Today folks, let me share my experience with Crypto Assets for the last 2 years since I started investing in the so-called risky asset classes where 30% to 40% market dips are considered normal corrections. While the downsides are enough to scare away most new investors, we will also discuss the upsides at the end of this article. Also, this article is not a piece of financial advice, it’s all my experience and might not work for you.
Let’s start by discussing the normal market cycles in Crypto Trading.
This usually starts with strong FOMO, at first when I was in the initial days of my investment as a school kid, I tried to time the market and ran behind prices. Some days when the uptrend was good enough, I made some money but the other days, it was buy high and sell low scene for me.
I still remember investing in coins at high premiums, no reputation, zero innovation just on the basis of prices and it all turned out a bad trade for me. Fortunately, I didn’t have much money to invest back in school days and I invested a very small portion of my savings around Rs 5000 or $70 today. If that scene kept happening today, probably I would have been rekt by now.
The first rule of investing in crypto which I learned by loosing my savings is that never put all your eggs in one basket. The downside of having it all at one place is that if the market goes red, you might even loose 60% to 70% of your investment which is really very bad financial move. A good portfolio is one which is made by diversifying investments based on risk appetite and market sentiments.
If I speak of today, in 2021 the market is in bull cycle and no matter which coin you have in your bag this year, if you keep holding it with patience, it is bound to go up. That again brings me to another question, when to exit?
Setting up targets for sell orders is equally important. You should always have some selling target for your investments. It’s equally important to have a good decision-making process to buy low and sell high. Most of the new traders fail to do that and the exact opposite happens.
Here’s a chart to demonstrate the facts which I have mentioned above. Before explaining this one, let’s understand corrections and why are they important in any market cycle. If the price keeps going up and up for consecutive days or months, it creates a bubble and we all know what happens with bubbles from what we have seen in the 2008 financial crisis. Corrections are important to shake off weak hands and bring down the greed factor from the market.
In the chart below, you can see that the best time to add coins to your bag is in the accumulation zone. New folks fail to understand this simple rule and they buy when the market prices are already high.
Also, when the prices remain low for a prolonged period of time, then weak hands tend to sell their holdings and in return, they fail to reap the benefits of the next markup. This is what happened to me when I was new, I never really had the patience to hold the tokens. If you want to make money in the bull run, then the best strategy of investing is to hold your portfolio and set a realistic sell price.
Being too much optimistic about your holdings is another bad side for new investors. Some of them feel that they have the best tokens in their portfolio and they will probably be the next 100x coin which will change their fortune.
I really wish you aren’t that investor who is filled with such optimism. Low cap coins which have less than $10m market cap are highly volatile and can even go to zero if any big investor (aka Whale) dumps their portfolio on your face. If you really want to make gains, you have to really start by investing in the top 10 market cap coins and then slowly explore other tokens by using the gains of your previous investments.
Pump and Dump Schemes (Ponzi !)
Being an unregulated industry, new investors often loose their entire capital by investing in so called low-cap gems which eventually turn out as a pump and dump scheme.
How to spot such schemes? The easiest way to detect them is by their marketing. Most of these so-called low cap gems have no innovation in the background to support the price of their token and it runs purely on the hype that is built on social media by paid influencer campaigns or by convincing a bunch of early investors to buy their idea of creating an impact in the space.
If you are a new comer, I would suggest you to stay away from these projects based on your risk appetite. People loose a bunch of money by going all into these projects.
Patience is the key (HODL)
If you are confident about the project in which you are investing, then the best strategy to gain maximum returns is by holding your coins. Don’t sell them even at small gains for that short adrenaline rush. The biggest gains can only be made if you are a patient hodler. When I was new, I didn’t realize this simple fact and I kept switching investments on a short-term basis with small gains on each.
I still remember the days when Bitcoin was at $600 and I sold them at a mere profit of $100. It was an act of foolishness which I still regret.
My recent investments in Matic, Swipe, WRX have all turned out great with a minimum 4x return on investment over the last 1 year. So, the best defense against volatility in price is to hold. Hold for as long as possible.
Finally, I would say don’t get into crypto because of greed or money. It’s like an investment where the price volatility is high because of less volume. If you have risk free capital, you should invest in crypto but if you don’t have any spare cash, it’s safe to stay away for now.
Thanks for Reading 🙂
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