It was another red night in the crypto markets. BTC plummeted from 61,000$ all the way down to 51,600$ within just a few hours. It's events like these that cause a lot of anxiety in many crypto investors. The crypto market is volatile, we all know that. Nevertheless, when volatility goes the wrong way, many of us can't help but feel deeply worried about it. I had these issues myself in the past, whenever I saw the numbers drop it got me highly worried. Nowadays, events like these really don't bother me at all any more. That's because I've made my crypto match plan. Instead of looking at things from a day-to-day point of view, I now have a long term mentality. The price of today has little meaning in the bigger scheme of things.
Photo by Austin Distel
When people first come into contact with the crypto markets, they usually start to invest with a more or less clear goal set in fiat. Since we are deeply unit biased creatures, this usually comes down to something like "I need to make 100,000$ / 1,000,000$ with these cryptos". The idea, often times, is to buy crypto now, wait until it reaches a certain value, and then sell everything for fiat again. Every time the market is in the green, it feels like we are getting a step closer to reach that target. Every time the market is in the red, we are loosing ground. Looking at the market like that obviously is going to create a lot of stress. It's just like crypto works - gain 20% in the course of a week, drop 30% within 5 hours. You get used to it eventually, but as long as you are only trying to reach that fiat goal, it's going to stress you out nevertheless. So from a pure peace of mind point of view, it's really not a good idea to look at the charts every day. The more important question, though, is whether it's actually a good plan to aim for a certain fiat value to sell of everything again.
You might have guessed it already, at least in my opinion, this is a pretty awful idea. This is true due to various reasons, with the most glaring one probably being that I simply don't trust fiat money to retain its value in the future. Most people look at Fiat like it has a somewhat set value. We understand that there's inflation and things are slowly but constantly getting more expensive. Nevertheless, we treat that part of the equation as fixed. "If I make 1 million dollar with Bitcoin I'll never have to work again". Because of that, we believe the crypto markets to be highly volatile and we only want to be in it as long as we have to be in order to reach our goal. The truth is, fiat is not stable, not at all. Even without recent events, the buying power of your Dollar has been on a constant decline. But factoring in the whole Covid-19 nonsense? The amount of money printed around the world is basically unprecedented. We might not see the full impact of that all yet, but we are very likely to see it pretty soon. To tell the truth, I'm more confident in the expected value of my BTC and ETH than I'm in the value of my Euro!
So with that in mind, just cashing out everything back to fiat, hoping to live from that for the rest of your life is probably not the best thing to do. But what should you do instead? Well, the answer to that depends a lot on where your own priorities lie, what currencies you really believe in. Obviously, I can't and don't give financial advise here. But to me? It's the exact opposite of what a lot of people seem to be doing. Ideally, I want to never convert my crypto to fiat money. My personal goal is to able to live from crypto at 2025 at the earliest and by 2030 at the latest. Depending on how things go, we might already be able to pay (most) our bills with crypto by then. If not, then I will convert what I need to fiat, but keep everything else in crypto indefinitely. Make your crypto work for you is the name of the game. I want to be in a position where the crypto currency I own pays for all my bills but without having to touch the actual currency. Instead, I want to live off the interest these coins provide for me.
Again, there are obviously many ways to achieve that and what you aim for will mostly depend on your own risk tolerance. Personally, I'm more risk averse even if that might sound a bit odd considering I plan on living off crypto eventually. To me, that means that I will focus a lot on established currencies like Bitcoin and Ethereum, only adding a few select currencies that I believe to have a great future. These tokens are then spread across different interest generating options. Some of it is sitting at Nexo, providing a small but steady interest. Some is staked at CubFinance. Others, like Hive and LEO, are powered up, providing constant staking rewards in the form of my curation payouts.
Even now, these rewards amount to more than 1000$ per month. So yes, I still am comparing things with fiat every now and then. This is just to illustrate where I'm standing at the moment, though. Eventually, the value of both fiat and my crypto currencies is going to change. The important takeaway is that the value of crypto in dollar is, at least in my opinion, almost guaranteed to grow faster than the buying power of fiat is going to decline. So long term, the buying power of my cypto interest is always going to grow relatively and really, that's all I care for now, that's my crypto plan.
All that said, just let me point out one more thing here. I'm pretty convinced that this whole thing is going to play out as I hope. Nevertheless, I don't bet my (financial) live on it. I'm working a good paying everyday job, I don't put all my money from that salary into crypto. In fact, if all crypto vanished by tomorrow, it wouldn't impact my life in any meaningful way. It's important to have a match plan. But things don't always go as planned, so having a backup plan is just as if not even more important. Never put all your eggs in a single basket, never go all in on anything!
And that's all from me for today. Thank you all for reading and see you next time!