5 Crypto Investment Strategies to Mitigate Risks in 2025

Many believe cryptocurrency is all about gains and profits, often overlooking the most critical factor—risk management.

As a result, many investors fall victim to FOMO (fear of missing out), rushing into crypto investments without a proper strategy, only to see their portfolios bleed with losses.

Recently, we witnessed a similar scenario with the launch of the Chinese generative AI assistant, DeepSeek. Trained for $6 million—a fraction of the $100 million cost of training ChatGPT—its debut sent shockwaves through the stock market, causing a significant downturn– with Nvidia losing around $600 billion in market value. The crypto space wasn’t spared either, with some assets experiencing price drops of up to 20%.

That is why, understanding and implementing effective investment strategies to mitigate risks is crucial for long-term success. In this article, you will learn five essential ways to protect your investments while maximizing potential returns.

5 Crypto Investment Strategies in 2025

1. Invest What You Can Afford

A rule of thumb in crypto investing is: Don’t invest what you cannot afford to lose. While this may sound obvious, most investors disregard this principle, assuming that every investment will generate profits.

Yes, investments are made to earn profits, but this rule serves as a safeguard against emotional stress if your investments don't go as planned. Crypto markets are highly volatile, and significant losses can happen unexpectedly.

Experts recommend that beginners allocate no more than 5% of their income to crypto investments. Enthusiasts with more experience might consider 10%, while professional DeFi traders or investors comfortable with higher risks could go up to 20% or more.

2. Prioritize Liquidity

After setting aside the amount to invest, the next step is to focus on liquidity. Choosing assets that can be easily converted into cash without significantly losing value can help you secure your investment. This helps to determine how quickly and efficiently you can sell an asset when needed.

Some well-tested assets with good liquidity include Bitcoin, Ethereum, and stablecoins like USDT and USDC.

To assess an asset’s liquidity, check:

• The trading volume—higher volume means better liquidity.
• How frequently the asset is bought and sold.
• The overall investor interest in the asset.

Thoroughly checking for these criteria ensures you can exit your position quickly if market conditions turn unfavorable.

3. Implement Dollar-Cost Averaging (DCA)

Dollar-cost averaging (DCA) is a widely used investment strategy in financial markets. Instead of investing a large sum of money at once, DCA allows you to make small, regular investments over time, reducing the impact of short-term market fluctuations.

With crypto’s high volatility, this strategy helps mitigate risks by spreading out purchases rather than buying at a single price point. For example, if you decide to invest $500 in Bitcoin, instead of buying it all at once, you could invest $50 every week for 10 weeks.

This approach ensures that you buy at different price points, averaging out the cost and reducing the impact of market dips.

4. Take Profits from Time to Time

While HODLing (holding onto assets for the long term) is a strong strategy, it’s equally important to take profits periodically. Markets do not always move in the expected direction, and failing to take profits can result in missed opportunities.

A smart approach is to set profit targets and gradually sell portions of your holdings when prices rise. For instance, you can decide to sell 20% of your investment once it gains 50% in value, securing some profits while still keeping a position in the market.

This strategy helps you lock in gains and ensures you don’t lose all your earnings if the market suddenly turns bearish.

5. Have an Exit Plan

Investing without a clear exit strategy is a recipe for disaster. Many investors get caught in the cycle of greed, holding onto assets even when it's time to sell.

To avoid getting rekt your exit plan should include:

• Setting price targets for selling (both for taking profits and cutting losses).
• Defining a time frame for your investment. Are you investing for months or years?
• Using stop-loss orders to automatically sell an asset if it drops below a certain price.

Having this clear exit strategy removes emotions from the equation and ensures that you make rational investment decisions based on market conditions.

Conclusion

Investing in cryptocurrency comes with its fair share of risks, but that doesn’t mean you have to navigate it blindly. By taking control of your investments and applying smart risk management strategies, you can safeguard your portfolio while still seizing growth opportunities.