Safeguarding Your Assets in the Crypto Storm: How to Invest Securely in the Digital Currency Market

According to the cryptocurrency section of Saed News, with recent sharp declines in digital currencies, how can investors approach the crypto market more securely? Majid Khakpour, CEO of FaraSwap, addresses this question in a note for Zoomit.

Recently, with significant drops in cryptocurrency prices, some investors have experienced panic, fear, or notable losses. However, this is neither the first nor the last major crypto downturn. At a time when every Iranian asks daily, “How can I protect my assets and savings against the current high inflation?” it is unsurprising that Bitcoin and other cryptocurrencies have attracted attention, with studies showing that roughly 14% of the population holds crypto assets.

At first glance, cryptocurrencies can offer high returns but are also extremely volatile and risky. With reasonable certainty, the risk of investing in crypto surpasses that of more commonly accessible assets for Iranians, such as stocks, gold, or real estate.

Cryptocurrencies Are Among the Most Liquid Assets in Iran

Compared to other financial markets, cryptocurrencies are highly liquid in Iran. Thanks to numerous local crypto trading platforms, assets can be converted to Iranian rials within minutes with just a few clicks.

But the key question remains: how can investors manage the multiple risks associated with crypto investment? This note aims to address that.

Where Does Your Investment Capital Come From?

The first crucial question in any investment is the source of capital. Are you using your own funds? Part of your savings? Borrowed money? A portion of a loan or credit?

The general and firm recommendation is never to fund crypto investments through debt. Investment amounts should not be so high that losing them would disrupt your life or create a financial crisis. Ideally, invest only from personal savings or assets—not borrowed funds.

How Diversified Is Your Portfolio?

Another key consideration is portfolio diversification. Assuming your holdings already include a reasonable mix of assets with varying risk levels, the best way to manage crypto’s high risk is to allocate only a modest portion of your total portfolio to it.

Experts suggest dedicating no more than 5–10% of your total assets or savings to cryptocurrencies, which can significantly reduce exposure to high market risks.

Are You a Super-Trader?

No one can predict with certainty the optimal time to enter or exit the market. So, how can investors identify suitable crypto investment and trading strategies?

Recent studies have analyzed the returns of various crypto trading methods. Here is a brief overview of strategies that have historically yielded the best results for ordinary (non-professional) traders. Note: these are only general methods—never attempt them without sufficient knowledge and experience.

Dollar-Cost Averaging (DCA)

For non-institutional investors using publicly accessible tools, only a few methods have consistently delivered reasonable returns. One lower-risk, long-term approach is Dollar-Cost Averaging (DCA) on older, more established cryptocurrencies like Bitcoin and Ethereum, which have higher liquidity and lower fraud risk.

DCA involves purchasing a fixed amount of crypto weekly or monthly and holding it for 5–7 years. Success with this strategy requires discipline, emotional control, and the ability to hold assets for extended periods.

Trend-Following / Momentum Trading

For more active traders, trend-following or momentum strategies can work if executed correctly. This approach involves following market trends—buying or selling in line with momentum and stopping once the trend ends. Successful implementation demands experience, skill, proper stop-loss levels, and carefully sized positions.

Unreliable Methods

Research shows that many other trading approaches—such as day trading, leveraged trading, and futures—result in losses for over 90% of traders. Likewise, investing heavily in numerous altcoins without transparency, strong teams, or real-world utility often leads to losses. This is why large organizations focus only on a few prominent, transparent cryptocurrencies for long-term investment.

Even with HODL (holding) strategies, reviewing your portfolio every six months to a year is essential. Adjust future purchases rather than selling existing assets, as short-term performance does not reliably predict 5–7 year returns. Frequent conversions also incur fees, risks, and the potential for emotional decisions.

Is Your Wallet Secure?

Security is crucial. Choose platforms with strong protection, full KYC, and reliable account recovery options. For medium- to long-term holdings, avoid single-signature hot wallets, which are prone to hacking. The safest storage methods are hardware wallets (cold storage), followed by multi-signature hot wallets.

Patience and Discipline Are Key

Crypto trading and investing can be appealing, but they carry high risks. Patience, calm, and emotional discipline are essential skills for success. As Warren Buffett wrote in his 1991 annual letter to Berkshire Hathaway shareholders—a lesson equally true for crypto: “The stock market is designed to transfer money from the active to the patient.”