How to assess risk in the crypto market

Start with the downside

First ask how much you could lose without affecting your day-to-day life. Money needed for housing, emergency savings or near-term expenses does not belong in a high-risk position.

Then set a time horizon and maximum exposure before considering potential gains.

Check four data points

Look at volatility, trading volume, liquidity and how concentrated ownership is. A sharp price move means less when trading is thin and a small number of participants account for much of the activity.

Check information across multiple sources and document the reasons behind a decision.

Avoid false precision

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