If you’re thinking now is the best time to get into trying your hand at stocks or even more risky, cryptocurrencies, because the economy seems to be driving you in that direction, think again.
Historically, someone entering now is at the top of another bubble market. We thought the markets were going to reach their zenith and pop in 2019, and then COVID came around and sunk everything in Spring 2020. However, amazingly not only was there a recovery across the board, the markets kept climbing more and more. That essentially means everything is hyper-inflated, and it also means the markets are highly vulnerable to daily fluctuations and trading positions are looking for momentary breakouts.
You’re Outclassed Well Before Starting
This is the world of trading bots and big houses moving large amounts of money daily for marginal profits. Because they work in the millions of dollars, it’s very profitable. A sliver of a changes can mean tens of thousands of dollars of profit making between the morning and lunch hours. However, for the consumer, the current markets are a killing ground. One could try to track and follow the coat-tails of a big player or fund manager, but more than likely it will be a breakeven affair if not a loss.
Unfortunately, the average consumer is still being told Buy & Hold is a great strategy. It might be, but not for the consumer. It simply means more consumption is taken up by retail which helps big players offload problem stocks or tokens. This is extremely evident in the crypto world where only the inside players get the timely advantage of positioning large amounts early when discounted and taking profits as everyone else tries to rush in on the first official trading day. Just looking at the typical meme token chart shows how it all plays out. A big green candle going up, a peak, and then the inevitable sell-off as the insiders take their cash and consumers are left holding the bag.
Go the Liquidity Pool Route Instead
The better play tends to be in the constant need for trading and liquidity. Where there is consistent volume, liquidity pools provide an ongoing income level. The trick, of course, is to watch out for how the exchange shifts between the two tokens matched up in the LP pair. No one wants to get stuck with an illiquid position of 100% worthless token, which is very common with meme tokens in crypto. That said, because people are trading fast and hard, exchanges make a tidy profit off of every transactions, which is the consumer can position to take a nice share. It’s also very effective for building up positions over time, which can then be moved out and re-positioned into something else.
A good LP approach is to start off with one or two LPs that pair up very solid coins, i.e. bluechip crypto currencies, and consistently keep adding with additional amounts over time. Additionally, the income made should be reinvested as well. LPs that provide farming incentives are very good for this kind of strategy. Within a few months, a consumer will have a nice tidy portfolio and can then branch out to other token pairs.
Of course, the above is not financial advice. Go talk to a broker for that. This is simply insight on how to make your investments actually work in a market moved by whales. Don’t try to fight the swimmers; use their power to help drive your income through exchanges.
Start Small, Grow Big
One of the best places to practice and learn how LPs work without spending a lot of money tends to be in the WAX Blockchain. Both Alcor Exchange and Taco Exchange provide multiple opportunities for farm incentives and LP positioning. While the Taco side is very much a position and wait simple approach, the Alcor side gives a consumer more tools to work with and understanding how different spreads work. Even if you make a mistake, the damage is usually in pennies, not 100s of dollars. It’s a great sandbox with real-time trading to learn LPs effectively and then apply them to bigger markets like Solana and Ethereum.
