Risk comes from not knowing what you are doing — Warren Buffet! Stock Market’s evergreen Super Star Warren Buffet, the name when heard by investors is an inspiration and envy to many of them. However, the underlying question is, why do people who try to even screenshot his portfolio has ever become like him? People talk a lot about his strategies and have made several case studies in the past. Though just of handful of people may have managed to reach his level of returns, they haven’t reached his scale yet.
So what makes this star a superstar of what he is today? Secondly, can this be applied to cryptocurrency? Many would immediately jump into conclusions that cryptocurrency is a different ball game altogether and would argue that stock market strategies will not work for cryptocurrency even if it is from Mr. Buffet himself.
The whole underlying strategy of Mr. Buffet is not just patience or choosing the right stocks or knowing when to buy or sell etc., It is just about the consistency, scale of investment and its growth. Let’s say, a common long-term investor (not a trader) invests $100 and gains 40% profit after a couple of years. Then the investor most probably would be contented and realize the principal amount along with the 40% profits. Further, if the investor would reinvest the capital amount for another couple of years and once again if his best times continue, he would be left with $180 considering 40% profit at the end of first two years and another 40% profit at the end of next two years by using the same capital amount. Therefore in net, the investor would have gained 80% profits through his $100 investment at the end of 4 years. In case if it was Warren, he would invest $100 and once he receives say probably 20% he would sell it but would reinvest the entire $120 back into his the stocks (may be the same or different stock off-course) and keep doing the same for the next four years consistently. If you see his returns would have compounded annually for the next four years at a constant rate of 20% each year for 4 years which would be around $207. Therefore the net returns of Mr. Buffet is 107% at the end of 4 years as opposed to 80% returns of a regular so-called long-term investor in the same four years. In other words with the same $100, Warren could make 27% greater returns within the same period of 4 years. While this may not be the exact way Warren Buffet does (as he never considers one or two years as a long-term unless for specific reasons), but this is the underlying strategy that has been working for him for the last 30 to 40 years. Here the consistency is only 20% returns, but his net value at the end of four years is greater than the person who got 40% returns in two “2-Year” terms.
Therefore we can observe, it is not just about the long-term investments or choosing stocks which may give huge returns. It is all about your ultimate goal of returns and being a very long-term investor who is consistent in the returns. This is what makes Warren Buffet the “Super Star” of the money market.
So, the question is, can this be replicated for cryptocurrencies? Yes, No or maybe or maybe not. Before we arrive at a logical conclusion or rationale, we must understand that cryptocurrency trading is a recent happening of the decade and it is like the stock markets in its late 1700s or early 1800s. The global adoption growth of cryptocurrencies (may not be in actual utility) has been exponential as opposed to the stock market’s growth in the past two centuries. However when it comes to the maturity of the market, regulatory compliance, volatility etc., ‘cryptocurrencies’ are still in the early 18th centuries (of the stock market) I would say.
Now, let’s take a look if Warren Buffet’s underlying strategy (consistency & compounding of returns) would apply to cryptocurrency investments or not. Successful gainers in cryptocurrency go on to say that “HoDLing” is the “mantra” which may be true, but what strategy have you applied here or have you gained just by accident is what really matters. Isn’t it? Holding is the most misunderstood word both in the stock markets and cryptocurrencies because nobody tells you when to sell and when to buy back. If just holding would make you rich, yes maybe it will when you enter your old age homes, but what’s the point? Are you planning your retirement or saving for your next generation? When would you live your life? Hence holding is definitely important, however, it works consistently only when you apply right strategies like one of Warren Buffet in stock markets.
Therefore, the key or the “Mantra of Success” is the“Consistency” which requires huge patience and a very long-term view with a balance in mind before the market moves into a bubble or bear. If this is applied in cryptocurrencies, one has a greater chance of overtaking long-time stock market billionaires though we are in an amateur crypto market. Off-course people must always invest what they could afford to lose and avoid greediness or experimenting with their luck.
Lastly, choosing the most probable cryptocurrencies or crypto-tokens to invest which has the potential to yield long-term consistent gains is equally important. Experts always say that apart from objective technical analysis, subjective matters must also be given equal importance while choosing a stock or cryptocurrency. There are centrally managed decentralized coins or tokens which has strong fundamentals, actual utilities, products or services with a vision to address prominent problems and visionary people running the show. There are coins or tokens which endeavors to make a positive impact on people’s lives. By taking these into account, we can make a confident choice of investment and take calculated risks. The more the people start using the coin or token for its features & Utilities, the more growth it will have. Once this is done, we must apply the underlying principles of the stock market’s success stories as discussed above. For example, we have tokens like Cashaa (CAS Token), Ripple which have the vision to make an impact on people’s lives.
Thereby, if all these were in the right proportion, “no one could stop you from being the Warren Buffet of Cryptocurrencies” in the near future. Cheers & DYOR!
Disclaimer: This article is purely informational and not any investment advice whatsoever. People must DYOR (Do Your Own Research) before investing or trading and the author of this article shall not be responsible for any invariable flaws or loss arising out of these mere ideas and theories to whomsoever and whatsoever.
