Posted on August 12, 2020
by Adam Justice
category: Finance,
A lot of people are aware of Bitcoin and the fact that it soared in value a couple years ago, but the vast majority of people still don’t understand Cryptocurrency and its role in finance. Most people just assume they miss the boat. I think you couldn’t be more wrong, and 2020 is the best time ever to invest in Cryptocurrency.
If you’d like to get started investing in Cryptocurrency I strongly suggest setting up an account on Crypto.com app – you will get $50 in CRO if you buy 1,000 CRO coins and stake them – and Coinbase app – you get $10 free in Bitcoin if you use my link and trade $100 worth of Crypto. I’ll explain at the end of this article why I suggest these apps and how this will help you. These are my referral links. Also check out how to get $80 in free coin.
What is Cryptocurrency?
Cryptocurrency is a decentralized form of currency that is entirely digital. It had been an idea for many years until some of the problems with double spending and counterfitting were solved about a decade ago.
Since the introduction of Bitcoin there have been several new cryptocurrencies introduced with all sorts of improvements and specialized purposes.
Bitcoin used a proof of work model. When someone made a transaction several computers on the blockchain would complete difficult equations to verify the transaction and would in turn be rewarded with new Bitcoin as new blocks were created. This is called mining Bitcoin.
Some newer coins use a proof-of-stake model were holders can stake their coins to prove future transactions, in turn they will be paid interest.
New Innovations
One of the biggest innovations with Cryptocurrency is smart contracts. With smart contracts people or organizations can make contracts that when met will trigger a predetermined transfer. Ethereum is the major coin associated with smart contracts, but in V1 the information used to trigger the transfer must come from within the chain.
Other Cryptocurrencies have been developed to address needs in a certain industry such as application development.
Some banks have launched their own coin and paired it with existing financial products. Crypto.com now has a debit card that you can use anywhere VISA is accepted. Once an average consumer can spend Crypto in their day to day lives it will lead to enormous gains, but it will likely also attract more regulation.
Some of the more promising cryptocurrencies have improved on the foundation of Bitcoin. By inventing ways to transfer currency faster, cheaper and safer new coins are poised to become major players in the coming years.
Why 2020?
As the Coronavirus pandemic lingers many national currencies have fallen in value. Unrest in the US and an unpredictable election cycle hasn’t helped the stability of the dollar. The United States has leveraged trillions in future earnings to combat a recession and national medical disaster.
Investors have turned to gold, silver and other precious metals which have risen to all time highs. The last major bull market for Bitcoin was in the fall of 2017.
Looking at graphs of most Cryptocurrencies you can see a clear pattern in how a coin will run, then drop, and then level out at a level higher than the price it was at before the run. Almost every coin that has investor confidence has followed this pattern over and over again. Proponents of Bitcoin are so sure that they believe it will go to a price between $100,000-$300,000 in the next bull market.
As 2020 nears its end there are a diverse range of new coins that are promising to investors. As banks start to use Crypto to transfer large sums and consumers become aware of new debit cars that leverage crypto and offer outstanding rewards, Crypto is poised to grow for the next decade at least.
Like the stock market, it’s only a matter of time until it runs. I believe we are seeing the beginning signs of that next Bull Market.
If you’d like to get started investing in Cryptocurrency I strongly suggest setting up an account on Crypto.com app – you will get $50 in CRO if you buy 1,000 CRO coins and stake them – and Coinbase app – you get $10 free in Bitcoin if you use my link and trade $100 worth of Crypto. I’ll explain at the end of this article why I suggest these apps and how this will help you. These are my referral links. Also check out how to get $80 in free coin
How Can You Be So Sure?
Even though the technology can be complicated when you dive in to it, investing in Crypto is a lot like investing in stocks.
It’s important to have a good business mission and plan as a basis. Coins with good fundamentals make better long term investments and mitigate risk.
The market follows a bull/bear pattern and in good markets there are a lot of winners.
In daily trading coins follow the news just like stocks. A press release announcing a new partnership or a large organization adopting the technology can send coins soaring. News of a hack or an investor selling off their coin can cause a drop in price.
The real story is in the ways investing in crypto is different than investing in the stock market.
You’re investing in a currency. Its main purpose is to facilitate transactions.
Since overall people still prefer fiat currencies the market is still in its infancy. Many businesses and banks reported coin shortages during the coronavirus, and an attempt to limit spreading germs caused even more people to adopt credit and debit cards as their primary means of purchasing goods. The jump from a debit card to crypto is much smaller.
Since it’s in its infancy the market can be more volatile, which also means there is more upside.
It also means that growth is almost guaranteed. Since the basis of how crypto works is built into equations and programming growth and market trends can be quite predictable. For instance investors have used Fibonacci sequences to successfully anticipate market highs.
When a new coin is introduced it is often limited in how many people know about it and have access to it. If the underlying premise and security is good then it will eventually be brought onto more mainstream exchanges. Getting good coins early is almost a foolproof method of making profit.
The Risks of Crypto Investing
With everything there is a risk involved with investments made in Cryptocurrency. Many well respected investment gurus have called Crypto trash and have said they do not believe it has any intrinsic value.
The truth is they are right, and wrong as well. Finance and investment analysts wouldn’t be able to see the value in something like Crypto, instead you should look to technology experts. There are huge benefits to using Cryptocurrencies and coins can be picked based on fundamental benefits in the technologies and networks they are built around.
Some of the major risks with Crypto are
- Government regulation
- Hackers
- Major internet outages
- Banks and exchanges that facilitate transactions failing economically
No one can know the public will adopt and use crypto in the future, for a long term investment over 10 years I would definitely advise people not to put too much of their investment capital into Cryptocurrencies.
It’s a product with high risks that are pretty clear, but also a high reward. A relatively small investment would pose little risk to an investor but provide an opportunity for relatively substantial gains.
In the short term the U.S. government has backed off regulation for the time being and most countries have already made their stance on how they will handle decentralized currencies. Investor confidence is at an all time high.
Personally I don’t see a risk in an investment that is targeted for 2-4 years. This could change depending on the outcome of the election.
Hacking is one of the most present dangers for Cryptocurrency investors, but the name itself implies the dedication to security using Cryptographic technology. The most likely types of attacks have been identified and investors monitor the market to anticipate them.
Warren Buffet and other old school investment bankers say that Bitcoin and other Cryptocurrencies are bad investments because there is nothing tangible backing them and they’re basically imaginary. This is not an entirely valid criticism because most of the fiat money in the world is being traded and spent digitally already. Many consumers rarely ever touch paper money.
The electronic basis of Crypto does play into its volatility however. Coins with low market capitalizations and coins that have shareholders with large stakes can be more volatile. As coins become more useful and more institutions adopt them they become more stable and some ICOs have stability mechanisms built into themselves.
Crypto Investment Strategies
At the very least everyone reading this should put aside a couple hundred dollars and spread them across 3-5 coins that they like, then forget about them.
Investing in Crypto is not unlike investing in the traditional stock market. Rules for sound investing apply to both:
- Diversify your investment to mitigate risk
- Avoid the urge to constantly trade due to fluctuating price
- Make a strategy and follow it
You should start by investigating coins that you are interested in. It helps when there are benefits to using a specific currency that other currencies do not have. It helps when the currency has a good track record against hacks. It helps when large institutions buy in to them.
Once you pick your investments use traditional investment strategies like dollar cost averaging to mitigate risk.
Draw up a plan for when you think you will sell off your stake. By comparing past gains and gains of coins with more historical data you can make reasonable estimates about where the ceiling is on the next bull market. You can also estimate where the next stable price point will be.
As your coin rises in value you can sell off part of your stake along the way to lock in profits. Always keep a percentage to sell at the highest possible price you set, and you may want to keep a certain amount of coins for long term possibilities.
If your calculated strategy is correct you can sell off at the high water mark and then buy back a portion of your coins at the new stable price point. Once your holdings are all made up of profits you made from the market the risk has been entirely mitigated.
If you’d like to get started investing in Cryptocurrency I strongly suggest setting up an account on Crypto.com app – you will get $50 in CRO if you buy 1,000 CRO coins and stake them – and Coinbase app – you get $10 free in Bitcoin if you use my link and trade $100 worth of Crypto. I’ll explain at the end of this article why I suggest these apps and how this will help you. These are my referral links.
Variables Unique to Cryptocurrency Investment
While Cryptocurrency is affected by news stories, new products, the economy in general and other classic indicators, there are also some unique variables that you should account for.
First of all the basis of most coins is built into a program, so it’s possible to use math to estimate how the price will react to the market. The investors most involved in Crypto have analyzed it for years and benchmarks will often trigger massive selloffs.
Secondly, a large portion of holdings are on exchanges where people can buy and sell several coins. This means that when someone sells off their Bitcoin at a market high price then they will often invest in another coin. Many investors will continually cash in on one coin and immediately invest in another.
There is a chance as Bitcoin or another popular coin rises it will cause other coins to lose value as investors move their money around.
Many coins will either closely track or identically track the value of other coins.
A lot of coins are tied directly to new technologies or companies. The health and outlook of those entities will heavily affect the health and outlook of related coins. Institutions that adopt a certain coin for their own purposes can also have similar effects.
Since the majority of retailers do not take Crypto as payment people usually will have to use an exchange to use it. In some cases a currency will need to be exchanged twice before it’s a fiat currency you can use at a store.
It’s also possible for analysts to predict pricing relative to the market cap. You can make a relatively safe guess about what market cap will correlate to a certain coin price.
Which Coins Do I Like?
So now that I’ve explained the basics of investing (not necessarily the technology side of it), let me give you a few reasons why I am interested in certain coins. Since many coins are going to see massive gains in a bull market I try and stick to coins that have real world utility, unique benefits and fundamentally superior technology.
LINK– Chainlink
Chainlink is a coin derivative of Ethereum, and like ETH it specializes in smart contracts.
Unlike Ethereum Chainlink can integrate information that is off the blockchain into those contracts which makes it many times more useful as a contract currency.
Investors have bought into its utility and they’ve mad several high profile deals which has driven the price up. At the time of writing this piece Chainlink is at around $10.
To illustrate one benefit of Cryptocurrency I went to my bank earlier this week to fund one of my Crypto accounts. They messed up my wire transfer but still charged me the $30 fee.
Instead of trying again through them I bought the same amount of money in LINK and transferred it between my wallets.
When I bought the coin the market was down 4%, and when I woke up in the morning the coin was up 20%. Due to an error at the bank I made $400 overnight on a $2000 investment that I wasn’t even trying to make (this is in addition to my other LINK holdings).
XRP – Ripple
Ripple or XRP as it’s known on the exchange has been stagnant for a while. At the time of writing the coin price is just under 30 cents.
However many large finance banks have bought into the coin and even the IMF is looking at using it. The reason for all the interest is because XRP can be transferred around the world much cheaper and much quicker than bitcoin.
It’s one of the first coins to be supported by multiple major financial institutions. The all time high for XRP is around $3.84, and if Bitcoin runs again some people believe XRP will cross $10 per coin.
This is one of my longshot investments. I believe it’s more stable because of backing by major banks, and it’s definitely going to skyrocket if the Crypto market goes up. It’s more likely to go up as more financial institutions or even governments start taking advantage of its utility.
CRO – Crypto.com Coin
CRO is the coin of Crypto.com. The reason I like CRO is because Crypto.com has a debit card that can be used like any Visa debit card but is funded by the Cryptocurrency in your account.
This makes it more attractive to the average person and opens up Cryptocurrency for the masses.
Not only can you use cryptocurrency the same way you use digital fiat, but there are also substantial awards associated with the card if you stake your CRO investment. Since CRO works on a proof of stake model they need coins to be staked to process transactions. For doing this service you can earn up to 18% annually in return, 5% rewards on your spending (10% until the end of September on groceries) and they’ll even pay for your Netflix, Spotify and Amazon Prime memberships.
This is the debit card of the future if you ask me, and if Cryptocurrencies decrease in volatility lots of people are going to want to use cards like this.
The problem with Crypto.com is you currently have to either wire money from your checking account or you have to transfer Crypto straight to your wallet. The average person will be turned off by this, but they could add easier funding methods in the future.
The bank supporting the Crypto.com card, MCO, has recently bet it all on the CRO coin requiring all cardholders that had MCO coin to switch over to CRO to retain their benefits.
COMP – Compound
Compound is a coin that will allow you to borrow Cryptocurrency based on your stake in the coin. This has led to investors using COMP to yield farm other investments.
Its utility has made it a popular coin, and it often tracks opposite of bitcoin. The other coins I am big on are all alt coins of Ethereum so their trajectories can be tied closely to each other.
It would be important in a well rounded portfolio of Cryptocurrency to mix in coins that historically go up when others go down, or at least coins that aren’t directly tied to BTC or ETH.
Let Me Talk You Out of It
Before getting started with Cryptocurrency you should do additional research at the very least. Learn how it works and learn the differences between investments.
Keep in mind this is an extremely volatile market. A trader with lots of investment capital and time would actually track the volatility and use different exchanges that are capable of setting purchase price points to trade daily.
To be successful you will need to be able to ignore price drops and push through them. If you think you have a winning strategy then a price drop will allow you to use dollar cost averaging to lower your buy in price.
If you’ve never invested before you need to read that last part again, and again until you believe it. Your investments are for medium-long term gains and it could be 3 months or 8 years before you see a return. Most likely some of your investments will get tied up at a slight loss for a while while others rise. Don’t panic.
Overall you’re betting that more people and institutions will find utility for cryptocurrency over the next decade so whatever money you decide to invest you should be prepared to leave alone indefinitely.
Do not invest more than you’re willing to lose. There is a chance XRP will drop to 4 cents per coin, but there’s also a chance it will go to $10. Your $2,000 investment could fall to around $300 in a worse case scenario, but it could also climb to $72,000 in the next bull market.
Many big name financiers say that Cryptocurrency is nothing more than a Ponzi scheme. Less retailers take Bitcoin today than they did in 2017.
I believe it boils down to this – if there is a Crypto bull market soon will you beat yourself up for not getting in on sky high returns and turning a couple thousand dollars into a substantial sum of money; and if you invest $2000 dollars and it’s entirely gone tomorrow will it ruin your life?
I think you can’t ignore it. At the very least you should throw a couple hundred in the market for yourself and put your children’s next birthday money in it for them. If the market and utility lives it could be $50,000 in 15 years and if not then they will get more birthday money next year.
How to Start
If you think the possible benefits outweigh the possible risks then you need to do 2 things. Set up an account on Crypto.com app , buy $200 worth of CRO and stake it – it will generate an additional 160 CRO every year and you’ll get about 300 CRO as a sign up bonus. Now download the Coinbase app – you can trade USD for Crypto much easier on this app and you get $10 free in Bitcoin if you use my link and trade $100 worth of Crypto. I suggest picking a couple coins, devising an investment percentage and spreading out your investment between some coins with more potential gain and some that have steady gains. Also check out how to get $80 in free coin
Disclaimer: At the time of this writing I am heavily invested in LINK and have an investment in XRP. I hope to be invested in all coins mentioned in the next few months. There are referral links throughout this piece, they are both applications that I use personally.
This is not intended to be financial or legal advice, only the author’s commentary.
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