Bitcoin was just the beginning. In fact, now its beginning to seem old fashioned. So how should a newbie investor evaluate coins when the valuations don’t follow the same model as a company on a stock exchange?
My main thought for investing in cryptos is this:
“If a crypto project isn’t a complete gamechanger for an industry and doesn’t have big partners, I wouldn’t invest in it.”
First, look for industries ripe for disruption which are begging for innovation from blockchain’s main abilities: decentralization, fast and possibly anonymous value transactions, verifying information, and self executing contracts.
Bitcoin was the first major cryptocurrency and is still the market leader by far. Of all of the cryptocurrencies out there, you can actually buy things online and in the real world the most with bitcoin. I was paid for a job with bitcoin a few years ago and I found places to spend it. That’s how I got involved in this space. I won’t go into how revolutionary bitcoin and decentralized digital money is. You can read about that in my other articles. But I will say that bitcoin was a first generation technology. Although it is slowly evolving, it has some major competitors who are attempting to solve its problems of scalability, slow transaction time, fees, energy/computing waste from mining, etc. However, Bitcoin has huge brand awareness and that’s not to be taken ligthtly.
Smart Contract Development Environment:
Ethereum (2nd biggest crypto)-most new decentralized apps, ICO’s, and crypto projects are on this platform. Its the biggest and most tested smart contract system. When a government or corporation wants to implement a project, they usually go here first. When you want to buy a cryptocurrency, you normally have to first buy Bitcoin or Ethereum on coinbase or another exchange.
Banking: Ripple is the third biggest cryptocurrency with a huge market cap.The only competitor I know of that Ripple has is the International Bank of Settlements, which takes forever to settle a transaction. Check out this expert’s case for Ripple:
Are they already a business with a product, customers, and profit?
Omise Go: One of the few crypto projects which already has customers and a business model. Check out the partnerships! https://medium.freecodecamp.org/the-definitive-omisego-beginners-guide-f95dcdf8635c
Power Ledger- Australian based blockchain project for electricity markets. Already in business. Also check out Grid+ and Wepower for blockchain disruption of the energy sector.
Blockchain was built for verifying information
Credit Rating: Don’t you hate the dinosaur credit rating agencies who lose our data and refuse to evolve. Blockchain was made for this type of verification of information Check out Bloom: https://hellobloom.io/
Health records: There’s Factom and Medibloc in the top 100 and there are new projects coming out for the medical records industry all the time.
Supply chain is definitely one of the best applications for blockchain, but there are a lot of players in the top 100. I’m very interested in Chinese supply chain companies because China’s whole economy is based on manufacturing AND they have a big counterfeit problem AND there are obstacles to investing in blockchain in China. So, the big money hasn’t invested yet AND China tends to condone domestic companies instead of allowing international companies to compete there. Many of the supply chain projects have a very big market cap. Check out David Hay’s pick “ WABI” below.
Insurance: I haven’t seen any blockchain companies exclusively for insurance, but when someone figures that out, its going to be huge. For now I’ve seen https://www.enigma.co , https://tierion.com/ and Factom.com create insurance applications
Example of a decent portfolio:
This funny/odd polo shirt wearing guy has a youtube show that is really informative. He posts his portfolio live and its very conservative…mostly big market cap projects and market leaders. He also likes to invest in exchanges.
Exchanges are profitable businesses, but suceptible to hacks
But exchange based tokens could crash if the exchange gets hacked. The good thing is that exchanges have lots of customers and lots of cash. These companies have thousands of new customers every day trying to get in on these markets. Kucoin has a cool model of profit sharing. Its basically like a dividend. Binance is the biggest one.
David’s Portfolio: http://www.davidhay.org/cryptocurrency-portfolio-2018/
Many companies are trying to solve the big problems that Bitcoin and Etherium have…energy and computing waste from mining, scalability, fees, interoperability, and transaction speeds/number of transactions per second.
Many of the companies in David’s list such as Cardano, Nano, Iota, EOS, and others in the top 20 such as Stellar, Lisk, Ark are fighting to be the next digital money like bitcoin or the next big smart contract platform like Ethereum. Sure these platforms can coexist, but some will be big winners and we don’t know who it will be yet.
Notice that many of the big market cap coins have a very limited supply of coins such as bitcoin, which will only ever have 21 million coins maximum. This is built in scarcity.
Go to coinmarketcap.com for information about each cryptocurrency and their coin supply.
Buy Low and Hold: This is a very volatile market and if you buy at all time highs you could easily lose half your money immediately. In the long term you’ll probably be fine either way, but I would buy after a correction like RIGHT NOW (2/2/18). You’ll see these bull and bear cycles a lot and so just keep an eye on the charts and buy the dip.
Diversify Small Cap Investments:
I don’t think its a bad idea to also spread a small amount of money in the small cap projects with potential for big returns such as Bloom and Grid+ and soon on exchanges: Wepower. Most of the other projects mentioned have a fairly high market cap. This isn’t for the faint of heart. If you lose half your money its no big deal in this market, it could rise by 20 percent the next day. Big players called Whales are manipulating the market to drive the price down so they can get it cheap and then drive it high for short term gains and do it over and over again on a weekly basis. A long term hold strategy is best. Reevaluate every 6 months or year.
Risky ICO’s and Small Caps: If you have a bunch of time to research, get in on the new projects early, even at a small investment level. High risk, high reward.
Why you and your mom should HODL
I recommended my mom buy Ethereum a few months ago. She purchased 100 dollars worth at 350 dollars per ETH. Now (2/2/18) its worth $970 and it just crashed from 1300. That is just to give you an idea of the volatility. You bet she wished she purchased 10,000 dollars worth. But what if she purchased ETH last week and she would be sitting on 30 percent losses at this moment. BUY THE DIP and HOLD or as they say in the crypto world: HODL hold on for dear life. Warren buffet says the same for stocks. buy when there’s blood in the streets.
Don’t cash out too soon, or if you do, that’s ok but you might regret it.
Another amateur mistake is to cash out after making 100 percent. If its a really good project and has room to grow…hold on and it could make 5x ,10x or more. If you made 100 percent on bitcoin a few years ago and didn’t hold onto your 100 dollars that turned into a million, you would be kicking yourself. So if its a low market cap project, hold on for the long term. Then again, no one ever felt bad for making money instead of losing it.
Dollar Cost Averaging:
Another way people avoid risk is by dollar cost averaging. If you invest 300 a month over the next three months, it mitigates the risk rather than spending 900 at once and then the price could drop and you lose a lot of value. So there are a few strategies. Get in early on a project and hold, trade the volatility in the short term (only for experts), buy the dip and hold, or dollar cost average,
Team is Important: Management, advisors, and team is even more important in crypto than the rest of the tech business world because there are many inexperienced people running projects without any connections or advisors.
There are fees every step of the way for BTC and ETH, a fee charged by coinbase when you buy bitcoin and a fee for every bitcoin or ETH transfer. ETH has lower fees and faster transaction times. I prefer it in every way.
When you buy on coinbase, use a debit card, you get crypto instantly. If you use a bank account it takes several days to clear and the process becomes laborious.Always use 2 factor authentication on all exchanges and wallets. Cold storage is king of security and most people with a significant sum own a trezor or ledger brand cold storage device.
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The biggest and most trusted exchange for “altcoins” or coins other than bitcoin is Binance, and you can use my referral link below.
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