This article summarizes 12 survival rules for long-term development in the encryption field

Author: VIKTOR

Source: Twitter

If you want to grow in the crypto space for a long time, the most important rule is to survive.

Here are 12 basic rules to follow if you want to survive in the crypto space.

Rule 1: Make sure to always hold at least 10%-20% of your net assets in stablecoins.

It guarantees that you will always have “dry powder” (low-risk, highly liquid assets that can be converted into cash in an emergency) and limits the drawdown when prices fall.

The holding percentage can be higher, depending on your situation.

Rule 2: BTC and ETH should account for at least 30% of the "volatility portion" of your portfolio.

These are the only two cryptocurrencies that I am 99% sure will still be around in 5-10 years.

Rule 3: Most of your on-chain tokens should be in hardware wallets.

A Ledger Nano S hardware wallet costs less than $100 and can save you tens of thousands of dollars, if not more.

From a risk/reward standpoint, it's one of the best investments out there.

Rule 4: Cryptocurrencies other than BTC, ETH or stablecoins should not make up more than 30% of your total portfolio.

If your position grows from 5% to 40% of your portfolio, take your profits!

Rule 5: Diversify your stablecoins.

You should hold at least 3 different stablecoins.

I like MAI and LUSD very much, but I also use stablecoins with larger market caps, such as BUSD, DAI, USDT, USDC.

Rule 6: Small cap tokens (eg market cap less than 50-100 million) should not make up more than 20% of your portfolio.

Small cap coins are considered an asymmetric bet: small down/big up. Therefore, you should not invest large sums of money in it.

Rule 7: Don’t put more than 15-20% of your crypto equity in a single DeFi protocol.

You can adjust this ratio according to the security of the protocol.

For some of the safest protocols like Curve, AAVE, Uniswap, etc., you can scale upwards.

Law 8: If one of the following statements is true about a DeFi protocol, do not invest 5%-10% of your portfolio in it.

⇒ Its TVL is low

⇒ The market cap of its token is low

⇒ it was recently introduced

Rule 9: Never put all your funds on a centralized exchange.

In my opinion, Binance and FTX (or Coinbase) are pretty safe, but I would hate to put more than 30% of my crypto there.

The whole point of cryptocurrencies is to be non-custodial.

Rule 10: Avoid all "non-Tier 1" CEXs (basically everything except Binance, FTX, or Coinbase) and all "CeFi" lenders (Nexo, BlockFi, etc.), especially in bear markets.

You've seen what happened to Celsius...

Rule 11: Make sure no more than 50% of your token holdings belong to the same ecosystem.

Remember Terra?

If you really held 10 different Terra ecosystem tokens and the stablecoin UST, you would feel safe and diversified, however...they all plummeted together.

Rule 12: Do not hold more than 50% of your net assets in cryptocurrencies on non-Ethereum chains.

Some details:

If you have less than $3K-$10K in crypto (or any amount that is much smaller than your "off-chain"/real net worth), these laws don't matter as much because you're entering crypto to take on more risk in the hope of earning excess returns.

Conversely, if you have more than 50% of your net worth on-chain, the rules are even stricter!

I've given specific thresholds and percentages in this article, but they can be tweaked.

You can also determine the ratio yourself by assessing the consequences of worst-case scenarios.

For example, how bad would it be if one of your altcoins in your portfolio went nowhere? etc.

What I mean by "survive" is that even if the worst happens, you won't go broke because there is no "single point of failure" in your portfolio.

That's the whole point behind following these 12 laws.

I hope these laws of security and diversity will help you avoid death in the crypto space.