BASIC CRYPTO INVESTING (time horizon and consistency)
3 questions often asked in regards to Cryptocurrency...
When should I buy crypto?
What cryptos should I buy?
How much crypto should I buy?
Trust me If I could tell you that I probably be as smart as all the crypto youtubers (joking)
I can however give you some tips to answer those questions for yourself.
When should I buy crypto?
If you have familiarized yourself with crypto cycles and bitcoin dominance you know that the tide comes in and the tide goes out. Bitcoin has taken up to 90% corrections after a bull run. Right now it is September 1 2022 and bitcoin is down about 70% from its all time high. We are between halvenings.
A lot of people have such a short time horizon when they think about crypto investing. By short I mean: they hear crypto is going up again and put their money in expecting to get a high return in the following months. They try to time the market and make quick money. Few are able to do this and most lose. It's same as day trading; the chance of success is slim.
Compare this to the long term investor, taking advantage of a 70% discount on bitcoin and even more on alt coins. They dollar cost average while things sit flat and low and reduce their buying when pricing gets euphoric. They are well positioned to take profits on the way up if needed. They pay long term capital gains tax. Usually no more than 15%. Stress is low as they do not sitting on their phone watching a 5 minute chart move. Their investment is passive not active. You get the point.
I have played both sides. The long game has proven itself.
What cryptos should I buy?
I do believe that if you decide to be a crypto investor you should have Bitcoin (BTC) and Ethereum (ETH). However, I do advocate for some portfolio allocation into Alternative Coins aka Alt Coins...even if this is your first rodeo. There are 2 reasons for this. One goes back to Bitcoin Dominance; when bitcoin rallies, the market will follow. There are a lot of good Alt Coins that have potential to outperform bitcoin by a lot. They have much smaller market caps therefore they move much quicker but if you use the long term investor method discussed above they are managed the same and can increase your portfolio much more. The big difference with Alt Coins is its wise to take majority of your profits on these due to their volatility. A lot of them will absolutely fall more than 90% when a parabolic run ends.
Apart from Bitcoin (BTC) and Ethereum (ETH) here are some of the popular Alt Coins to keep an eye on.
Cardano (ADA)
Solana (SOL)
Polkadot (DOT)
Litecoin (LTC)
Chinlink (LINK)
Algorand (ALGO)
VeChain (VET)
Polygon (MATIC)
Uniswap (UNI)
I use Coin Market Cap to watch certain cryptos and get all of their basic info.
How much crypto should I buy?
Crypto is nothing like any other investment. It is volatile. You can't count on it to make you 8%-12% a year although there is a good chance that if you do make money it will yield much higher than that.
Personally I think that if someone wants to take their shot with crypto that is a good decision; however, I don't think that in this stage of the game it is advisable to invest any money that you cannot afford to lose in full. Meaning, if you were to buy coins and somehow lose everything, it would not negativly affect your life nor cause you any struggle.
This can definitely be categorized by age. When you are young and liabilities are low there is minimal risk to losing some money that you saved up on the side. If your choice is to allocate that to crypto, more power to you. On the other hand if you are 40, have kids, and building your 401k it would be advised to make very small allocations. Maybe 1%-3% of your monthly earnings.
A lot of investors like to categorize it by percentage of portfolio. That is a good way to go about it as well. Most investors like to stay between 2% and 15%. There is no right or wrong number. What is more important is keeping yourself in check.