How to protect your crypto in a volatile market: Bitcoin OGs and experts weigh in
Crypto is a volatile place. Money can be as easily lost as made through the ups and downs of Bitcoin and the wider market, and there are massive decisions to make. Should you just hodl — invest and do nothing — or actively trade the market? How many coins should your portfolio hold? Self-custody or keep your funds on an exchange with pre-determined stop losses?
Basically, how do you protect your stack from the million and one things that can go wrong? We asked Bitcoin OGs and experts in the space for their advice and opinions.
Walk before you can run
When faced with the question of how best to protect your crypto, OG Brock Pierce is circumspect. The former presidential candidate and co-founder of Tether and Block.one points out that not everyone is in the same place.
“Early noobs looking to begin their journey might go to Coinbase and purchase their first $20 or $50 worth of crypto, and it’s not an investment in crypto, but an investment in yourself. However, the moment you have a material investment – and that is a different amount for everybody – then it’s important to understand the basics of hodling and investing in crypto,” he says.
“It’s always better to walk before you can run, to walk in baby steps and don’t let FOMO (fear of missing out) cloud your judgment. This is a marathon, a long game, so take you time and be informed.”
Self-custody for safety
Pierce repeats the mantra, “Not your keys, not your coins.” This is one of the most widespread pieces of wisdom in the world of crypto, where people are encouraged to take responsibility for holding their own crypto rather than outsourcing it to an exchange that can get hacked.
But there are dangers with this approach, too, and if something goes wrong, there is no centralized bank authority to reset the passwords or refund money lost to scams. It’s like holding cash under the mattress — the entire responsibility rests with you — and is referred to as self-custody in crypto.
Self-custody is the key to safe trading, according to Itai Avneri, deputy CEO and chief operating officer at INX Limited, the first and only fully regulated, end-to-end platform for listing and trading both SEC-registered security tokens and cryptocurrencies.
“Self-custody is the key here. Especially when thinking about digital securities and not just crypto. Trading on a centralized exchange that provides the confidence and protection of regulation and, at the same time, trading in a decentralized manner when the customer holds his / her own assets. Generally speaking, your wallet, your keys, your assets. This is the best way to protect yourself from a sudden hold on withdrawals or other events we witnessed in the past year,” Avneri says.
But Bitcoin billionaire Tim Draper of Draper VC says that while that’s true, institutions aren’t keeping funds on a Ledger in a drawer.
“I no longer believe that my dollars in the bank are very safe. They are subject to political winds and inflation,” he says.
“The safest personal money is BOL—Bitcoin on Ledger. The safest institutional money is BAC— Bitcoin at Coinbase,” Draper continues.
Diversification: Don’t just buy eggs
Pierce points out that people advanced in sophistication can look at investigating yield farming or decentralized finance. This allows people to not only protect their crypto but also to look at increasing it through earning yields — but again, this involves risk.
He emphasizes the importance of investing in your own education and notes the importance of diversification.
“If you are participating in those markets, then you by necessity take on the counterparty risk associated with those platforms, and how you mitigate those risks is through diversification, but not having all your eggs in one basket. If any one asset fell, it won’t wreck (rekt) your entire portfolio.”
Diversification in crypto is tricky, as Bitcoin and the rest of the market tend to move up and down at the same time. But Pierce warns against putting too much money in more volatile coins, for example, memecoins, in case of a downturn where the pain will be magnified.
Andrew Latham, a certified financial planner based in Rolesville, North Carolina and the director of content for financial websiteSuperMoney.com, echoes Pierce’s restraint and suggests looking outside of crypto as well.
“The key to surviving market downturns is diversification and a disciplined approach. Don’t put all your eggs in one basket. Spreading your investments across various asset classes can help cushion against volatility. Keep a disciplined approach to crypto investing, focusing on long-term goals over short-term market fluctuations.”
And while crypto investing is often a little bit too interesting for its good, he says successful investing is often the opposite.
“As the old adage goes, ‘Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas,’” Latham says.
High-conviction bets
Sometimes, it makes sense to be overweight in a blue chip, market-leading token though, as Warren Buffett’s 50% portfolio allocation to Apple shows. There are plenty of Bitcoin-only hodlers, but Lakov Levin, the co-founder of the new DeFi investment platform Locus Finance, leans heavily on Ethereum.
Levin suggests: “Ethereum is the blockchain, which is used as the fundament for the financial evolution of the 21st century. It is a hub for hundreds of protocols that build value for its users. Holding Ethereum is similar to holding a fraction of the internet and value it provides to users. It is truly a remarkable financial opportunity.”
Levin notes that Ethereum’s hodlers can stake their assets and receive 5% APR in ETH itself and points out the “Ethereum blockchain burns fees for each transaction made on the blockchain, which makes Ethereum a deflationary asset.”
“I do not think that ever in human history we saw a deflationary asset that generates consistent yield and has potential for such innovation,” concludes Levin.
A tool to stop losses
Pierce is sanguine about overall market dumps if you are positioned properly.
“If the market falls by 10%, take the hit using something like a stop loss, and try to recover in the next run.”
A stop-loss is a risk management tool that automatically sells a token once it reaches a certain floor – predetermined by the user. It is designed to limit losses but can be a blunt tool in the crypto world, where movements of 10% are common and could see all assets dumped as a result.
Levin is cautiously bullish on stop losses, which basically allow traders to close a trading position at a specific price.
“The effectiveness of any tool lies in the hands of those who use it. The most important thing about ‘stop losses’ is the feeling of control, which protects from the anxiety of being in the market.
One of the scenarios that stop losses is the management of hypotheses on market behavior. When entering a trade, a trader has a hypothesis of the behavior of the market, which leads to opening a trading position.
“Stop losses allow you to pick the price where your thesis is rejected by the market and limit your loss, which is a must thing to have for long-term trading. But ‘stop losses’ do not save from cognitive biases, which heavily affect trading. In this case, a trader may re-enter trade a few times, breaking his own rules under the influence of greed or fear. It is important to have discipline to follow your own rules.
“One of the rules that I used when trading is when hit by stop loss, I take a break from trading this asset,” says Levin.
Pierce is not an active trader and sees himself more as a long-term participant in the market. He appreciates that market volatility is not a negative thing and that tremendous wealth is made in volatile markets — the more movement, the more opportunity.
“But it’s not for the faint of heart. You know, you’re riding a roller coaster ride almost every day,” says Pierce.
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Options can protect against extreme volatility
All-time highs – and all-time lows. Recent reports in The Wall Street Journal point to SpaceX writing down the value of its Bitcoin holdings by $373 million. It is currently unclear whether SpaceX sold or merely reduced the value of its digital assets in its accounts. This may cause difficulty in the future, as U.S. accounting rules dictate that once written down, the value of Bitcoin on company balance sheets cannot be adjusted upward, even if its price rises.
The subsequent downward movement took many by surprise — established investors and newbies alike. What other tools are available to users to protect their crypto? Well, a 50-year-old model created by Nobel-prize-winning professors could be an option.
Options trading gives the trader the right or obligation to buy or sell a specific security on a specific date at a specific price – it’s a contract that’s linked to an underlying asset such as a stock or security. Since 1973, options have been priced using the Black-Scholes model originally authored by two university professors. This mathematical equation estimates the theoretical value of assets based on implied volatility, taking into account the impact of time and other risk values. It is to this day regarded as one of the best ways to price an option contract.
Asked if he might consider using a tool like options, Pierce is cagey. He reckons that leverage is the demise of most people’s wealth. Leverage is the use of borrowed funds to increase one’s trading position beyond what would be available from one’s cash balance alone.
“Be very careful playing with leverage. It’s a tool for hedging to try and achieve great gains but can be the thing that creates more problems if you are not a skilled trader.”
Pierce has bought into options in the past – a few times where he tried to swing for the fences with leveraged option bets.
“It’s not worked out well, for me, because one of my problems is I’m so close to the market, that the markets are not as rational.”
Pierce quotes the recent SEC/Ripple legal action. He didn’t trade on this occasion, but if he had, he would have bet on an altcoin bull run.
“It didn’t happen. If I had followed my gut, then I would have bought and been wrecked the next day.”
As Pierce said, that’s why he’s not an active trader.
Stop losses and options?
A new protocol called Bumper is launching this month, claiming to provide a safety net for downward volatility. It combines stop losses and options in a way that co-founder Jonathan DeCarteret claims is cheaper and more efficient than both those traditional tools.
Bumper’s backtested economic simulations claim a yield improvement of 46.2% over options pricing during the 2022 bear market. This is demonstrated through a historic simulation report audited by Cryptecon and CADlabs.
“Decentralised Finance (DeFi) typically has low latency and high frequency of liquidity, which poses certain complexities for the model.
“Option desks make great use of pricing risk but have to add their costs on top. Bumper evolves the now half-century-old Black-Scholes equation to leverage all the unique properties of DeFi, such as pooled liquidity, smart contracts and protocol composability. Two years ago, we raised $20 million in funding to create a superior crypto equivalent,” says DeCarteret.
Don’t fall foul of criminal scams
The membership program Crytolock.ai enables users to save up to 90% of compliance and recovery expenses in case of a crypto breach. Not surprisingly, CEO Roger Ying says to focus on prevention, detection and recovery.
“Crypto users need to be educated on ways to prevent, secure and make sure they are not transacting with illicit entities otherwise, they may be implicated in a crypto crime,” he says.
“Furthermore, there are a growing number of ways to monitor your crypto on the blockchain and be immediately notified of unintended transactions and stop them before they get confirmed.” He adds that if you still end up the “victim of a hack or rug pull, understanding the necessary processes to recover crypto is very important both in time and expenditure savings.”
Hodling as a safe course
Of course, hodling large-cap cryptocurrencies is probably the safest and easiest way to maintain a position. Pierce recommends using cold storage provided by hardware wallets as a safe way to keep crypto.
Read also
“Back in the day when I started, we used paper wallets. You’d have a new device, and you’d print out the keys, laminate the paper, and chuck it into a safe.”
Sorkin is very direct in his hodling actions:
“Buy ETH, stake it in Lido, receive LDO and find ways to stake LDO. Otherwise just buy Bitcoin and forget about it completely until late 2024 when halving of BTC happens.”
Latham says the key to hodling is patience and conviction. “Invest only in cryptocurrencies that you believe have long-term potential and can withstand market downturns. Regularly review your holdings to ensure they still align with your investment goals. Time in the market does beat timing the market, but that only works when you pick cryptocurrencies that don’t flop, so it’s crucial to vet your investments carefully.”
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One of Kemi Badenoch’s top team has admitted there were flaws in the plan to return illegal migrants after Brexit, Sky News can reveal.
Boris Johnson repeatedly told the public that Brexit would mean taking back control of Britain’s borders and migration system.
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But in a leaked recording obtained by Sky News, Chris Philp, now shadow home secretary, said Britain’s exit from the EU – and end of UK participation in the Dublin agreement which governs EU-wide asylum claims – meant they realised they “can’t any longer rely on sending people back to the place where they first claimed asylum”.
Mr Philp appeared to suggest the scale of the problem surprised those in the Johnson government.
Chris Philp is the shadow home secretary. Pic: Reuters
“When we did check it out… (we) found that about half the people crossing the Channel had claimed asylum previously elsewhere in Europe.”
In response tonight, the Tories insisted that Mr Philp was not saying the Tories did not have a plan for how to handle asylum seekers post Brexit.
Mr Philp’s comments from last month are a very different tone to 2020 when as immigration minister he seemed to be suggesting EU membership and the Dublin rules hampered asylum removals.
In August that year, he said: “The Dublin regulations do have a number of constraints in them, which makes returning people who should be returned a little bit harder than we would like. Of course, come the 1st of January, we’ll be outside of those Dublin regulations and the United Kingdom can take a fresh approach.”
Mr Philp was also immigration minister in Mr Johnson’s government so would have been following the debate closely.
Philp was previously a close ally of Liz Truss. Pic: PA
In public, members of the Johnson administration were claiming this would not be an issue since asylum claims would be “inadmissible”, but gave no details on how they would actually deal with people physically arriving in the country.
A Home Office source told journalists once the UK is “no longer bound by Dublin after the transition”, then “we will be able to negotiate our own bilateral returns agreement from the end of this year”.
This did not happen immediately.
In the summer of 2020, Mr Johnson’s spokesman criticised the “inflexible and rigid” Dublin regulations, suggesting the exit from this agreement would be a welcome post-Brexit freedom. Mr Philp’s comments suggest a different view in private.
The remarks were made in a Zoom call, part of a regular series with all the shadow cabinet on 28 April, just before the local election.
Mr Philp was asked by a member why countries like France continued to allow migrants to come to the UK.
He replied: “The migrants should claim asylum in the first safe place and that under European Union regulations, which is called the Dublin 3 regulation, the first country where they are playing asylum is the one that should process their application.
“Now, because we’re out of the European Union now, we are out of the Dublin 3 regulations, and so we can’t any longer rely on sending people back to the place where they first claimed asylum. When we did check it out, just before we exited the EU transitional arrangements on December the 31st, 2020, we did run some checks and found that about half the people crossing the channel had claimed asylum previously elsewhere in Europe.
“In Germany, France, Italy, Spain, somewhere like that, and therefore could have been returned. But now we’re out of Dublin, we can’t do that, and that’s why we need to have somewhere like Rwanda that we can send these people to as a deterrent.”
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Has Brexit saved the UK from tariffs?
Mr Johnson announced the Rwanda plan in April 2022 – which Mr Philp casts as the successor plan – 16 months after Britain left the legal and regulatory regime of the EU, but the plan was blocked by the European Court of Human Rights.
Successive Tory prime ministers failed to get any mandatory removals to Rwanda, and Sir Keir Starmer cancelled the programme on entering Downing Street last year, leaving the issue of asylum seekers from France unresolved.
Speaking on Sky News last weekend, Home Secretary Yvette Cooper said there has been a 20% increase in migrant returns since Labour came to power, along with a 40% increase in illegal working raids and a 40% increase in arrests for illegal working.
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Britain’s membership of the EU did not stop all asylum arrivals. Under the EU’s Dublin regulation, under which people should be processed for asylum in the country at which they first entered the bloc.
However, many EU countries where people first arrive, such as Italy, do not apply the Dublin rules.
The UK is not going to be able to participate again in the Dublin agreement since that is only open to full members of the EU.
Ministers have confirmed the Labour government is discussing a returns agreement with the French that would involve both countries exchanging people seeking asylum.
Asked on Sky News about how returns might work in future, the transport minister Lilian Greenwood said on Wednesday there were “discussions ongoing with the French government”, but did not say what a future deal could look like.
She told Sky News: “It’s not a short-term issue. This is going to take really hard work to tackle those organised gangs that are preying on people, putting their lives in danger as they try to cross the Channel to the UK.
“Of course, that’s going to involve conversations with our counterparts on the European continent.”
Pressed on the returns agreement, Ms Greenwood said: “I can confirm that there are discussions ongoing with the French government about how we stop this appalling and dangerous trade in people that’s happening across the English Channel.”
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A Conservative Party spokesman said: “The Conservative Party delivered on the democratic will of this country, and left the European Union.
“The last government did have a plan and no one – including Chris – has ever suggested otherwise.
“We created new deals with France to intercept migrants, signed returns agreements with many countries across Europe, including a landmark agreement with Albania that led to small boat crossings falling by a third in 2023, and developed the Rwanda deterrent – a deterrent that Labour scrapped, leading to 2025 so far being the worst year ever for illegal channel crossings.
“However, Kemi Badenoch and Chris Philp have been clear that the Conservatives must do a lot more to tackle illegal migration.
“It is why, under new leadership, we are developing g new policies that will put an end to this problem – including disapplying the Human Rights Act from immigration matters, establishing a removals deterrent and deporting all foreign criminals.”
Proposals have been drawn up to spend millions in deprived neighbourhoods which are most at risk of failing to meet the government’s missions, Sky News understands.
Approving the money will ultimately be a decision for the Treasury in the upcoming spending review, but it has wide support among backbench MPs who have urged the government to do for towns “what Blair and Brown did for cities” and regenerate them.
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Labour MPs told Sky News austerity is the main driver of voters turning to Reform UK and investment is “absolutely critical”.
The plan is based on the findings of the Independent Commission on Neighbourhoods (ICON), which identified 613 “mission-critical” areas that most need progress on Sir Keir Starmer’s “five missions”: the economy, crime, the NHS, clean energy and education.
The list of neighbourhoods has not been published but are largely concentrated around northern cities such as Manchester, Liverpool, Sunderland and Newcastle, a report said.
Some of the most acute need is in coastal towns such as Blackpool, Clacton, and Great Yarmouth, while pockets of high deprivation have been identified in the Midlands and the south.
Clacton is the seat of Reform UK leader Nigel Farage, who is hoping to be Sir Keir’s main challenger at the next general election following a meteoric rise in the polls.
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Voters turn to Reform UK
‘Residents deserve better’
However, Labour MP for Blackpool South Chris Webb said this wasn’t about Reform – but investing in places that have been forgotten.
He told Sky News: “Coastal towns like my hometown of Blackpool have been overlooked by successive governments for too long, and it’s time to change that narrative.
“The findings of the ICON report are a wake-up call, highlighting the urgent need for investment in our communities to address the alarming levels of crime, antisocial behaviour, poverty, and the stark disparities in life expectancy.”
He said he’d be lobbying for at least £1m in funding. His residents are “understandably frustrated and angry” and “deserve better”.
Chris Webb. Pic: Peter Byrne/PA
‘Investment essential to beat Reform’
The spending review, which sets all departments’ budgets for future years, will happen on 11 June. It will be Rachel Reeves’ first as chancellor and the first by a Labour government in over a decade.
Southport MP Patrick Hurley told Sky News the last Labour government “massively invested in our big cities” after the dereliction of the 1980s, “but what Blair and Brown did for our cities, it’s now on the new government to do for our towns”.
He added: “Investment in our places to restore pride, and improve the look and feel of where people live, is essential.”
Another Labour backbencher in support of the report, Jake Richards, said seats like his Rother Valley constituency had been “battered by deindustrialisation and austerity”.
“Governments of different colours have not done enough, and now social and economic decay is driving voters to Farage,” he said.
“We need a major investment programme in deprived neighbourhoods to get tough on the causes of Reform.”
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ICON is chaired by former Labour minister Baroness Armstrong of Hill Top.
The report said focusing on neighbourhoods is the most efficient route to mission delivery and is likely to have more support among voters “than grandiose national visions of transformation” – pointing to the Tories’ “failed levelling up agenda”.
The last major neighbourhood policy initiative was New Labour’s “New Deal for Communities”, which funded the regeneration of 39 of England’s poorest areas.
Research suggests it narrowed inequalities on its targeted outcomes and had a cost-ratio benefit. It was scrapped by the coalition government.
Deputy Prime Minister and Housing Secretary Angela Rayner has already announced £1.5bn “Plan for Neighbourhoods” to invest in 75 areas over the next decade, with up to £20m available for each.
A government source told Sky News expanding the programme “would be a decision for the upcoming spending review”.
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