Binance CEO Gives #1 Advice Tip to New Users

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Investing in Crypto like a CEO

Changpeng Zhao (CZ), the Chief Executive Officer (CEO) of Binance, took the opportunity to caution new investors on proper risk management and investment portfolio allocation in a recent interview with ODDO-BHF.

CZ advises new users to ‘start very small’ as his number one tip. New users should use less than 1% of their net worth or even smaller as their initial crypto investment. He further adds that it is important for the investor to learn about crypto before ‘slowly’ increasing the investment portfolio allocation. 

Only a small percentage of the world population is invested in crypto assets or has exposure to crypto-assets. Many new users unaccustomed to the volatility in this new asset class are often spurred into action as the market is heating up. These market participants are often retail buyers and unsophisticated investors. 

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Risk Management

Binance profits from increased trades, therefore it is counterintuitive for CZ to advocate small allocation for crypto assets. But ultimately, risk management is the most important aspect that users often overlook. 

Recently in CZ’s Frequently Asked Questions (FAQ) series blog from January 11, he said:‍

‘Protecting users costs time and money, but we believe it is the right thing to do and is the best way to attract and retain users. We encourage other exchanges to do it as well.’

The most common misconception about investing in cryptos is the promise of exponential gains. Like any other investable assets, risks often move in tandem with the reward. Exponential gains also translate to exponential risks. 

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User Protection

Centralized exchanges like Binance receive a certain amount of flak from the crypto community. More experienced users that are accustomed to decentralized exchanges would prefer a decentralized and autonomous platform. New users unfamiliar to the crypto space are better protected from avoidable losses through exchanges such as Binance. 

Binance is able to assist users to track funds even if they are not users on Binance. The exchange also covered user losses due to technical glitches at a data centre. 

In short, the road towards wider crypto adoption is bumpy. However, adopting proper risk management and having a better understanding of the crypto market can be rewarding. 

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Check out the full talk from CZ at ODDOBHF Live here:

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