When it comes to investing, you want to be ahead of the trend before momentum is built, not a late adopter before the end hits.
And we are here to help you make that happen in crypto’s next phase of evolution. We are seeing reports that institutions are getting into the space of the blockchain and cryptocurrencies in a big way. Countries like El Salvador and soon enough, Paraguay, and other S.American countries will probably gain greater acceptance of Bitcoin due to a change in their laws.
Just today, Bloomberg published an article on “Even Gold-Obsessed Indians Are Pouring Billions Into Crypto”
(https://www.bloomberg.com/news/articles/2021-06-28/even-gold-obsessed-indians-are-now-pouring-billions-into-crypto), even as China has taken a huge stance in shutting down Bitcoin mining, the next largest nation in the whole world with an obsession over gold is now dropping their physical gold for digital gold.
When we see adoption trends take place at this level, we must know that the wave in a certain trend is about to come to a resolution and a new one is about start in its place. When most people who refer to cryptocurrencies for the first time, they refer to Bitcoin and at the very most, Ethereum, without the ability to name at least 3 to 5 more cryptocurrency tokens or projects that are currently being built for that matter. This is an indication that there is a trend that is still building into a momentum that will take place in the world of the blockchain and cryptocurrencies.
Yet, with over 5,000 cryptocurrencies and so many projects taking place, how do you know which one will take off to the next BIG THING and not end up being binned, or rug pulled? Well, here is where we need to apply time-tested fundamentals about investing so that we can profit together in such of real treasures within the world of digital assets.
Here are 4 keys that you can use to navigate yourself into a profit position.
1. Be like a wise farmer.
Don’t be a maxi. Some folks are “all out Bitcoin” and they start bashing everything else. That is not a wise thing to do. Yes, Bitcoin is the progenitor of the crypto space. But things have evolved. This space is an ever-evolving space - who would have thought that #NFTs (non-fungible tokens), smart contracts for real estate/property, IP rights, etc, #DeFi would become such a big thing now? No one could have foresaw this development. But it did take place. So always be on the side of the student. Keep learning, keep growing.
2. Use information to triangulate your position and diversify.
Read this post on 4 reasons to invest in alt-coins to give you some perspective on what the altcoin-verse is all about.
Place bets not like you are the Federal Reserve with unlimited capacity to balloon your balance sheet, but like someone who knows that even within diversification, there is a place where bets need to be concentrated in. This applies for equities as it is for crypto.
Warren Buffett was known for this oft-quoted line “Diversification is a protection against ignorance," Buffett once said. "[It] makes very little sense for those who know what they're doing (https://www.gurufocus.com/news/1229451/warren-buffett-on-when-diversification-makes-sense).
3. Understand the trends but follow the money.
Are the trends not where the money is?
Oh no no no.
This is where most crypto investors will get it wrong in this next stage. They get onto forums, follow supposed gurus with all sorts of marketing advice, and end up putting money into spaces where they get led like sheep to the slaughter.
Don’t be the next sheep. Be the lion. Be the wolf. Before you follow a trend, ask yourself some basic questions - what could possibly go wrong with this trend? Play the devil’s advocate. Will an algorithm of this level create a rug pull? How will it happen? Read up on the IRON FINANCE, TITAN TOKEN example that got even billionaire Mark Cuban caught with his pants down, literally. Yes, there is wisdom in the crowds, but only to a certain extent as to how a narrative exists and then takes a sudden turn.
There was an observation made by Francis Galton who made a keen observation on collective intelligence, or what we call the “wisdom of the crowds” where in the early 1900s, he witnessed 800 people at a local fair who were tying to guess the weight of an animal. The average of the guesses turned out to be very precise. The real weight of the animal was nearly 1,200 pounds and the crowd collectively guessed themselves into a figure that was just 1 pound off. The diversity of views weighing into a common space opens up possibilities for the correct answer to be found.
However, there has to be a place of disengagement where one needs to realise that narratives have changed, trends have altered and trajectories are off to another course. In short, you will need to stop following the trend but instead follow the money. This is the key that separates the “Soros of our day” from the rest whom we don’t care to know their names. It goes beyond being contrarian for the sake of going the opposite direction. It is knowing WHEN to take a contrary opinion and really profiting from it when the trend takes the reversal.
4. Take a macro view.
The macro view to me is a bird’s eye view of everything that is happening.
One of the folks gaining a big following in this space is Raoul Pal (https://twitter.com/RaoulGMI?s=20). He studies the macro trends, takes a position and let’s his thesis play out. Some folks drift in and out of positions faster than the F1 race drivers and call themselves experts, only to find out that they could have taken a passive investment approach for a majority of the cases and made more money.
Study how Catherine Wood takes to her investment approach at the ARK Invest. Read the macro trends and how she takes the time to develop her explanation on a certain subject area. Read her arguments on Wright’s law vs Moore’s law (https://ark-invest.com/articles/analyst-research/wrights-law-2/) and how this plays out in the tech space. Then read up on Metcalfe’s law and apply it to Bitcoin. Watch how network effects affect value.
Keep that learning going - get a list of names that you can read about with regards to their philosophy and investment strategies. And then find your own path in that place. Don’t get bogged down by the fear of losing money. Learn by taking small lessons in seeing where your thesis plays out.
All the best in your search for the next big thing in crypto. As always, this does not constitute investment advice, do your own due diligence before investing.
Yours,
Chief Editor
BBA Market Perspectives
