Cryptocurrency — The secret to profiting from the most volatile market in the world via “Asymmetric Investing”
Cryptocurrency — It’s a wild ride. A roller coaster of emotional swings. One day you’re dreaming of your mansion by the sea, the next you’re in bed staring at your phone, a nervous wreck lost in a sea of red questioning why you even got into this market in the first place.
Have you ever wondered why these swings of profit and loss exist, why are they so extreme, is it possible to profit from them, and if so — how?
Step into the world of “Asymmetric Investing” where losses can be minimised and gains set to run long.
The goal of this article is to:
- Teach you about volatility, a vastly misunderstood part of investing.
- Explain the concept of “Asymmetric Investing”.
- Provide an example of where I believe Asymmetric opportunities to exist in cryptocurrency.
Lets dive in shall we…
1 .One Vastly Misunderstood Concept of Investing.
Volatility
It’s a bad word isn’t it? The media and talking heads on TV want you to believe it’s bad. The majority of novice investors think it’s bad. I expect you wouldn’t be too popular at a dinner party praising your new found love for volatility, it’s just too risky and fought with great danger.
All this is true, however….
As a trader, I love volatility. I owe much of my success to this “dirty word” of the financial world. I believe it can be harnessed, and used as a wealth generation tool over time.
If you can learn to wield the power of volatility, you have the chance to beat your average investor. You can profit from large swings in the market on the upside, and patiently wait for the downside.
Aren’t we glad that cryptocurrency is one of the most volatile markets in the world? Let’s compare the volatility of Facebook and Bitcoin.
Looks pretty good right? Nice….. slow……steady…… gains.
$1,000.00 invested in Facebook back in Feb 2017 @ $130.00 would be around $1460.00 today. A gain of 46% per year, pretty good considering the Oracle of Omaha has averaged 30% since 1950.
Let’s pop over to Bitcoin:
Looks pretty good, until recently right? Fast, extreme, emotional, gains (and losses)
$1,000.00 invested in Bitcoin in Feb 2017 @ $1,000.00, would be around $9,000.00 today. A gain of 900% per year, even with the 45% correction from the high of $20,000.00.
Facebook low volatility= 0
Bitcoin high volatility = 1.
Now I know what you’re thinking: It’s all easy in hindsight, if only we had a time machine in our backyard, and a crystal ball in our hands, we could teleport back and make our investments. Which leads me to…
2. Asymmetric Investing.
You probably first heard about symmetry in high-school maths class. As a refresher, it’s when the parts of something are equal in size and form.
Meet two of our friends: Mr. Symmetric Tree & Mr. Asymmetric Tree.
If we cut Mr. Symmetric Tree in half, right down the middle, both parts would be symmetrical. On the other hand, if we did so with Mr. Asymmetric tree, it would end up uneven, with one side being larger than the other.
Enter the world of “Asymmetric Investing”.
When it comes to the financial markets, the Pro’s avoid symmetry and focus on Asymmetry.
An asymmetric bet, trade, or investment is when the potential upside of a position is much greater than it’s potential downside.
Let’s go through a simple example. If we go to the casino and bet $1,000.00 with the thought of making $1,000.00 that’s a symmetric bet. If however, you bet $100.00 to win $1,000.00, thats an asymmetric bet.
Small risks, big returns. Small investment, high reward. Risk a little, make a lot. That is idea behind asymmetric bets.
It’s commonplace in the markets for new investors to focus on symmetric opportunities only.
As an investor – I’m in the market to make as much money as possible, whilst risking the least amount of money as possible. Myself — I wouldn’t touch an investment with a symmetrical risk/reward profile. I want to be placing my funds into projects which have the potential for $1.00 to turn into $10.00 or even $100.00. Sound impossible? Read on.
3. Where I believe Asymmetric opportunities to exist in cryptocurrency.
So how do you find these opportunities?
Asymmetric opportunities come in a variety of forms…
If you buy a cryptocurrency with the potential to make 200% upside potential and you’re prepared to cut your losses at 20% that’s an asymmetric bet.
Upside of 200%. Downside of 20%. 10 to 1 odds.
Cryptocurrencies with the potential to massively appreciate in value offer asymmetric risk/reward profiles. This is a big reason I devote my time and energy to finding these gems.
Here’s one place where you can find them:
Private Sale ICO’s
ICO’s which raise a small hard cap ($10–$50M) have limited downside, with the potential for asymmetrical upside. Whilst the majority of investors are focused on buying Page 1 of Coinmarketcap.com, I am buying coins which are not yet listed on Coinmarketcap.com. Why? Because the room for growth is asymmetrical, limited downside with high upside.
Let’s go through two examples:
Example 1 — Siacoin.
Siacoin is on-line storage on the blockchain. Think Dropbox for crypto.
Page 1 — Rank 30th on Coinmarketcap.com, Market Cap $948M.
Do I see Siacoin being a bad investment? No. However it doesn’t provide us with the asymmetry we require for potential exponential gains.
Example 2— Sharder. A competitor of Siacoin.
Rank — Not yet listed on Coinmarketcap.com, Hardcap of 7.7M raised at pre-sale.
Here we have two competing technologies — Sia coin ($948M) and Sharder ($7.7M).
From conducting proper due diligence via reading both whitepapers, inspecting each companies team, and taking into consideration the technology and market cap of both coins — Sharder has the potential to provide a x135 or 13,500% return if it was to reach the current market cap of Saicoin, meaning your $1,000.00 invested in Facebook or Bitcoin in our previous examples, could turn into $135,000.00.
Pretty crazy right? You bet.
(Calculation is made by dividing the market cap of Siacoin by the market cap of Sharder)
This is an example of an Asymmetric investment.
Conclusion:
The cryptocurrency market is stacked with boundless asymmetrical opportunities to take advantage of.
Use the above example to first find large cap coins, then look for new competing ICO’s. Compare the new competing team, technology and market cap and make a calculated informed decision.
I hope by reading this article it has given you the knowledge and education to assess and find similar opportunities within the market.
Kind Regards,
Ryan Donnelly
Disclaimer: I am not invested in either Siacoin or Sharder. This is not investment advice, merely my opinion on the market. Do your own research.
IMPORTANT NOTICE: This posting is intended for informational purposes only. The views expressed in this post are not, and should not be construed as investment advice or recommendations.
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