Whenever crypto markets break out to new highs, the inevitable messages start coming in.
“What cryptos should I buy?”
“Shiba Inu coin?”
“Cardano?”
“Margin account on Binance?”
Replies in order:
That depends on your goals
No
Nope
Absolutely not
Humans love to jump into hot markets near the top. It’s a consistent theme throughout history. There’s just something irresistible about a market breaking out. It fuels FOMO and bad decisions.
So I normally begin by telling them this may not be the best time to buy. Ideally you want to buy crypto when it’s in a brutal bear market and everyone hates it.
However, today the market has fallen 45%+ from recent highs. So it’s a decent time to start exploring and building a few positions. Bitcoin looks particularly attractive here due to the macro situation, and we’ll get into that in a bit.
Let’s start with long-shot crypto investing.
The elusive 100x
Are you looking to make 100x+? Because Bitcoin is unlikely to deliver that at this point. BTC doing a 100x from here would make it a $90 trillion asset class, roughly the same size as all the fiat money in the world.
Probably not happening soon. The same goes for Ethereum, which is a great project but not likely to deliver 100x.
Finding potential life-changing crypto investments is a worthy goal, but brutally difficult. I’ve been in this market since 2013, and frankly, I suspect much of the money has already been made in altcoins this cycle.
Let us recall that Shiba Inu was up about 45,000,000% in 2021. $100 on Jan 1 would have been worth $45 million on Dec 21. And it’s a ERC20 Dogecoin clone.
Solana went from $1 to a high of $230 in ~18 months ($80 now). Cardano went from $.05 in May of 2020 to $2.90 in August of 2021 ($0.80 now).
Only the best altcoins are likely to outperform for a bit. So to have a chance at accomplishing a 100x today you need to get your hands dirty. You need to explore Ethereum competitors (alt L1s) such as Avalanche, Solana, Harmony, and especially the newer smaller ones. Find out which ones have the best user experience, and invest time and money in those.
Exploring new ecosystems and participating is key. You will be rewarded if the network grows. In the form of token appreciation, airdrops, staking, and networking.
Another idea is to find new decentralized exchanges (DEXs). Use promising ones (carefully), and you may be rewarded with an airdrop in the future that could be worth quite a bit. There’s also the potential to provide liquidity on DEXs and be given tokens in exchange (see Sushiswap and Uniswap).
Another idea I’m exploring is the new generation of crypto game platforms, such as DeFi Kingdoms (ticker: JEWEL). It’s an interesting concept that combines an RPG-like gaming experience with a decentralized exchange. Here’s a beginner’s guide (note I have not tried DFK yet, and such projects are highly speculative).
I’ve been watching the token for a while and it has fallen from a recent high of $17 to around $4 today. Not the worst time to evaluate.
In general, you want to invest in the projects with good communities, great tech, regular updates, and strong leadership.
Bitcoin as the Core
Are you looking for a scarce inflation hedge with substantial upside? Apolitical digital money for an age of financial warfare? That’s Bitcoin, AKA digital gold.
Bitcoin is as safe, proven, as secure as it comes in crypto. And it’s easily exchanged for fiat all over the world.
For now, Bitcoin’s the only crypto widely viewed as an inflation hedge. So it has a unique and durable catalyst that could last for quite a while.
The strategy with BTC is simple: buy and hold long-term. I really don’t recommend trying to trade, or use leverage. I’ve seen dozens of people blow up their accounts on Crypto Twitter recently. These markets quickly process and digest amateur traders.
Bankroll management
If you’re just starting out, make sure you leave some cash to scoop up possible crashes. There is a surplus of potential crash catalysts in global markets today.
If supply disruptions and currency fluctuations continue, it seems certain we’ll see some systemic financial impact. Chaos could ensue: margin cascades, hedge fund implosions, bank issues, etc.
We should be aware that such a scenario could cause assets like BTC to fall if financial contagion occurs. Sharp moves can cause crypto trading firms to be hit with margin calls and potential liquidation. We saw this during the turmoil of March 2020, when BTC touched $4k.
Today’s situation could be much more disruptive than COVID. So it probably makes sense to set some buy limit bids at various levels — $10k, $20k, $30k etc. Just in case.
Alternatively, the price of Bitcoin might soar as people flee to more sovereign forms of money. Either path is possible, so it makes sense to cover all bases. However, I don’t expect Bitcoin will remain at depressed prices for too long. The next few years are going to be a wild time monetarily speaking, and BTC should remain attractive.
Long term thinking
The goal is to build a stack over the long-term. Bet on Bitcoin adoption and inflation, efficiently. If you buy alts, hold those long-term too. This allows you to defer taxes and compound your gains far more efficiently.
For most people, I think Bitcoin should form the core of a crypto portfolio. Add in a little ETH (5-10%?). Then maybe 20% for highly speculative stuff. Just know you’ll have to put in the work if you do dig into alts.
We’ll spend more time exploring promising alt projects over the next few weeks. If you like a project, please do shill it in the comments.