Should I start investing in Crypto today?
Since I started writing this blog, the most common question I get asked is:
"Should I start investing in Crypto today?"
That question is usually followed by "Is Bitcoin too expensive?", "Will it continue to go higher?" and "What other coins should I invest in?"
I never tell people when to buy or what to buy for the simple reason that nobody knows what the fuck is going to happen, I included.
There is a reason many traditional stock and forex investors have avoided Crypto; it is hugely volatile and massively risky. When investing in the stock market, there are both macro and micro signals which help investors make decisions:
- Macro: job creation, global stability, government policy etc.
- Micro: company performance, mergers, acquisitions, innovation etc.
With Crypto, we are learning more and more about the market, but really, none of us knows what the fuck is going to happen.
Twitter is full of experts who will tell you that Bitcoin is going to £10k, £100k, £1m or that the Crypto market will be worth £1tn in 3 years. These experts usually have a name which combines Bitcoin and Crypto with some legend from film or the arts, such as, CryptoDarthVader or CryptoGandi. Like they have some dark powers to tell the future or are some modern day saint.
Most of these experts are fucking idiots who believe their own hype. Just look at their comments, there are suckers following these guys every Tweet like they are the second coming of Christ, except rather than turning water into wine they are turning bytes into Lamborghinis.
Nobody knows what the fuck will happen which is why every expert has made a bad call. Like the guy who told everyone to sell NEO halfway to the top and wrote about it. Yeah, that was me. I was wrong. I'm not an expert, do not copy me.
Personally, I think Crypto will continue to grow, I think currencies such as Bitcoin and Dash will eventually liberate wealth from government control and token based services will provide a new layer of applications for the web. If I didn't then I would pull all my money out now. I'm keeping my money in but I accept there is risk.
So back to the original question: "Should I start investing in Crypto today?" Honestly, I have no fucking idea. Investing in Crypto is a personal decision based on your life and personal circumstances, your goals and your risk profile.
Bitcoin and the wider Crypto market has been making parabolic moves this year. In just one year Bitcoin has grown from $574 to a high of around $4,478 and the global Crypto market cap has risen from $11.4bn to a high of over $145bn. Therefore:
- Either we are in a bubble
- Or we are at the start of technical and financial revolution
So if you are just coming into Crypto and asking yourself the question: "Should I start investing today?" We, therefore, need to run through the possible scenarios:
- Crypto is without value, is an elaborate Ponzi scheme, in a bubble and is going to crash
- Crypto is a technical and financial revolution, we are still very early, and the market is going to grow into $trillions
- Any scenario in between
As such, if you invest today the following may happen:
- The market will continue to grow as will your investment
- The market will trade sideways, and your investment will stay the same
- The market will crash as will your investment
Any of the above are possible in any time frame. Further, a combination could happen:
- The market may go up very quickly then crash and rise again slowly
- The market may go up rapidly and crash and burn forever
- The market may crash and then come back slowly
- The market may crash and never come back
Nobody knows what the fuck will happen and anything may happen. Therefore should you invest in Crypto today?
I don't care.
What I care about is, if you do invest today you do the following:
- Invest with a strategy
- Invest with discipline
Any investment is a risk, and the rule of thumb is, the higher the potential returns, the higher the risk. You may have heard stories of Crypto millionaires and +1,000% returns. Sure, but these people made these returns because they made a risky investment which came good.
Those who invested in Bitcoin when it was $10 were taking a huge risk on a theoretical payment protocol with no real world retail adoption. If they have made millions then cool, they deserve it.
Those who keep missing the boat and thought Bitcoin was expensive at $100, $500, $1,000, $3,000 and are now thinking of investing have missed out because they didn't take a risk. So be it.
At any point you invest, you are taking a risk based on the current price, market, adoption and a whole bunch of stuff out of your control.
Like a stock trader who invests in Tesla is taking a risk on them being able to change the automotive trade or a Facebook investor taking a risk on them being able to grow their infrastructure and revenue, Crypto is an investment risk based on a combination of knowns and unknowns but with more unknowns than knowns, therefore more risk, therefore potential higher returns and equally higher losses.
Do you get it? Crypto is risky because nobody knows what the fuck is going to happen.
So if you are going to invest today, you need to have a strategy and discipline.
Invest with a strategy
If you are going to invest today then your strategy needs to start with the number 1 rule of Crypto investing, or any investing for that matter:
Do not invest anything you can't afford to lose
You are investing in a highly volatile and highly risky market. If you are investing money you can't afford to lose then:
- You may need to withdraw that money at a time when the markets are not in your favour and then you have made a loss
- You will be worried about price movements, become emotional and make mistakes
- You may also bring unnecessary stress in your life, I've done this, I lost £20k trading tech stocks and felt genuinely sick and lost for a whole month. It isn't worth it. It is only money.
I am an accidental Bitcoin and Crypto trader, returns as of today of over %1,200. As I have said before, I have no idea if I am smart or lucky, but Crypto has allowed me to quit work, spend time with my family and travel the world. I want to keep this lifestyle as long, as such, I have developed a strategy which I hope will maintain this as long as possible.
So if you are investing today, when developing your strategy you need to think about the following:
- What coins are you going to invest in and why
- What kind of portfolio you want
- What period do you want to invest in
- Do you want to be a day trader? (Don't do this)
- Do you understand the charts enough to know whether a coin is bubbly and overpriced
- What will you do if they market turns against you
- What will you do if an individual investment falls hard
You may also want to read my Beginner's Guide and my Guide to Your First 3 Months as a Crypto Investor.
I always say crypto investing is a long term investment based on the potential of a technical and financial revolution which will have many extreme spikes and dips in the middle. The price movements are like someone playing a yo-yo on an escalator, and they can be going up or down on that escalator.
Once you have decided to enter the market, do so slowly and be patient, which leads us to the next important thing, discipline.
Investing with discipline
Now you have a strategy it is important you become super disciplined with it and your trading habits. Indiscipline can lead to unnecessary mistakes. I have done this, loads of times:
- I stopped following by 5% for 25% when the market corrected in June/July. I reinvested the money I had withdrawn through greed as I thought it was a buying opportunity and the market crashed further. This decision cost me a lot of money.
- I started investing in all kinds of coins at the top of the bubble because I was being greedy and thought everything would go up forever. I saw some massive losses on some investments, BAT -65%, Swarn City -85% and ZenCash down -70%.
Your trading habits will be controlled by two basic human emotions, greed and fear. The more control you have over these, the better you will trade and this requires discipline:
- If the market flies do not believe this will go on forever
- Don't start throwing money in that you can't afford to lose
- Don't remortgage your house or take out loans
- Don't start buying any coin with the blind belief that everything is a winner
- Don't chase coins making parabolic moves
- Be cautious when the market is bubbly
- Be prepared to take money off the table when you are making good profits
- Don't quit your job to trade unless you have a good reason (yes I am a hypocrite here)
- Buy into a new coin just because someone on Twitter or Reddit tells you to
- Don't panic when things start to fall (get used to volatile moves)
- Don't overtrade without reason
- Don't chase losses with unresearched investments (this is gambling)
- Don't try and day trade your way out of a negative balance
- Don't obsess about the market lose sleep or bring necessary stress in your life
Develop your strategy, your risk profile and create a set of rules about how you will react to market conditions and then have the discipline to keep to them.
Be patient with the market and consider your portfolio as a 3-5 year investment. As such if the market does crash you should be able to ride out any correction or bear market. If the market does die, then you have only invested and lost money you could afford to lose anyway.
Crypto is not a get rich quick scheme; it is a highly risky investment asset. Treat it as such.
Any questions, then please shout.