I get so many messages on Facebook, Instagram, Twitter, and YouTube as soon as the market has a small correction. All the new investor start freaking out when they should focused on the fundamentals of crypto investing. That is why I’ve decided to outline my to 6 cryptocurrency investment strategies here.
1. Set Realistic Goals
I've noticed a lot of people were coming in with the expectation that they're going to turn $1,000 into $1,000,000. if you want to turn a $1,000 into $1,000,000, I think what you're really doing is treating the crypto market like a casino. You would need to get so incredibly lucky to turn $1,000 in to a $1,000,000. Statistically, it's difficult task.
So many of these new YouTube channels pop up and they all basically are promising get rich, get rich, get rich, and that's not how getting rich works. Typically getting rich involves discipline, research, and work.
If you think that it's just as simple as putting $1,000 in an ICO and being a millionaire a year from now, I wish you the best of luck. I have no problems. If you do that and you're successful. So it's for those reasons that I think one very important step when you're getting involved into crypto is to set realistic goals.
2. Don't Make Emotional Decisions
I see so many people that don't take an analytical approach to investing and they say, “ oh, TRON is down 35% today I have to invest in it”. Like something is fundamentally different because it went down 35% today as if It can't go down another 30% tomorrow.
If you have a degree in mathematics, or you have a degree in finance, or you're a savvy investor then watch these charts; your theories might be right. if you're an everyday person like myself and you're trying to time the bottom and the top of the market time and time again, you're probably going to find yourself wrong many times.
The more emotion that you put into these decisions, the less that you're really educating yourself about the technology, about the market, and about the industries. There's a lot of work that needs to get done when investing in the crypto markets. Investors that spend all day in front of their computers, refreshing their screen to see the new price of one crypto on Coinmarketcap are doing themselves a disservice.
Instead of becoming attached to the latest price of one crypto, I'm actually researching technologies, talking to different people involved in different platforms, and trying to better my understanding of the industry.
3. Don't Buy Crap
I see so many people on Facebook and so many people popping up on telegram right now that are in pump dump schemes that are investing in the currencies that they literally have absolutely no understanding of or no appreciation of how they work.
I've seen other people that basically use this terrible logic that says things like “If Ripple trades at $2 at Bitcoin trades at $15,000 surly, one day ripple could be the next Bitcoin”, and they ignore things like market cap, the technology, and everything else that goes in behind it.
So one of the things that I constantly say to everybody, especially when the markets are hot and people are getting really enthusiastic to invest, is “just relax, you know now is not a time to put all of your money into crypto. The same way that at the top of the market, it's not a time to put all your money into crypto.”
What I recommend doing and what has made me successful in the past is research. Take your time. Take a very long-term and disciplined approach. When I look at a cryptocurrency, I don't always immediately jumped in and buy that crypto.
If I like it, I might buy some of it, but if anything, I'm actually watching it. I'm putting it on my radar because I want to know more and over time you'll get more and more comfortable. As I get more comfortable with the project, I'll start investing more funds.
4. Use Dollar Cost Averaging
So many people have crypto FOMO set in and they just lose all common sense. Look, I don't want to tell anybody how to make the most money in crypto. If I'm trying to tell you how to make the most money in Crypto, I'm also trying to tell you how to take the most risk.
To be honest, I don't know how to take the most risk. I don't think I would be successful in my investment strategies if I was constantly looking for the investments with the highest level of risk. When I'm looking at investments, whether it be a stock, real estate, or crypto, I'm trying to balance the risks and returns.
5. Minimize Tax Liability
Anytime you've done short term trading, you're going to get short term capital gains tax, which is such a higher tax rate for nearly everybody than long term capital gains tax. Your long-term capital gains rate can be half or a third of the tax rate of a short term capital gains.
If Trader A and Trader B had the exact same performance, but Trader B has been trading in and out of positions then Trader B would have a higher tax rate. For example, if Trader B buys Ethereum and then all of a sudden Trader B is selling that and then buying Bitcoin and then selling Bitcoin and buying Cardano, and all Trader A has done is hold Bitcoin.
At the end of the year, both sit down and both have made a 150% return. When it comes time to do taxes, Trader A is going to be significantly better off than Trader B which has been jumping in and out of those positions. This is because Trader A won't actually owe any tax if he or she don't sell their Bitcoins.
I know that If I hold my Bitcoin for over a year I get to accumulate that wealth. The best example I have of this is that I have Bitcoins that I purchased at $300 that I still haven't sold. So my tax liability from 2014 is zero. I mean obviously when I do convert those Bitcoins into fiat, I'm going to trigger a tax event.
By not selling those Bitcoin right now, I'm able to just “free role”. I'm able to basically profit off my profit's. Whereas if I had at some point turn that into fiat, I would've had to pay taxes on that money. That money would no longer be invested into crypto. So when we're talking about all these strategies and we're talking about trading, I think it's equally as important to understand the tax implications.
I like to get in on a little bit of trading, but 90% to 80%t of my portfolio is hold. it's so much simpler, I don't have to follow Coinmarketcap everyday. I get to spend all my time researching the technologies. I get to research and basically predict. I feel like for me that's a much better use of my time and that's a much better investment strategy for the long-term.
6. Leave Some Cash on Hand
This is because you never really know what the market's going to do. If you have an overall bullish outlook on cryptocurrencies, it really can't help having 10, 20, maybe even 30 percent of your total portfolio available in cash. So if the market does correct or if you have, like for example, a flash crash like last year where Ethereum we went from $400 down to $10 you are able to capitalize. If you have money in those trading accounts you're able to capitalize on those opportunities.
There may be some opportunities where you can pick up Bitcoin for $5,000 or $6,000. You don't know what the market's going to do. It's for those reasons I like to keep some amount of my portfolio in cash. when the market shoot up, just even putting some money in BitUSD, Tether, or even just leaving the money on the exchange their U.S. dollar is a good idea.
Of course this requires that you trust an exchange, but again, if it's a small part of your portfolio and you're looking to do this in combination with dollar cost averaging and research, you may find it advantageous. On quite a few occasion I been able to buy quite low in the market just because there have been a lot of people panic selling.
What Do You Think of These 6 Crypto Investment Tips?
Now that you know these 6 crypto investments tips, which ones ill you apply to your investing method. Have you gained or lost big in crypto recently? Please share your ideas in the comments below so we can all learn together and build a healthy crypto investment community.
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