My purpose behind writing this article is to arm you with information that will enable you to make smarter financial decisions. So, it's important that you make the following distinction. Cryptocurrency is a new wealth-building tool, but it’s not the only one. Crypto assets are not risk-free investments. Yet, the potential for high returns is there. Thus, the best way to head into things is to add them to your existing portfolio, not exchange all your assets for virtual currency.
Building wealth is a complex process. It takes a lot of planning and attention to all aspects of your finances. Investment is a big part of it. Don't get me wrong, but it might not serve you as well without having your emergency savings, a proper retirement plan, and a clear goal in mind for your money. I repeat this over and over again in all my courses, Facebook, and Telegram posts: Diversify, diversify, and diversify! What do you want to get out of your investments? Do you want to live comfortably after retiring? Perhaps you want to buy your dream home or travel the world. Maybe retire early and do nothing. Different financial goals may require very specific financial strategies. But once you have all other financial aspects covered, it would be a waste of time and capital not to consider cryptocurrency as an asset in your diversified portfolio. It's not like you have to understand every particular technology behind every Altcoin you come across to figure out if it's a solid investment. Similar best practices apply if you're investing in any financial asset. That implies taking your emotions out of the equation, exercising discipline, emphasizing research, and learning how these assets move in the market.
No investment should total more than the money you can comfortably lose. With digital assets being somewhat on the high-risk/high-reward side of things, I believe that putting in between 10% to 40% of your investment funds is enough – at least for now. But this percentage also relates to what phase of the market cycle you decide to invest in, as we will see later. To younger investors, this number may fluctuate even more. They not only have the advantage of playing the long game, but they're also more passionate and receptive to the technology fueling the asset. Regardless, the entry bar is much lower than you think, and with the correct preparation, you can optimize your picking strategy.
* Investment Opportunities
Now let's answer one of the most popular questions – How can I invest in crypto? There are several ways to do it:
● MINING
Mining is one of the most expensive ways of breaking into the crypto world. As more coins are mined, the algorithm becomes that much harder to solve. Few people around the world mined the cryptocurrency in its early days, and even fewer could speculate as to what it would become. Today, miners use specialized mining equipment designed to specifically solve Bitcoin's difficult hash algorithm. In the beginning, central processing units, or CPUs, were the primary miners. However, you could boost your mining speed by leveraging the superior computational power of graphics processors. So, Bitcoin miners used graphics cards in their mining operations for many years – until specialized miners hit the market. But this is where things get interesting. Back in the day, miners like Laszlo probably mined hundreds or thousands of Bitcoins daily. The algorithm was much easier to solve, and with few miners around, it wasn't difficult to mine absurd amounts. Today, the algorithm is way more difficult as there are thousands of miners. That’s why Bitcoin miners use specialized mining equipment designed to specifically solve its hash algorithm. All this is due to the tremendous rise in the value of cryptocurrencies. Particularly with Bitcoin, the financial investment required to make money after buying the equipment and paying the bills isn't for everyone. However, you can mine altcoins for a fraction of the cost. Although one could argue that this is a lot like working, and earning cryptocurrency, it's also an investment. Your total return won't be evident until further down the line.
● STAKING
When you become a crypto holder, you can choose to stake your currency. It's a relatively new way of increasing your digital assets, and not all coins are accepted. Staking is the way many cryptocurrencies verify their transactions. This means cryptocurrencies that require staking (or Proof of Stake POS, more on this later) need individuals or organizations to commit some of their coins to enable transactions within that ecosystem. The user would commit their coins to the system to facilitate transactions and earn interest in the form of coins. This is not dissimilar to depositing cash in a bank to increase the bank’s liquidity and get rewarded by getting paid interest on the deposit. In this way, you can use your assets to back the value of cryptocurrency, and in return, you can earn interest on that coin. The rates aren't exciting for coins like Bitcoin and Ethereum but could be very enticing for some of the ALT coins. In mid-2021, I replaced an average salary with the interest earned from staking my cryptocurrencies alone. On most websites, Bitcoin and Ethereum top out at around 3%, depending on how much you stake. That said, earning even that little in interest is great if the price goes up over time, and you are not planning to sell your coins. However, some coins pay nearly 20%-90% Yearly Return, so it can be a very lucrative proposition to stake some of these coins as you will be building your coin portfolio passively. This is akin to getting a rental return on a real estate property. It's an extra source of passive income. Not only are you profiting from the rise of the cryptocurrency, but you are also getting a form of dividend or passive income through staking. This interest in coins can be further compounded, which adds to the number of coins and overall profits. I call it the “Triple Dipping” staking strategy.
● BUY AND HOLD
Before staking, people bought and held onto their crypto assets until they could resell them in exchange for more fiat currency. Many holders still prefer doing this, but that's mostly because staking hasn't gone mainstream just yet.
● EXCHANGE
Another way to invest is to buy one currency and then exchange it for another if you think you can make a profit. Furthermore, you can do something that's not allowed in betting anymore – coin arbitrage. Essentially, this means that you can shop around at different exchanges and resell your assets for the best price. Naturally, this is a hands-on approach that may not be very lucrative if you're operating on a low budget.
● DAY TRADE
Whenn people hear the term day trading, they immediately think about Leonardo DiCaprio or Charlie Sheen, or Michael Douglas, in movies such as: “The Wolf of Wall Street” and “Wall Street I and II”. Younger generations think about Bobby Axelrod in the series Billions. Indeed, day trading is a lot like Wall Street. Despite it requiring a hands-on approach, day trading also exists in the crypto world, and many take advantage of it. I could write an entire book just on trading, but for now, I just want to give you some pointers so we can quickly progress to other topics. There will be more on trading in one of the next chapters, however, if you wish to further expand your knowledge on this, I offer a Trading Course specific to Cryptocurrencies. More on this later. Should you decide to trade: 1) Be as Objective as you can. Wanting to be right rather than truly listening to what the market is indicating is what causes 94% of traders to lose money. 2) Make it a number game and remove emotions from the equation. The moment you engage in fear and greed is the moment you lose objectivity. 3) Treat Trading like a Business 4) Understand that sometimes you will lose some and win some 5) Listen to what the market is telling you. The buyers and sellers share their strategies and strengths with each passing candle. 6) If you are a beginner, opt for bigger timeframes as this will help diminish the market noise created by market manipulation. If you are scalping, meaning you are trying to make profits on a very small market movement and are using leverage, you will find that 40% or more of your profits go into fees. It becomes a losing proposition. 7) Build your "Trading Muscle" by paper trading or by trading with smaller amounts you are comfortable with. This way, you will learn how to remove emotions from the equation, how to be objective with all your trades, and also develop a 6th sense regarding market trends, patterns, and fluctuations. 8) Learn as much as you can. It can take many transactions to generate substantial profits. But if timing the market was already appealing to you, then you can apply your passion to cryptocurrency instead of stocks. As long as you remember that some of the fundamentals are different.
● LEVERAGE INVESTING
Cryptocurrency is as much an investment asset as stocks and fiat currency are because you can use leverage to maximize your exposure to the market and increase your profits. Various crypto exchanges offer this opportunity – some being fairer than others. Whichever way you look at it, investing in crypto has no shortage of strategies and opportunities. More will come as the popularity rises. Of course, you should always proceed with caution. The rise of Bitcoin brought along with it plenty of confusing altcoins into the mix.
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