On Making Money in Crypto

My position on Cosmos (ATOM) has been bullish since I read its whitepaper. Today it lost 16% of its value after a meteoric run that grew its value x8 in under a year. I smiled even as, on the surface, it appeared that I'd lost about $160 overnight.

There are two kinds of crypto investors out there: those who know why I smiled, and those who would have sold right then and there.

I smiled because of the free money, immediately growing my stake by about 25% with the purchase of more ATOM. 

Here's the thing: crypto isn't like the stock market. They operate based on speculation, sure, but not all guesses are created equal. In a traditional security exchange, you have a number of immaculately disciplined companies marshalling millions of dollars in resources every month to ensure that they are integrating the latest best practices for their product or service in the industry. You're not betting that Stock X is going to see increased adoption, you're betting that Stock X has the right combination of resources, knowledge, and skillsets to reliably outperform Y and Z. 

That's to say that in the NYSE, you're looking at the financial equivalent of the Kentucky Derby. These are all, widely speaking, top specimens with a proven track record of success. And even when one 'has a bad match' so to speak: what no one talks about is how many horses in the race never even made it out the gates. 

Crypto on the other hand, is still a total cluster.... mess.... of securities with wildly varying degrees of quality. When something like 'dogecoin' gets its moon shot, the internet explodes with buzz. "Man, $3 in dogecoin could have made me a millionaire!!" It's all made to sound so simple, isn't it? Problem is, dogecoin had already peaked before it was put onto any major exchanges. Coinbase must have made hundreds of millions of dollars from sales to all of the newbies excited to get in on the action. You hear a couple of high-profile stories of people making it big, but the vast field of bag HODLers never seem to make it 'into the frame', so-to-speak.

And if what you're looking to do is play Russian Roulette with your money, by all means don't let me stop you! But please understand that this is probably the worst and least-likely way to make good money in the crypto space. 

Most winners in the crypto space have a VERY straightforward strategy. It's some permutation of the following: 

1) Find a handful of currencies that you believe, based on extensive research and investigation, to be best-in-class and have the widest opportunity for more adoption in the future. Read the whitepapers. See what respected institutions make of these options. If you're able, either do some data analysis on the price charting yourself, or hire someone else to do so. You can get a trusted professional on Fiverr for like $15 to do this for you. Then, make your decision.

2) Buy an initial investment in them. Don't try to time the market, the right time to buy is the moment you decide that these haven't realized their full value yet. 

3) Hold. Keep holding. Actually, never stop holding for pretty much any reason. But if you must (and only if you really, truly must) liquidate some of it, don't hesitate. Do it for the amount of fiat you need, and no more. 

4) The reason to stop holding will actually be really clear: highly visible signs will emerge that the asset has realized its value.* TRON is a perfect example of this. In 2017 it was a very promising commodity: a high market cap in its heyday with zero transaction fees and a much tighter turn around than BTC/ETH. That seemed very attractive 5 years ago. 

Now however, almost every major altcoin outperforms TRON in those metrics. Any success that TRON has seen in the last few years is a reflection of the benefits of being highly visible due to good marketing in a space where overall sentiment was flourishing. Oh yeah, and that time that they finally increased their team from 2 to 40 engineers after 3 years of development. Yikes.

All of that has evaporated with the market correction we're currently seeing anyways, and I'd bet just about anything we never see it compete with a top currency again.

Good coins, on the other hand, have much higher floors now than they did at the start of the 2021 boom. The difference is clear to see.

And this brings us to the last rule of good crypto sense:

5) When a competitor has made an innovation that clearly outclasses your holding, it's time to make the change, even if the short term numbers don't compare. For example, Cardano (ADA) is VERY clearly undervalued right now: they have a team of over 100 experts in the field taking a research-based approach to their coin. Their roadmap is excellent and they're delivering consistently on their promises. On all metrics, ADA and its Proof of Stake consensus mechanism has shattered the technical performances of other top coins (yes, even Ethereum, which is rushing to switch to Proof of Stake itself in order to stay relevant). Its adoption has occurred at a healthy clip with many high-profile cases. Quite frankly, it's the ONLY coin out there that has any chance of being adopted by any major financial institutions for the purpose of actual transactions. 

Suffice it to say, I don't hold Ethereum anymore. 

And that's that! Thank you for sticking through a long post!! 

*there are 2 notable exceptions to this: Bitcoin and Ethereum, because of their massive rates of early adoption relative to the rest of the market. Of a 3 trillion dollar market, these two coins alone account for over 1/3 of its market cap. Bitcoin and Ethereum are outdated. There are no metrics which belong to them that are best-in-class. However, they have a HUGE advantage in visibility, and so it will take a long time for their hold on the market to diminish. It is best to understand their current and future performance as a representation of market sentiment overall, rather than as a reflection of their actual utility in the crypto space. 

Please remember that none of this or any post of mine is to be construed as financial advice. My writings on publish0x are only a record of my own thoughts and experiences in the crypto world. 

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Yale Philosopher and Crypto Enthusiast

Why Crypto? A Philosopher's Perspective
Why Crypto? A Philosopher's Perspective

The old guard keeps telling us that crypto is a classic example of a market bubble, and that it's about to burst But what we're witnessing is a revolution which can only be described by the market, and is not circumscribed by it. The next class shift is fueled by crypto, and it's poised to tear down their whole world

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