Is Cryptocurrency, digital tokens, blockchain the digital wild west?
- At times it feels like the Gold Rush, where there are endless opportunities to stake your claim in the future. Fortunes to be made. Claim a stake of Web 3, the Metaverse, ..., the Future!
- At other times there is blood on the streets and it feels more like Wall Street after the latest crash. I suppose it is the 20s again!
If you are making investment choices or decisions with your FIAT or Crypto this post might be of interest. This post is not investment advice but aims to layout and discuss some common strategies so that people can reflect on how they are managing their Crypto Portfolios. It also doesn't consider Tax implications which could be a major consideration when you are making choices.
New comers to Crypto are often bombarded with different signals and it can be very difficult to make sense of it all.
What are the different approaches you could take to Managing your Crypto Assets?
Your approach may be a combination of the following and it may also take into account your attitude to risk, your ability to absorb losses, your geographical location, your experience, your access to further capital, your investment goals, your time horizon, your technical ability.
Passive Strategy
A Passive Investment Strategy is where you ride out the highs and lows by sticking to a long term strategy over time of investing on given dates.
- Investing a % of your paycheck each month. Aka dollar cost averaging.
- Putting in 1% of your Assets to Bitcoin and not looking at it for a few years.
This is generally a long term strategy
Trading the Market
Look out for anomalies or short term trends which can produce profits. Continually take your profits and reinvest.
- Arbitrage Trading - Look for Price or Market Anomalies and do trades where you cant lose.
- Day Trading - Buy and Sell based on Short Term Cycles when markets start and end trading.
- Swing Trading - Profit from Ups and Downs, by buy and Sell Stock to exploit movements. Many on hive use this to stack hive.
- Trend Trading - Look for Trends / Chart Analysis which you can exploit.
- News Trading - Buy based on the news cycles. You may have heard "Buy the Rumur sell the news".
Individual Trading options are generally a short term strategy. What really distinguishes the Trading the Market Strategy is that people dont make predictions. They react to Signals. This could be based on Instinct of based on research, for example of news feeds, reddit, wall street bets, twitter.
Fundamental Analysis
Is there something unique about a given coin or investment. Can you spot something that no one else can?
This might be because you have a particular area of expertise that you can exploit.
There are different approaches you could take and things to analyse. For Example
- Company Strategy / Business Cases - Does the Company / Coin have a solid Business case or Whitepaper that has a chance of panning out?
- People - Who are the Company Directors, Key People, Culture? This is the strategy that Warren Buffet is famed for being a master of.
- Market Analysis - What are the market trends? Is this sector profitable? Does this sector have a future?
- Competitors Analysis - How are competitors performing? Who is going to dominate the market?
Generally a longer term strategy but may identify short term opportunities
Predicting the Price
You may make use of advanced time series or chart analysis models to identify trends, or patterns which can be used to extrapolate out the price over a period. There may be a correlation between Price Movements of other coins (Bitcoin Down, Alts Down) or featurs of the market. e.g. December is a Strong Month ...
Could be long term or short term.
Insider Knowledge
Of course you may know something is going to be shorted or manipulated. Of course for regulated markets this is illegal but I have no doubt (if you believe the movies like Wall Street) this goes on a lot. And I am sure its rampant in Crypto also.
Very Short Term - You may go to Jail, or worse!
Which Strategy do you use? and do you have any advice for newcomers to the Digital Wild West?