My take on Crypto Investing:
This whole article will be dedicated to my own philosophy of Investing (not trading) in Crypto, and should not be viewed as advice. However, this is what I personally do…
Crypto has been the most profitable asset class of 2017 for some, and a missed opportunity for others. Now moving into 2018, I have a few thoughts on where it could go. I think that Crypto, in general, has officially reached a level of awareness that will keep it around for years to come. The price action has done something like that of the tech bubble for the internet. It has caused awareness of an innovative technology that in the future will be game-changing.
- Do I think blockchain and digital currency will be game changer? Yes.
- Do I think it is anywhere near that point? No.
I see a few years to go, before it’s in a place of having a real impact. Right now, too few retailers accept it to really use it effectively as a currency. Potential regulations and network scalability issues also prove to be potential future roadblocks. However, I do see a future in which there is widespread adoption and usability. In my world, I see it at a minimum becoming the new form of Western Union, that allows cheaper, more secure transactions to anyone in the world. On the upper limits, I could see some sort of more global digital currency that could also be a store of value. Now again, we are very far from such things but are still moving in the right direction.
So, how do we use all that information to make an investment decision today?
Well no matter where it goes I continue to see upside in its price. This continuous flow of uncapped fiat supply moving more demand into the fixed supply of crypto will drive prices higher. I do not believe crypto was meant to be invested in, as it’s a protocol that is transactional in nature. It amuses me that the world is trying to make it more easily investable when it’s just a computer program that allows exchange with no centralized third party needed to verify transactions. However, with my bullish outlook, I fall into the same line of trying to capitalize on future movement.
Now the question becomes how do you get your exposure?
I personally don’t believe in any one coin at the moment. There are some that seem more promising than others, but all have different issues they will face moving forward. I do foresee one of two scenarios playing out in the space. Either one coin will become the end all be all, or there will be a few superstars that are used in different communities, with atomic swaps to allow smooth transactions across all chains.
So, in this line of thinking my bets are on capturing either scenario.
I do this by spreading my investment across about ten of the largest cryptos out there, and do so on a market cap weighted system that has no more than 25% in any one coin. This allows me to be almost 80% weighted in the top four, in case one coin should emerge. While giving me increasing exposure to new coins as they start to gain traction, in case there ends up being a few superstars. It also smooths out the volatility that portfolio experiences and makes it easier to handle the swings. Now I should probably say that I’ve pulled out my original investment plus a couple hundred percent, and have been doing this with all profits.
If I was starting out today, I may be a little more cautious as it has seen quite a run. However, it seems the entire world is playing a big game of buy high and sell higher, across all asset classes. I would treat this as a pure speculation trade and have a plan to take profits and pull out at least your original investment. I do this by turning my profits into physical metals like in the Personal Gold system.
Whatever your plan, make sure you write it down and have fun with it.
If you make this stuff too serious, you might give yourself a heart-attack. 😉
Jake Larmour