Investing Strategies in Cryptocurrency

“Happy New Years to becoming cryptogods. To wealth and riches and getting bitches.” My cousin Simon typed in our messenger group. He was ecstatic about the potentials of making money in cryptocurrency.

Ever since I took a leap of faith and invested in this new technology, I have had great returns. I convinced a few of my younger cousins to invest in cryptocurrency. Due to the extremely bullish trend of the market, all of my cousins doubled their initial investment within a month.

Being entranced with such an event, many of them were unable to keep their emotions in check. Some of them were experiencing dopamine rush, like my cousin Simon.

For me, on the other hand, I was unfazed by the explosive growth in my portfolio. It was the natural consequence of research and calculation.

I have studied cryptocurrency for hundreds of hours. I probably studied harder in a month than I ever did in college. I cannot say that I am an expert in this field. But I have a general understanding on the cryptocurrency market. I want to share some of this with you.

Think Multiplicative, Not Additive

First thing I want to say is that this is not a financial advice, but more of an observation. In the cryptocurrency market for the time being, it is extremely easy to multiply your money. We’ve all heard stories of how people became millionaires within the past few years. In fact, you can become a millionaire within a month or even a week! This all depends on how much you invest.

We have seen that cryptocurrencies can increase in value by 10,000%. In fact, many cryptocurrencies went beyond that amount a year ago. It is possible that many cryptocurrencies can still increase in value 100 times in the coming year. However, this is becoming more and more of a rarity due to the large market capitalization that the top coins already have.

What is not a rarity and a common occurrence in the cryptocurrency market is the process of doubling, tripling, and even quadrupling your money in a short time period. The market is extremely bullish and volatile. And within this volatile market, I want you to understand that the money that you make is multiplicative, not additive.

If you invest 50 dollars and in a month it becomes 100 dollars, this is a 2x increase. If you invest 5,000 dollars and in a month it becomes 10,000 dollars, this is also a 2x increase. You get the idea.

The market has experienced so much growth that if people are not doubling their money weekly, they become depressed. This is a worrying trend, but it shows you the crazy potential that is there.

If you want to expedite your money’s growth in the market, increase your initial investment amount. You can’t expect to invest 100 dollars and hope to make 1 million dollars in the future. This is an increase of 10,000 times or 1,000,000%! This is very unlikely to happen.

Instead of looking for the next cryptocurrencies that can go up 10,000 times in value, just settle for solid, promising, high market capitalization cryptocurrencies that are high up in the market. Ironically, they are the stable coins in this already volatile market. They won’t likely experience 100x growth again, but a mere 2x or 3x increase in value is highly possible.

The key here is: are you willing to invest a large sum of money? Betting on a small investment reaching a million dollars is far more unlikely to happen than betting on a large investment doubling its value.

I am not saying that this is something you should do. If you are scared of losing everything, then don’t take this step. But for someone like me who understood how common it is to double your money, it becomes easier to invest larger sums of money. It is a risk I am willing to take with 90% confidence.

What separates someone who makes a lot of money and someone who doesn’t is recognizing opportunities and taking calculated action. If you backed up your actions with sufficient research, there is no way you would lose in this market. Let me show you my researching process.

Researching Cryptocurrencies

The fastest way to research for potential cryptocurrencies to invest in is to go on YouTube or forums like the cryptocurrency subreddit and search for undervalued cryptocurrencies. Because there are over 1,300 different kinds of cryptocurrency, it is in your best interest to narrow down your search by listening to what people have to shill (endorse).

If there are consistent threads on the subreddit shilling a cryptocurrency, you can tell that there is a huge following for this coin. This logic also applies to several YouTubers promoting the same cryptocurrency. If a cryptocurrency is praised often, then surely there is some merit to the praise.

When you gathered your list of cryptocurrencies to potentially invest in, it is important to do an evaluation. Answer the questions below to analyze the coin’s potential:

  1. What real world problems does this coin tend to solve or what value does it serve humanity?
  2. Is it a unique coin in such that it doesn’t just copy the source code of what is already out there?
  3. What is the current state of the coin? Is it just vaporware, ponzi scheme, scam, or an actual product?
  4. Is there real adoption for the coin? Are people using it or are large investors buying the coins just to pump up the price and dump the coin when the price is high?
  5. Does the coin have a good team and a long roadmap? Can you read the whitepaper and understand the details?
  6. What are the current stumbling blocks or shortcomings of this coin? Is there an upcoming solution being created?
  7. Does the coin have potential in areas like scalability, privacy, decentralization, adoption, ease of use, security, feeless transactions, speed of transactions, smart contracts, decentralized apps, and more?
  8. Is it possible to test the coin for what it claims it can do?

If the cryptocurrency checks off all the questions above, buy at once. If it checks off some, especially the first few questions, it is still a good choice, but that is up to you to decide.

In the end, if you still can’t figure out which cryptocurrencies to buy, then you can simply diversify between several cryptocurrencies of your choice.

Diversification is Key

We’ve all heard that diversifying your portfolio in investment helps reduce its volatility. It also helps you manage risk and rewards. This can also be applied to investing in cryptocurrencies.

Let me show you my portfolio. I have invested in 25 different cryptocurrencies.

portfolio copy

Yes, you can say that I went a little overboard. There were just too many choices that I want. Because I didn’t want to miss out on possible growths on so many coins, I ended up choosing all the ones that I liked. However, the good news is that nearly all the coins I chose went up in value! The table below shows the result.

tables

Since the market is very bullish, there is almost no point in over-diversifying your assets. A good portfolio only needs about 8-10 different cryptocurrencies.

Don’t Chase the Pump, Settle for Long Term Hold

In the cryptocurrency market, one of the most common way people lose money is by chasing the coins that are pumping or buying into a cryptocurrency at its all time high valuation. Don’t let fear of missing out and emotions control your trading habits. Don’t try to predict the market. Instead, broaden your perspective and look at long term potentials of certain cryptocurrencies.

If you believe in the long term potential of a cryptocurrency and will invest in it for a year, then it doesn’t matter if you buy the cryptocurrencies at a high price. However, be aware that investors usually sell their cryptocurrencies after a pump in price to make some profit. This usually drops the price of the particular cryptocurrency for a brief period of time. In a sense, it is undergoing a correction.

A very good strategy to investing in cryptocurrency is to buy the coins and hold on to them for a few months, or even a year. If a cryptocurrency is undervalued, then it will rise in value with time. What happens in between is chaotic swinging of prices that would make your stomach churn. You and I cannot accurately predict these volatile prices at each moment. There are just far too many variables to consider.

There a general rule that I want you to understand. In the current cryptocurrency market, the trend is fairly simple. Any time cryptocurrency price explodes in value, it is followed by a correction. If cryptocurrencies take 7 steps forward, they will later take 4 steps backwards. This doesn’t apply to all the cryptocurrencies individually, but to the market as a whole. If you understand this, then you know that patience is the key to success. If everything is dropping in value, simply hold on for dear life. The cycle will repeat itself.

This is a generalization that I am making, but it gives a rough idea of how the market works. I don’t think that cryptocurrency is going anywhere. It is far too integrated into our world already. Perhaps it could all crash one day, anything is possible. But for the time being, this possibility is rather small.

Closing Statement

I know that many people are ecstatic about the crazy gains in the cryptocurrency market. I am also very excited. However, if you ask me if the market is a bubble, I would say yes. Nothing good will last forever. The insane market trend is temporary. Perhaps we will see the bubble pop at some point, but that is still a few years away. The current state of cryptocurrency is no different from the internet in 1998. Not many people back then know about the internet or its usage. The same goes for cryptocurrencies.

Technology and innovation is moving very fast. The bubble is constantly growing and it will eventually pop. We just don’t know when (I personally suspect after 2 years), but in the mean time enjoy the crazy market growth!