Now is the Time to Buy Altcoins!

I wanted to share an observation I have noticed in past Bitcoin runups. Bitcoin tends to lead the pack and this makes sense as it is the current “crypto-reserve currency”. What I mean by crypto-reserve currency is that the supermajority of all cryptocurrency prices will reference Bitcoin in one manner or another and most people entering the cryptocurrency space may only know about Bitcoin. As new money flows into Cryptocurrency it comes in through Bitcoin. Once the money makes it into the crypto world it tends to stay.

For the purposes of this article, I'll refer to altcoins and tokens interchangeably to mean all cryptocurrencies other than Bitcoin. At this point, there is an incredible variety of cryptocurrencies. When Bitcoin becomes overvalued and investors look to diversify their wealth, there is a noticeable trend that they are moving it into altcoins. The cryptocurrency market cap corrections have decreased from 75% in the 2013-2014 to 50% this year. This is bullish as it indicates investors becoming more and more confident in the long-term staying power of cryptocurrencies.

It makes sense to diversify now as the price of Bitcoin continues upward. Due to the lower liquidity in smaller altcoins, you can see larger returns on the runup, but is important to diversify and ensure your altcoin investment is a smaller fraction of your Bitcoin investment. As discussed in my previous article, Saving for the Future, I discussed on the macro level that you should diversify your investments in the 8 forms of Capital. Cryptocurrencies are a form of Financial and in some cases even to Social capital (Steem token). In these realms, you should diversity as well.

If you have any sizable savings, it should NOT all be in cryptocurrencies; be sure to set a percent cap of your net worth before you start and stay disciplined. If you do not do this you are more likely to get sucked in emotionally and increase your risk as the price increases. For every price increase, there is a decrease, not creating a plan in advance can lead to panic during periods of volatility and cause poor decisions. Set your cryptocurrency percent allocation cap and then in your cryptocurrency allocation set your altcoin cap. Be disciplined and use the following guidelines when determining if you should invest in an altcoin!!

Go to coinmarketcap.com to get a current list of all cryptos. Don’t limit your altcoin investments to just one or two altcoins but rather five to ten. Coins over a $1 Billion market cap like Ethereum and Dash may deserve their own specific allocation due to their proven utility. For the smaller market cap tokens, ensure your analysis considers the following three questions:

1. Is the token part of a platform that is a unique idea or something that could replace a centralized product? Is it like SwarmCity which could replace markets like AirBnB and Uber?
2. Is the token required to use the new platform? Can you not use Bitcoin or Ether cryptos on the platform?
3. Is the platform being actively developed? Does the project have a code repository (Github) open for public review and is there more than 1 person actively making commits to the project?

If the answer to any of the questions is NO, then there is nothing tying the token to a unique product. As a result, there is a limited chance that there would be any demand for that token in the future.

What about equity tokens? The main reason you should not base your analysis off the future value of a company is that governments do not allow the issuance of equities without their approval. As a result, you cannot think of altcoins in the same way you think about stocks. If developers of a token claim to give equity the company may be shut down by a government and send the value of that token to zero.

There are no set ways to invest, learn what works best for you. Use the questions above to guide you and take time today to start diversifying your portfolio and become comfortable moving money into different cryptos. During the tech boom of the late 1990s it wasn't clear that Google and Amazon would become the dominant players they are today. Those who invested small amounts across several top internet companies at the time still came out on top in the long run even though many companies failed. Take that into consideration as you diversify. If you spread your investments across several amazing ideas you increase your chances that one of the investments will become a huge success in the long run.

If governments one day approve trading of equities on a blockchain then my questions to ask may change.

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