Introduction
What's my strategy for investing in cryptocurrency? It's buy and hold all the way, in projects that I believe in, can understand and have a good development team and fundamentals.
With all the recent hype in 2017 about the explosive growth of crypto currencies, there are a lot of new people and new money flowing into the scene. Without a doubt, the scene can be very confronting and daunting for newcomers with the huge amount of coins out there and trying to understand the market.
Speculating - Crypto is volatile and dangerous
The principle rule when choosing to invest in crypto is understanding that the market is in its infancy (relatively) and that it is extremely volatile. You will most likely lose your money through either market fluctuations, insecurity of wallets, market manipulation or even exploiting buggy code (see the DAO and Ethereum).
That being said, my mindset approach to investing was to set aside a small amount (percentage wise) of capital to have some fun with. I have an overall investment strategy of which crypto speculation is only a small part of it. Most importantly that money in my mind, is already lost. I've mentally allowed myself to give up on this money in my quest for crazy gains.
Buy and hold
I read a lot of share market investing books when I was establishing the foundations for my overall investment strategy (outside of crypto). In summary, those who bought into the share market index fund over time will out perform over 90% of "managed funds". That doesn't really apply here, but overall the share market has climbed consistently over the years and simply having exposure to the markets over the long term (10-15 years) has historically been a good thing. The strategy is to ignore the daily and weekly gains and losses and understand that over time the market will grow.
I've applied this to my limited understanding of crypto markets. I believe in the underlying principle that crypto and block chains are going to be a big part of our future, and that getting on board early and holding key assets is key to growing wealth. Over time as crypto becomes more mainstream, the market cap will continue to grow and your coins will increase in value.
Choosing assets
How did I choose my assets? I researched heavily into the coins with the highest market caps and tried to understand the technology and growth path behind them. I only bought assets that I understood how they worked, had a dedicated team working on it and had a unique pitch from Bitcoin. Examples include Ethereum (smart contracts) and Monero (privacy features).
What about the "bubble"?
Am I worried about all the talk of a crypto "bubble" similar to the .com bubble of the late 90's? Yes I am.
The similarities are amazing. There are plenty of "vaporware" ICO's launching, people are throwing money (crypto) at ICO start ups and investing in projects that don't even have working demos or without understanding what new technology they bring to the table. For me, I don't think we have reached the bursting point of the bubble yet. The mainstream population is yet to start throwing their money into crypto, a lot of the market cap seems to be made up of early Bitcoin and Ethereum adopters diversifying their profits into other alt.coins, having a gamble.
Nobody will be able to call the bubble bursting point, but I am confident that there will be one. From there however, I'll be looking to re-invest big into the surviving coins and projects. Just like the .com boom where companies such as Google and Amazon grew out of it, there will be a few surviving projects that gain mainstream adoption and continue to enjoy growth and use. The hundreds of coins out there will fall in on a few projects worth developing, which overall will be beneficial for block chain technology. Bitcoin will undoubtedly survive as a reserve currency and I'm beginning to think that Ethereum is a safe bet as well. All other projects are going to be at the mercy of the market.
Let's enjoy this growth while it's happening, and continue to believe in the fundamentals of why we invested in the coins we all hold! I'm a long-term holder of my coins and in 5 years time, i'm confident I'll look back at this post with a smile.