Should I leave my money in crypto?

It’s time to shoot straight: while gambling can be a life-threatening addiction, many individuals like to take a flutter on uncertain outcomes. 

Some punters could be “all in.” Others prefer to wager a negligible amount with the guarantee that even if they lose it all, it won’t make a dent on their finances. Either way, such risk-taking behavior is attributed to doing it for the thrill and the suspense of the uncertainty—and to see the outcome of the wager or investment. 

Make no mistake about it: anytime you invest in anything, it’s pretty much a gamble. People have been investing in the stock market since the 17th century, and the heady years of the COVID pandemic brought digital stock trading and crypto to new audiences—culminating with the last epic bull run in 2021. 

The genie is already out of the bottle, the cat is out of the bag, the toothpaste is out of the tube, and the train has left the station as more people hop on the bandwagon.

But as evidenced by the crypto winter of 2022, and the present-day turmoil that the crypto market finds itself in, life ain’t always grand in cryptoland. That’s not to mention the black eye that the industry has faced thanks to the proliferation of scams, pumps and dumps, and security incidents. But that’s just par for the course with crypto—the volatility is part of the game. While this inherent volatility is what enables lucky investors to mint outsized gains, it also could prove to be disastrous if you don’t know when to fold. 

The Allure of Crypto

Fortunes rise and fall at a blink of an eye in crypto, and that’s what makes it so alluring. No other asset class can compete with the absurd ROIs that crypto can bring—but the tradeoff is that investors can and have lost everything in the blink of an eye.

The FOMO is real when you’ve read the thousands of stories about people who have gone “all in” on crypto and minted fortunes in doing so, especially during bull markets. It’s easy to forget, however, that there are hundreds of thousands of losers—even millions—for every one that wins the lottery,

The truth is, there’s no way to predict the outcome when you invest in crypto. But there are definitely several things you can expect with absolute certainty when you do. And you have to take them into consideration whenever you ask yourself the question of whether you should leave your money in crypto—especially when you’ve invested a substantial amount of your portfolio in it.

Your portfolio will be subject to extreme volatility

The volatility of crypto cannot be understated. Not even the leading crypto by market cap, Bitcoin, is immune to wild swings and major downturns. For instance, if you bought Bitcoin at the beginning of 2020, you will have bought it for around $7,000. It then surged to $69,000 in November 2021, sank all the way to $18,000 during the crypto winter of 2022, rose to mint new all-time highs in March 2024 at $73,000, and then fell all the way to $58,000 at the beginning of July 2024. The volatility is easier to swallow when it’s all hypothetical or if you have only 5% of your portfolio in crypto. When crypto accounts for the majority or ALL of your portfolio, the volatility can turn your hair gray in no time.

Safe custody of your assets becomes a higher priority

There is no one single silver bullet to solve the problem of storing your crypto. And THAT’S a problem when you have a sizable chunk or all of your money in crypto. You’ll have to decide on whether to keep your crypto on the crypto exchange or app that you bought it on. This option works best for convenience. Moreover, if you lose your access for any reason, most of these centralized platforms allow you to reset your password easily.

Do take note of the following disadvantages:

• Scams/phishing attempts. Crypto exchanges are an easy target for scammers and threat actors. This means you need to keep your login credentials safe and be wary of phishing attempts, which have become more elaborate over time. 
• Bankruptcy/liquidity problems. As evidenced by the sensational collapse of FTX, every exchange is just one liquidity run away from insolvency, putting you at risk of losing everything just as FTX clients did. Exchanges aren’t always as safe as they appear.

Your other option is to use a crypto wallet to store your assets. With a self-custodial wallet, your crypto is solely in your possession. This means you won’t lose it in the event that the exchange you bought it from collapses for any reason. However, if you lose access to your wallet, or lose your recovery phrase, then you’ll lose access to all your crypto—with no recourse to get it back.

You’ll have to make big, sometimes split-second decisions

Suppose you luck out and your crypto portfolio skyrockets. Where do you go from there? Likewise, should your portfolio take a nosedive, have you worked out a plan of action? It’s more difficult than it looks. You could either: 

• HODL and let it ride. Do you hold on for dear life and not touch anything? After all, you wouldn’t want to kick yourself for selling at a profit when it could continue rising. However, your investment could just as easily go south in a heartbeat, exposing you to risk. 
• Take a portion of your profits. Take a percentage of your profits while keeping your principal or some of your capital invested.
• Sell everything and take all profits. Sell your holdings and take your profits and your principal, exiting your position entirely. You also reduce your risk of your portfolio losing value to nil. And why not? In the end, no one ever went broke taking profits.

It might be a good problem to have, but it isn’t always cut and dried as it seems. Moreover, if you sell before holding your crypto for at least one year, you could be in line for short-term capital gains tax. Depending on how much your profits are, besides your income from other sources, you could be in line for a hefty tax bill.

Crypto: The Risks Involved

A growing number of investors are adding crypto to their portfolio as a diversification tactic with potentially high rewards .There’s nothing wrong with allocating 4% to 10% of your portfolio to crypto because of its profit potential. However, the inherent risk of crypto means that going all in isn’t a recommended investment strategy. Here are the factors working against you:

• Market volatility. Crypto is notoriously volatile, with rapid and unpredictable fluctuations the norm rather than the exception. You could easily run into significant losses if the market turns against you and wipes out a massive portion of your investment—and it could take years for prices to recover, if at all.
• Regulatory uncertainty. The regulatory landscape of crypto is constantly evolving, with governments continuously wrangling the tough question of how to regulate and categorize crypto assets. As we have seen in certain jurisdictions like China and India, strict regulations could negatively impact the crypto market by restricting retail investment, creating a hostile environment for would-be investors who are banned from doing so. It could also cause flights of volatility, which is already par for the course.
• Security risks. The crypto ecosystem, due to its rapid pace of development, is susceptible to security threats such as hacking, phishing, scams, fraud, and theft. Exchanges, DeFi protocols, bridges, and wallets have been subject to cybercrime, resulting in billions of dollars lost ever since the advent of Bitcoin in 2009.
• Liquidity issues. Most leading tokens have sufficient liquidity, but many altcoins still struggle with low trading volumes. Low liquidity can make it hard for you to sell your crypto immediately, especially in the event of a flash crash or bearish headwinds when everybody’s trying to sell. You could very well be forced to sell at a major loss due to a lack of liquidity coming from buyers.

When should you pull out your money from crypto?

That being said, how do you know when to exit your position on a particular crypto in your portfolio? Here are three signs you should look out for.

Bad press

Not all PR is good PR in the world of crypto. Just as much as you should do your own research on a coin before you invest in it, so should you constantly be in the loop for any negative press that could affect your investment’s value. 

Any negative PR from the founder, corporate front, top brass, or from security incidents will tank a coin’s value in no time. The latter, in particular, can be costly not only for you as an investor, but also for the trustworthiness of the token in question. Next time any of your tokens are the subject of a security breach, it might be high time to cash out. Another major factor to look out for would be news about government regulations or potential bans/sanctions on crypto trading as they become more wary of the use of the technology for nefarious ends. 

Flagging technical indicators

Technical analysis is a tool that most crypto traders and hardcore enthusiasts use to help deduce trading patterns, market trends, potential buying/selling opportunities, and make better investment decisions. By analyzing previous performances and charts that provide insights on the prevailing trend, trade volumes, and traction within the market, traders can paint a better picture and make data-driven decisions based off of it. However, it’s worth mentioning that while technical analysis could help, past performance is never an indicator of future performance. 

Negative sentiment arising from coordinated market manipulation

Sentiment analysis tools and market surveys are a fantastic tool to determine how a particular token is being perceived by the rest of the market. This could help you determine whether there is any negative fallout that’s causing price action to flag. One of the major turn-offs for investors is a token perceived to be a pump-and-dump scheme or rugpull, which could cause a domino effect on token prices. Unfortunately, rugpulls and pump-and-dumps are quite common in crypto, especially when it comes to meme coins and fly-by-night projects that proliferate.

This is compounded by the fact that social media influencers and celebrities are using influencer marketing to promote such projects. Be very careful of investing in projects that these personalities may shill using their clout.

The final word

In the end, the question of whether to leave your money in crypto is all subjective. Crypto is, after all, a risky investment. Unless you have the time, expertise, and knowledge to trade crypto using technical analysis and keep a steady finger on the industry’s pulse, then a long-term holding strategy might be aligned with your goals. However, with the breakneck pace and extreme volatility of crypto, long positions might not always be the right answer.

After all, a well-placed trade and a short-term hold could pay massive dividends. Holding too long could result in you losing value on some or all of your investment—especially if you make the ill-advised decision to keep the majority of your portfolio in crypto. Never overextend yourself.

Trading can be risky; therefore, keeping a watchful eye on your investments is the key to gleaning whether you should hold or fold. Don’t be married to your bags—know when to buy in,