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Editor’s Note: Joe Shew recently joined TradeSmith as our new Senior Crypto Analyst, and with his experience in making money in choppy markets, we want to make sure all our members have immediate access to this special briefing.
Folks look at the hammering bitcoin and other cryptocurrencies have endured this year and lament the “Wild West” status of that whole asset class.
And I’ll grant them that point.
But I started investing in cryptos back in 2014 — a year that ended with bitcoin at $320 — and have since watched that bellwether soar to as much as $69,000. I’ve also watched bitcoin whipsaw all the way down to around $20,000 since then. So, the current “Wild West” status is a marked improvement over its earlier status as “Anarchy.” Either descriptor is scary, but there’s a third word that really captures my view of this market.
That word is “Opportunity.”
Cryptocurrencies are the fastest-growing asset class in history. This means that — despite the wildness — it’s well worth the investment.
It’s the type of opportunity that can allow you to travel the world.
It’s the type of opportunity that can help you pay off your home.
It’s the type of opportunity that can help put financial stress in your rearview mirror.
And from all the mistakes I’ve endured, I can show you how to emerge from this “Wild West” with a ton of profit.
Mistakes I can share so that you don’t repeat them.
There are five “mini strategies” you need to embrace to smooth out the risk, to put the odds in your favor — and to turn that “opportunity” into cash in your bank account.
Let me tell you what they are …
A Blueprint for Cryptocurrency WealthMini Strategy No. 1: Failing to Plan Is Planning to Fail
True value investing takes a cool head, patience, and planning. None of which I understood at the time. All the information we have available today can make planning a lot easier — for instance, knowing when to enter and exit the market is essential to mitigating your risk.
During bullish phases of the crypto market, you need to preserve your capital and take profits on winning investments and trades.
You also need to plan how to store your cryptos. In a market as volatile as this one, trying to hold an investment indefinitely in the hope of life’s golden ticket is a near-certain recipe for financial destruction.
Have a plan.
Mini Strategy No. 2: Understand There Are Market Cycles and Ways to Play Them
I talk about this a lot — only because it’s so important. Educating yourself on market cycles is extraordinarily valuable. Relatively by accident, I entered crypto just before bitcoin literally doubled in value. And once I was in, I didn’t know what to do. Today I understand how to recognize when a market has gone “full bear” and can tell when a “bull” market is running out of steam.
Kind of important stuff — and something my proprietary analytics and research team can highlight for you as part of my Crypto Advantage Society.
One example that applies to the present: When markets have retraced their way back 70% to 90% from all-time highs, our research shows that you’re better off accumulating your targeted cryptos than avoiding them altogether.
Selling at the bottom plays into the hands of the 10% of people with a plan who have bids ready to scoop up your crypto on the cheap.
Having a base understanding of what’s involved with a market cycle is essential to making the best financial decision possible.
Mini Strategy No. 3: Never Forget That Liquidity Is King
There’s an old saying that “liquidity is always there until you need it.”
By “liquidity,” I’m talking about the flow of money back and forth, the order books, and the depth of buyers and sellers. In short, I mean market depth. Once you frame things that way, you’ll likely think twice before investing 1% of your cash into “Burger Coin” or any other nonsense.
I always think sadly about the flood of retail investors who plunged their life savings into obscure coins in 2017, only to have the music stop when the bear market hit. Once the market tipped over and accelerated to the downside, there was no liquidity — not even for panic selling. Liquidity is king, and the highly-capitalized coins have it.
Be careful investing in coins outside the “Top 50” by market cap, since that leaves you exposed to the disappearance of liquidity that we often see when people start selling: When you go to liquidate your holdings, you won’t find anyone willing to buy them.
It’s the “Wild West” nature of the crypto market that makes this possible. In bear markets, a smaller exchange might simply shut down — taking your unique “moon shot” coin with it.
Finally, something I learned was the importance of having multiple “off-ramps” ready to go where you can sell your cryptos directly back into fiat. This means testing multiple exchanges out (which takes time) — I’d only recommend using platforms that are highly regarded and have a history of dependability.
Mini Strategy No. 4: Don’t Get Suckered by the Hype
One of my early mistakes could have been fatal — but I got lucky and am still here to tell the tale. I began to listen to the charismatic “hopium” dealers on the internet, and it’s hard for someone new to resist these dealers when everyone is making incredible amounts of money.
Hundreds of self-proclaimed “gurus” promoted their paid groups, and crypto commentators pushed daily videos of bullish content for their audiences. One example: John McAfee, the creator of the widely used McAfee antivirus software, seemed to bring legitimacy to the space with his evangelism — and went on to release a “Coin of the Day.”
This involved a short, positive review of a token that would 10x in value after his tweets. Buyers piled in and basically made a killing off these calls.
Emotion overrode all good sense and people got sucked in — in a big way. A few years later, the podcasts, YouTube channels, and “gurus” all but disappeared.
Fortunately, I wised up before I got hurt. I’m now passing that secret along to you. Obviously, moving from “Anarchy” to the “Wild West” is a bit of a maturation process – but mania and frenzy is still possible.
History often repeats itself. Remember that — and be smart.
Mini Strategy No. 5: Don’t Go “All In”
Perhaps the very biggest lesson that I learned early on was that long-term wealth creation is about not making that one “go-for-broke” play.
The reality is that the best investments are planned and executed with the “long game” in mind.
Going all in carries obvious risk with a very small margin for error — it also takes away your options to pivot with market conditions.
We all know how quickly things can change, especially in crypto. A good investor buys and sells at predetermined points to mitigate market volatility and gain exposure to an asset. This also helps avoid that emotional urge to check day-to-day price swings on your phone. You want to live your life and not be glued to a screen every hour of every day.
I hope these five “mini strategies” help give you the resolve you need when things get tough, because I do believe cryptocurrency investing offers the opportunity to reach the feeling of financial security.