Well, it is finally time to dive into the world of cryptocurrencies. I know that I have been a little apprehensive before, but fear never gets us anywhere. Sometimes we have to take the bull by the horns and wrestle control of our futures.
I want this series to be a place where we can continually evolve our knowledge and information of crypto. With all of my stock market investing series (Stock Market Investing 101, Preferred Shares 101, Introduction to REITs, and Investing for Dividends 101), I was able to find a good ending point. I expect the world of crypto to continue to evolve almost every week.
Therefore, I expect this series to be a mainstay along with my other cryptocurrency articles. However, it will be fun to look back and see how our confidence with crypto matures over time. Let’s take a look at what we know about crypto so far.
Build the Mindset of an Investor
My Experience with Crypto. I just opened my Voyager account two weeks ago. I have read three books based on cryptocurrencies: “Bitcoin: Hard Money You Can’t F*CK With,” “Ethereum,” and “The Nft Revolution.” So, I am just starting my journey into the wide world of crypto. If you are nervous and don’t know much about it, then you are not alone. Today is as good as any to get involved. Crypto is not going away any time soon.
CryptoCurrency: The Digital Stock Market: Investing in crypto is an eye-watering good time. The numbers always dance around on your screen. That is because there is no centralized stock market. Everything is decentralized.
Decentralized means that there is no central actor that can change the rules or manipulate the scenario. For example, with the US Stock Markets, the Federal Reserve can change interest rates. Although this does not inherently change the stock market, it changes people’s investment theories, which change the exchange’s intrinsic value.
Crytpo is unregulated. The world of crypto is different because there is no central authority. This fact means that crypto, as of now, is an utterly free-market economy. Being an actual capitalist society can be a positive or negative situation.
The pros of being a free-market are that you can invest knowing that what you see is what you get. In the US stock market, you may want to invest in REITs, but there may be talk of the Fed raising interest rates. You have to perform second-level thinking before you invest. You have to manage a larger investment picture when others have control of the situation.
Is Saving Money Bad?
The cons of being a free-market are that the news cycle and “hype-cycle” in crypto can be perilous for the uninitiated. There are good crypto coins and bad ones. If you are waiting for the news to tell you what to buy, you are already too late. There are bad actors whose only mission is to hype up their coin, push up the price, and take profits—leaving you with the bag. They call this a pump-and-dump.
Insider vs. outsider. Knowing the difference between an insider and an outsider, as any type of investor, is vital to your success. I’ll take the time to explain it because this is how you can make extraordinary profits in the crypto space.
An inside investor is someone who controls the outcome of the investing landscape. An inside investor is the one who holds the company that goes to its initial public offering (IPO), who owns real estate and controls rents, who owns the business, and who creates the coins that go to the initial coin offering (ICO).
Dividends vs. Royalties
An outside investor is someone who controls none of the above. They buy overpriced stocks at IPO, have their rents raised, buy from the businesses, and purchase coins at an ICO. They have no internal leverage to control the investment outcome.
Now, there is nothing wrong with being an outside investor in certain aspects of life. We can’t all be everywhere and know everything. However, it is good to be an insider in parts of your life—perhaps own a small business or rental property. But this is a vast topic for another day.
Being a good crypto outside investor. Most of us will be outsiders in the crypto space, at least until we start to connect with some of the more prominent players. However, just because we aren’t bringing the coins to ICO doesn’t mean we can’t get as close to the action as possible.
Therein lies the profits in the crypto space, being close to the inside. As I dig deeper into the crypto world, I see that the first movers get the best returns. In the US Stock Market, the SEC blocks the average joe from getting into the action early. You have to be an accredited investor to invest in a company before IPO. In crypto, no such distinction exists.
My Foray in FOREX
How do you find good deals in crypto? Just like every other investment, you have to do your research. What I have noticed is that crypto is similar to every other investing mechanism. Those who are willing to read, follow, track, and analyze get the best results. Those waiting for the talking heads on television or YouTube to tell them what to invest in are the net losers (do not get high returns).
Where to look for excellent crypto news. We all have to start somewhere. I like to start my daily reading at CoinGecko. It is an aggregate site that pulls in articles from across the crypto sphere. As you click on outbound links, you can find additional sites that help you delve deeper into the inside. Remember, the closer we are to the inside, the better our returns. We want to find great coins that are early in their business cycle.
Looking for good coins. Much of the crypto world is based on speculation—meaning that there may not be a valid business reason for the investment to succeed; we may just want the price to go up. Speculation happens in all investments platform; stocks, bonds, commodities, real estate, Pokemon cards, etc.
Boring Investing is Good Investing
To find coins that have some staying power, you have to research what innovative thesis they provide. For example, Chainlink (LINK) helps the smart contracts aggregate data so that they can make a decision on when the contract complies or not. It connects to the outside world to allow the smart contract to decide when the contract should conduct a payout.
Now that I know that Chainlink will have utility, my investing thesis is strong, and I can invest knowing what I am getting myself into. Even if Chainlink drops in price, I can use this as a buying opportunity to add more. When you have the information, you have the power.
More to come. There is so much to talk about in Crypto, and I want to do it justice. I am learning as much as I can, but it is hard to keep up. Remember, crypto is just a part of my overall passive income cash flow system.
We Make $50/day in Passive Income
The other pillars are retirement income, real estate, stock market investing, cryptocurrencies, and business. I plan to make crypto about 5% of my portfolio. Crypto tends to have wild swings in market prices as it tries to find its way.
The future of Crypto. Look for crypto to stabilize more as its actual use cases come to the forefront. The Ehtereum platform and smart contracts will become a significant player in finance, video games, and maybe healthcare. Right now, most of everything is speculation, but the true importance of crypto hasn’t shown through yet.
Think of crypto as the early days of the internet, back in 1995. We had AOL dial-up and less than 1MB internet speeds (56 kps was standard). Back then, we had no idea about YouTube, Tablets, iPhones, and the connected world of 2021. Crypto is in the same timeframe right now.
We think we have a clue as to where crypto is headed, but we have no clue. We could be living our entire life on smart contracts one day (I’m joking). So we have to invest in what we think sounds like good common sense projects and do some speculation. There are no 100% solid bets because nothing is 100% reliable. We don’t know anything about the true future of crypto.
But if you had a chance to invest in Amazon or Google early in their existence, would you? It is the same now, with Bitcoin, Ethereum, ChainLink, and BitTorrent. These names will be the major players in the future.
So, invest safely, dollar cost average into your positions, and buy with at least a 3-5 year timeframe. I think we can all do okay if we keep our heads about us. I love the world of crypto because it is always on. Don’t get caught up in the day trading aspect. Research, make good choices based on solid investment theories, and buy-and-hold. I look forward to bringing you more as I learn more. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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