Are you prepared to dazzle your family and friends with your crypto savvy this Christmas? The dinner table will be abuzz with questions about how to join the bull market. Fear not – we’ve got some valuable tips to help you steer them through the complex world of cryptocurrencies.
Tip 1: Be Honest About Your Expertise
As a retail investor, it’s essential to remember that you’re not a crypto guru. You can’t predict the future, and anyone who claims to have all the answers is likely lying. Chris Burniske, partner at venture capital firm Placeholder and former blockchain products lead at ARK Invest, puts it bluntly: "No one knows anything for sure about markets. The only people you know for sure are lying, are those who say they ‘know for sure.’"
When crypto markets roar in a full-blown bull run, everyone feels like the next Warren Buffett. Stay humble – admit you don’t have all the answers. Remind them not to follow your footsteps blindly like a herd of sheep. Caution is key, even in the frenzy.
Tip 2: Give Them Context on Where We Are in the Bull Market
As Bitcoin dominates headlines, everyday investors with little experience often succumb to FOMO – the fear of missing out – and rush in without fully understanding the risks. Retail investors are often desperate to get in fast, driven by overwhelming hype where everybody seems to be becoming rich with crypto.
Successful crypto traders counter their human instincts by buying when crypto attention is low and selling when euphoria sweeps the market. Retail investors, on the other hand, often follow the herd, driven by emotion rather than strategy.
Burniske says the "painful reality" is that rising cryptocurrency prices inevitably draw attention, which fuels further buying. The feedback loop, which he nicknamed the ‘attention cycle,’ accelerates when prices become extraordinary. "The later we are in that attention cycle, the worse the entry," Burniske advises. He believes the market has been in a bull run for two years and may now enter its final stages.
So, what should you do when their appetite for crypto exposure remains insatiable, even if it’s possibly the wrong time to enter? Burniske recommends entering with an equal proportion to Bitcoin, Ether, and Solana (50%/25%/25%) as a starting point. If they get trapped in a bear market, investors could owe more taxes on realized gains than the value of the assets left after the crash.
Tip 3: Teach Them About Taxes
When investors sell during a bull market, they may watch the coin continue to soar, as no one can predict when the peak has been reached. Burniske advises teaching new investors to resist FOMO and avoid reinvesting profits in an attempt to chase further gains – this is "generally a horrible idea."
This practice is risky because if the market suddenly collapses, investors could owe more taxes on realized gains than the value of the assets left after the crash. To avoid falling into this FOMO trap, he recommends placing the gains out of the crypto market for 12–18 months in traditional accounts, which can provide some interest (crypto stablecoins have additional risks).
Conclusion
As an experienced crypto investor, it’s crucial to help guide new investors to avoid repeating the same mistakes in the next bull market. Encourage them to get interested in crypto when the attention cycle is low – or non-existent. If done right, they’ll be well-positioned to educate other newcomers who might jump in during the next wave of hype.
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