Cryptocurrency is an extremely exciting market to be investing in. Crypto could cause the greatest transfer of wealth we have seen for generations. That is the thought and idea that attracts so many to the space. Being able to change your financial destiny overnight. But the opposite can be true. Yes, you can achieve gains beyond your wildest dreams, but just as quickly you can be brought back down to harsh reality by losing it all. While it may seem like many in the space are getting rich by pure luck; usually, that isn't the case. What is more often the case is that the people in this space that are having the most success, also have made a well-thought-out plan and stuck with it. The question is, have you?
Yes, as I mentioned above, there is always a chance that you could pick that one coin to do a 200x, buying in at the very bottom and having the willpower to hold until it reaches its peak. That normally isn't the case, and it is a smarter idea to make your plan or strategy and decide what type of crypto investor you want to be. The answer will vary for each person. Everyone is at a different point in life, have a different financial situation, and has different obligations. Therefore what may be a good strategy for you, may not be for the next person.
The first thing you need to decide is how long you plan to be in the market. If you are a true believer in bitcoin and cryptocurrency like me and plan on investing in the space for the long-term. Then it would be a good idea to invest in the blue chips that will most likely still be around. Those would be Bitcoin and Ethereum and arguably a few others. While these coins will most likely make huge gains over a long timeframe, they may not match lower-cap alternatives. Therefore, if you are trying to make as much money as possible. Then perhaps you will want to invest in these lower cap options. Although, with great reward, comes great risk.
And that leads me to my next point. Are you wanting to take huge risks, or take a somewhat safer route? Taking huge risks could be categorized as investing in Meme coins, being only into smaller cap altcoins, trading, and trading with leverage. A safer route would be investing only in the lower-risk options such as bitcoin and Ethereum. You would be taking the long-term approach and HOLDING. Because you are in it for the long term, the day-to-day price should have little to no effect on you. But if you are taking the riskier approach, then daily price action might have a much more significant impact on you. It could become a very stressful experience that affects your sleep, personal life, and potentially even your health and mental health. My thinking is that just investing in crypto itself; is already quite risky. Investing in the lower-cap options only multiplies that risk. Although, I openly admit that I am living large amounts of possible profits on the table by doing this.
Now that you have acquired your crypto; you need to decide what you will do with it. Because I am bitcoin and Ethereum for the long-term, I like to lend it out to earn compound interest with it. As Albert Einstein once said, compound interest is the 8th wonder of the world. It can appreciate much faster than you think and help you to grow your portfolio much faster than you would have thought possible. My constant accumulation and also by lending, it has allowed me to double my accumulation this year. This becomes even more important as the prices of cryptocurrency continue to go up. On the other hand, if you are a trader or in this for the short-term; then lending or staking might not be the option for you. With lending, there are withdrawal costs, and there can be delays for the crypto to be returned to you or unstacked. Or there may not even be a place available to lend your lower cap coins. The important thing is that if you are hoping to trade or flip coins, having access to your coins in an instant is the most important thing.
You also need to decide what kind of buyer you will be. Will you set price targets and only buy when the prices of the coin reach those targets? Perhaps you will dollar-cost-average and buy whenever you get paid. Perhaps you will only buy on days when the prices are deep in the red. The list goes on and on. I like to dollar-cost-average and also keep money on the side for those deep red days. Similar to what the market just experienced. Dollar-cost-averaging is a great way to build an average investing cost price. But the real gains are made by investing on those deep red days. That is what has been so vital to my portfolio. But, it is easier said than done. Putting money into the market on days that people are exclaiming doom and gloom. Declaring that the bull run is over and we will have 2-3 years of a bear market. Those aren't easy times to keep spending. But if you have done the research, and truly believe in the coins that you are investing in. Then even on those difficult days, you should still have conviction.
One last important thing that is important to decide is how concentrated your portfolio will be. Will you have a highly-concentrated portfolio or a diversified portfolio with many coins? With a higher-concentrated portfolio that gives you a higher reward potential. But it is only limited to the few coins that are a part of your portfolio. If you have a diversified portfolio with many coins, there is a much higher chance one of your coins will go up in value. But it won't go up as much as if it were a higher-concentrated approach. For people who don't want to put too much research into it, a higher-diversified approach might be the best option. I prefer to have a higher-concentrated portfolio. I love doing deep research every day and that allows me to invest in coins that I have extremely high conviction in. More often than not, those coins have gone up in value and done very well because of that higher level of concentration. Again, this all goes back to the risk level that you are willing to take.
These are only a few things that you need to be thinking about as you build your cryptocurrency portfolio. Someday soon I will write an article either going more into depth on the ideas above and also continuing the list with more tips.
But how about you? What type of cryptocurrency investor are you?
As always, thank you for reading!