Crypto Investment Strategy: Invest to NOT Lose Money

leaky20 (65)in #crypto • 6 years ago (edited)

Crypto-currencies are a relatively new phenomenon in our society. In general they have only been around for 10 -11 years starting with Bitcoin back in 2009. Though crypto in general has a relatively large support base that is growing larger each week, it nonetheless seems to be still figuring out its overall place in the world.

Crypto markets in general are highly volatile and speculative and new coins and tokens seem to pop up out of nowhere each month. Today there are over 600 coins and projects in existence which makes investing in crypto increasingly risky - despite what many people want to believe. Though people who invest in crypto often make some serious gains, investing in Crypto is not a sure thing.

Crypto is an unregulated market that is subject to serious manipulation by whales, it is full of scams and shitcoins and massive hype from individuals who are only trying to dump their shares on unsuspecting investors. As such, many people also lose a lot of money when they invest in crypto.

With crypto being such a risky investment, I have put together a very basic strategy to help people think about investing and hopefully help them make sound choices of where to put their money. This is of course, only my opinion and I am not an expert. Always do your own extensive research and only invest what you are willing to lose (blah blah blah blah blah).

This article does not mention any specific projects to invest in (that is up to you) but instead talks about investment mindsets and strategic approaches to investing in general.

Strategy: Invest to NOT Lose Money

A lot of people get it wrong when they invest their money. They believe that the goal of investing is to make huge gains and to get rich quickly. However, this mindset can actually be detrimental to wealth creation and it can increase a person’s risk of not making any money at all. It can lead to taking bigger risks and ultimately losing their initial investment. Individuals who look for big gains tend to invest in highly speculative projects with a lot of hype surrounding them and they tend to constantly chase new “highs” in the form of the next “big thing.”

These investors tend to invest heavily in ALT coins or small cap projects that have big concepts and major word of mouth marketing (aka hype).

With so many tokens and coins being created each month the market is becoming increasingly diluted which makes this style of investing extremely risky. Most of the coins being created today will probably end up failing in the long run and going bankrupt. Other such coins often turn out to be scams or ventures that promise huge infrastructure change and disruption that sound amazing but are mostly unrealistic. Not surprisingly, anyone invested in these projects will ultimately lose most of their investment, if not all of it.

So far there have been a ton of projects that have gone belly up since their inception. To name just a few:

Yacuna, Swarm, 37coins, Harborly, CoinTerra, Buttercoin, BTC Guild, Brawker, Bonafide, Mining ASIC Technologies, GAW Miners, Gems, SpaceBit, Paycoin, DAO, Mt. Gox (exchange).

For an even larger list of over 100 failed crypto projects I recommend checking out the link

Deadcoins

So with that being said, a safer strategy which reduces a person’s risk in investing is to change their mindset away from trying to make huge gains and instead investing first and foremost to maintain their initial investment (i.e. invest NOT to lose money). A person can increase their chances of maintaining their wealth by investing in large cap projects that are well established, that have a lot of support and infrastructure, and that have a workable product.

These projects tend to be the safest of bets when it comes to investing and they are typically considered to be “blue-chip” assets (i.e. high quality, reliable companies/projects). In the world of crypto, I don’t think that anything can really be called “blue-chip,” but I think that it’s reasonable to conclude that some projects can be considered closer to “blue-chip” than others.

Overall, large projects that are well established often do not make super high returns in the short term. However, they tend to do very well when held for long periods of time. They tend to steadily chug away in an upward trend over the long haul. They also tend to do better in bear markets or recessions by maintaining a lot of their value, and they also tend to be the safest bets from bankruptcy.

On the other hand, small projects are typically the first to go bankrupt when times get tough or during a recession. In most cases, long haul investors do not need to worry about the day to day (or week to week) price of a token, what they need to care about is whether or not the project will last the test of time and what the price will be in 2 years, 5 years or 10 years.

For all of these reason I think that a good crypto investment strategy is to invest to maintain your initial investment by mostly investing in large cap projects that have been around for a while and that have a lot of support. It’s still completely fine to invest in small cap projects with potential to make big gains, but the majority of a person’s portfolio should be in projects that will last the test of time. Again, this is just my opinion.