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- YOU'RE NOT TO OLD FOR CRYPTO
Because blockchain technology is only about 14 years old it definitely catches the interest of the younger generations and leaves the older generation baffled and confused on how a digital asset with no tangibility can have such tremendous value. A lot of the time you hear people say things along the lines of "you're buying thin air." I like to think that I'm buying secured demand and I think with the right understanding of quality crypto principles, the older generation would be much more compelled to be involved. This may trigger some crypto gurus but I'm just going to say it: I do not think a deep understanding of blockchain technology and cryptocurrency is necessary to have a basic/quality crypto portfolio. Not to say that you shouldn't strive for a better education in this category (financial education is everything!) but just to incentivize anybody who feels that a lot of information goes over their head. You have to remember crypto is new, even experts are still learners. This being said there are a few things that all newbies should focus on before they make their first purchase of shares. Dollar Cost Averaging and diversification Too many times people cave to social pressure and buy all at once. This is not smart, especially for newbies. There is ton of excitement when you first buy but you have to remember that the real success comes from discipline and consistency. Treat bitcoin and other cryptos like you would a 401k. Monthly allocations is always Ideal. Diversification is important as well. In my other articles I have talked about how even "newbies" should be alt coin investors. This too needs to be done responsibly. While majority of a portfolio should probably be bitcoin and other large caps, throwing in a few moon shots is fun and can be rewarding. Remember high risk, high reward, and vice versa; so understanding what the dollar value that you are putting in means to you is important. (Disclaimer: Alt coins and even some large caps will require some take profits during bull runs as their corrections can be a bit too much for diamond hands). 2. Brokerages and Security There are a lot of different brokerage options when buying crypto. But for anybody that is new I highly suggest sticking with an easy to navigate platform like Coinbase. They are a public US company and allow you to set up recurring buys so so you can DCA automatically as well as manually. They secure accounts, but always remember to use 2 factor authentication as well. Especially in crypto. 3. Information Intake Crypto has a lot of inconsistencies and wrong information. Where you are getting your information is very important. You will notice that when crypto starts to run there is a lot of "experts" that come out of nowhere; the second bitcoin falls they disappear. An example of this is the crypto youtubers. It is important to find consistent and conservative information sources. If someone is pitching you on some alt coin it probably is not the right person to take advice from. Look for people who have had skin in the game for a long time, not disappeared through the lows of the market, and have positive/knowledgable outlook on the overall benefits of blockchain financial systems and technology. This alone could make a world of a difference for you investments.
- HUGE INSTITUTIONS BOUGHT BITCOIN (Tesla and others)
After the 2020 Bitcoin Halving institutions and even countries started to adopt bitcoin and other coins as part of their investment portfolio as well as for use. This process of an asset being institutionalized comes with quite a few changes for investors. Of course there will be regulatory changes but for now I would like to stick to the changes from a price action/investment standpoint. Bitcoins 4 year halving cycles have been profound with lots of volatility, thousands of percentages in gains and huge corrections. It has been a top performing asset in the last 12 years. Institutions adopting bitcoin and other cryptos is only going to help the long term investors but it will come with some changes. First being, the stabilization of the 4 year cycle movement. When an institution like MicroStrategy buys bitcoin they have no intention of selling. They are allocating bitcoin to their portfolio for the long run. Yes, we did see some institutions like Tesla sell their bitcoin but I can tell you that if crypto continues its growth there will be more institutional bag holders than not. So how will this change what investors have seen in the past? The cycles will flatten out into steadier growth. The huge parabolas and corrections that we are seeing, and have seen in the past, will be toned down. Majority of the owners will be institutions. If this is the case then we can expect pullbacks and corrections to find their bottom much quicker (where there is no more sellers). It is possible that right now may be an example of that if bitcoins price doesn't go any lower. The first photo is the run prior to the 2016 halving showing its 84% correction. Second is the most recent run after the 2020 halving showing a 74% correction. I expect this trend to continue with the growth of crypto. Retail investors will continue to buy and sell but their transactions will not move the markets as much. Bitcoin Whales will become less powerful with their ability to move the markets as well. Its really a simple concept that comes down to this... As Bitcoin and the entire market become a multi-trillion dollar asset everything will become less sporadic. Utility will also increase adoption; This too helps grow and stabilize the market. Crypto projects/companies will settle in their niche performing legit functions using blockchain technology. VeChain is a good example of this. With their advanced traceability they are partnering with lots of companies to integrate and utilize their blockchain tech. They are the UFC's first layer 1 partner. We have seen other simple quality forms of crypto utility like Ukrainian funding during their countries attack. Or even El Salvador using bitcoin as a currency and distributing it to the people of the country. Remember as countries make clear their regulations for crypto, more institutions will be incentivized for allocations. Big tech just wants to play by the rules.
- BIGGEST SECOND CHANCE IN CRYPTO, PROBABLY EVER
Reverse back to November 2021 when Bitcoin was at all-time highs. If you had any social exposure to crypto you remember tons of people saying "I wish I bought bitcoin" or something along those lines. A lot of people did buy cryptos at this time and have taken major losses over the last year. This is more-so due to social pressure than it is due to bad investing strategy. Present: Bitcoin is down 70% form its all time high. Right between halving's and "crypto is dead" is the new "I wish I bought Bitcoin." It's funny because if you just flipped those 2 statements on the time frame you would probably have a very successful portfolio. Fortunately there is a big second chance. Problem is, most people are now mistaking "crypto is dead" for "the crypto markets are 70%+ discounted." The second chance will most likely be the 2024 bitcoin halving (possibly a little earlier) as the crypto markets have moved in accordance with bitcoin and its coded supply shocks. Over time bitcoin dominance will probably continue to decrease but for now, and years to come, I presume it will still be a major deterrent. As everything begins to have upward pressure again all the attention will be on bitcoin and Ethereum. This is good because this is probably majority of everybody portfolio. Depending on how volatile your portfolio is you may have Alt coins as well. You have to remember coins take their turns pumping. Generally BTC and ETH will move together or at least close; sometime BTC leads a little and vice versa. Then while they top out and stabilize the large caps will take their turn followed by the alt coins and micro caps. You'll see a lot of people (influenced by crypto youtubers and other "experts") try to play the game of catching these individual pumps among coin capitalization sizes. I would advise against this. It will decrease your odds tremendously as well as require full time attention. This "path to Altseason" chart is a popular explanation of the money flow from Bitcoin to micro caps. So let's look at the upside of some of the alt coins from their pre 2020 halving to their all time high, as well as the correction back down to where we are currently. Hopefully you will see that if crypto is here to stay then prices are nearing their lows of this cycle. Also you can see that with any long term strategy in large cap, alt coin, or micro cap investing there is plenty of gains to be made without doing any sort of short term plays. Remember, all of this is a big IF. These small cap coins are volatile and come with high risk, but do offer high reward as well. ALGO (Algorand) DOT (Polkadot) VET (VeChain) Looking at these charts there are a few similarities. The corrections are all much more than BTC. This is expected as we know the smaller cap coins are going to be much more volatile. I expect these coins could drop as much as 95%+ if BTC continues its current downward trend falling below 18k. The more important lesson here is: you are never going to be able to call the top or bottom so starting to DCA (dollar cost average) in these areas is smart; you'll get a lower average share price over time. The other important similarity of the chart is the recent price action. Since a bit before June 2022, a lot of the coins have started to settle, finding their bottom. Again they are mimicking bitcoin as it has stayed in a range for the past few months. Previous cycles have looked just like this in good buy zones. You can see this at the end of each chart; the last 90 days have been much less volatile and created the flat price action that has not been seen since late 2020. This is significant for anybody starting out (especially if you have limited funds) imagine having the opportunity to allocate small percentages of your earnings over the next year or two. If you did this consistently you will have bought the bottom and been perfectly positioned for any run up. Remember non of this is investment advice. All speculation based on previous events. Always do your own research. Thanks for reading
- 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.
- BITCOIN AND CRYPTO ARE GROWING (understand a parabola)
Bitcoin and other larger coins for this matter move in cycles. This is due to a few things. First, Bitcoins code which cuts the mining block reward in half every four years. This is referred to as the halving. If you aren't familiar READ HERE but let's talk about the result. This Microeconomic supply shock has caused upward pressure on bitcoins price every time it has occurred. Investors call this a parabolic run. So let's go back to high school math without the formulas and talk about a Parabola. If you don't know...this is what a parabola looks like. You can see that the price action in the second photo below has similar curvature to the right side of the image 1 parabola. Import note: in investing, parabolic runs only last so long, then they retract coming to a temporary end. Bitcoin has shown this over and over throughout its cycles with up to 90% pullbacks after parabolic runs in the past. So what does a healthy parabolic run in crypto look like? It actually involves small sell offs aka corrections (temporary share price reductions during the period of growth/uptrend). A parabola can be extended horizontally (time) and vertically (share price) if corrections occur. In investing terms: A parabolic run can last longer and go higher in share price if corrections occur through the duration of the run. What does this look like? For bitcoin its around 30% ish corrections (this % becomes reduced as btc market cap grows). Some of you traditional investors this is outrageous but it actually very standard, especially considering this markets volatility. Each time the price trends up, it will top out, correct downward, find its bottom and then continue its upward trend of setting higher highs. Here is a chart from the early 2021 rally. You can see circled in purple that the first correction of the run was 31.27% and 2 more following it. Each time the price continuing to a higher high. These pullbacks are healthy and allow any asset to find a price where there is no more sellers due to the current circumstances. But all fun euphoric runs must come to an end...at least for a little while. Nothing to get upset over, especially considering bitcoin is still a top performing asset over the last decade. From January 2017 to its November 2021 all time high its up a little over 8000%. In my other post I will cover the road back down and how to avoid putting your entire 401k in crypto before it drops 70%+ (seen it done before) thanks for reading!