries idiosyncratic risk beyond general market volatility. Some investors choose to diversify across a small number of established assets rather than concentrating in one.
Security considerations
Beyond price risk, custody and security — how and where assets are stored — introduce risks not present in most traditional asset classes, including the risk of loss due to compromised accounts or lost access credentials.
Setting expectations
This article is educational and does not constitute investment advice, a recommendation, or a price prediction. Cryptocurrency investing carries a meaningful risk of loss.
