How I Avoid Bitcoin FOMO — A Guide To Low Risk Crypto Investing
DISCLAIMER
Before you read this, I must make a disclaimer before a wanna-be millionaire comes after me because they didn’t become a millionaire off of my strategy. Let’s make it very clear. These are strategies that have worked for me in terms of returns. The logic behind it is based off of my own knowledge and experience, which is limited. I have tested my strategy and it has worked out to a consistent 40–60% return. Will it work for you? Maybe. That doesn’t mean it will work tomorrow, but it did work yesterday and the past 2 years. I provide this guide for FREE for beginners as a way of starting an investment strategy into cryptocurrencies. This is one perspective of an individual who has a novice understanding yet a passionate interest into cryptocurrency and digital assets. Use at your own risk! If you can’t comprehend this paragraph, please go back to Youtube and watch some fun prank videos!
WHY AM I HERE?
Did you read the disclaimer? Do it right meow!
Okay so you’re sitting there at home, reading this because you keep hearing about Bitcoin from that one entrepreneur friend. You probably don’t have too much understanding of what exactly Bitcoin or cryptocurrency is but you can’t go to a social function without hearing that Bitcoin is “going up,” or that it’s the “future of currency”….and quite frankly you don’t really care how it works as long as you can cash in on the trend. You want in on it before it reaches $10k but you don’t have the slightest idea on how to invest into it. In other words, you’re here because of FOMO. Welcome, you are not alone.
Time and time again, I’ve got friends and strangers either asking me about how to invest and what Bitcoin is, or they vaguely describe how they are investors already. When I ask them a basic question about their digital wallets, they are hesitant. Don’t believe everyone who tells you they are an investor.
That guy that’s constantly talking about Bitcoin or stocks, probably doesn’t know all that much either. They’re just reading the news like everyone else and relaying the information to look like a person in the know. If you’re that guy then you should also read on!
WHAT IS CRYPTOCURRENCY?
Now before we get into my personal strategy, you are going to have to get a general understanding of Cryptocurrency. Don’t worry, we won’t go in depth but you should know the basics and I highly recommend researching further before proceeding into any investments. Or just YOLO into the next section.
If you skip everything, just know that Bitcoin and cryptocurrency isn’t just something you pay with but rather it’s a whole new system and infrastructure of currency. It is both what you pay with and also how you pay. (Goodluck with that!)
Grabbing a paragraph from our friend Wikipedia:
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange using cryptography to secure the transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies.
Bitcoin, created in 2009, was the first decentralized cryptocurrency. Since then, numerous cryptocurrencies have been created. These are frequently called altcoins, as a blend of bitcoin alternative. Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/centralized banking systems. The decentralized control is related to the use of bitcoin’s blockchain transaction database in the role of a distributed ledger.
Feel free to continue to read on here: https://en.wikipedia.org/wiki/Cryptocurrency
Before currencies existed, we traded with goods & services. Up until now money was the medium we used to exchange for goods/services in transactions. Generally, money holds value, it’s identifiable, widely accepted and governed as a legal tender. We use USD and you can buy anything and everything with it. We have a central bank, fees, tax etc. It’s all regulated and highly manipulative.
Cyrptocurrency on the other hand is generally unregulated. No government or central bank system controls it, which implies a flood of assumptions, the obvious being no tax or bank fees. Imagine buying something from someone on the other side of the world, or sending Satoshis to your dentist to pay for new fillings. No fees or exchange rates to deal with.
Ever been charged a fee from your bank that just made you so angry? Bitcoin and really its prevalent use is definitely something to look forward to.
ANOTHER THING YOU HAVE TO KNOW! VOLATILITY!
Well, without getting into too much detail, Bitcoin exists because of demand. Without the demand for an alternative currency or new payment method, we really wouldn’t put much “value” into the currency/system. We are in a digital world where Venmo, Paypal, Apple pay, Chase Quickpay are the easiest ways to send and receive money. Apps like Cash are tied to your bank account and you can quickly withdraw funds to send a friend after splitting that amazing Korean BBQ dinner (AYCE for life!).
Unlike the US Dollar, Bitcoin is still in its infancy and has a tendency to be extremely volatile. Amongst other factors, the volatility can be a result of new technologies, government regulation, laws and ultimately demand.
Bitcoin, similar to stock, can go either direction. Earlier in November, the value of Bitcoin dropped over $1,000 in an afternoon. 4 days later, it began to rebound. If the thought of losing a cool stack in an afternoon makes your stomach churn…well now you understand why Bitcoin is not for everyone. Bitcoin and cryptocurrency is still for the early adopters, the high-risk/ high-reward chasers.
On January 1st, 2017, Bitcoin held a value of $1,000 per coin. At the time of writing, it is now hovering at $8,000. Yes, that’s 800 percent in a year!
Volatility isn’t just how much it can drop; it’s also factoring how much it can rise in a given period of time. If you invested $5,000 earlier this year, you would now have $40,000 to buy me a steak dinner (medium please). At the very least a coffee, come on now!
CAN YOU STOMACH THE VOLATILITY?
As we get into my 2 methods/strategies, you have to ask yourself how much you can take. If you’re investing $8,000 this afternoon to buy one BTC, are you going to faint if the value dropped $600 tomorrow morning? If you’re like most people, the answer is a resounding “YES!”…..Actually it’s probably a stomach gurgle and an ‘are-you-serious?’ face and then a resounding “YES!”
You may like my much less riskier strategy. If you’re still with us, move on to the next section and let’s make some money!
THE TALE OF TWO STRATEGIES
Before I go on, again, I must make a disclaimer — basically use this at your own risk.
METHOD 1: Invest into BTC or any other cryptocurrency Directly.
Okay so the first strategy isn’t much of a strategy as it is a waiting game. Basically you will need a digital wallet that is tied to your bank account. Generally this is done through a website like coinbase.com which is where I hold one of my digital wallets.
Here’s a quick guide on digital wallets: www.buybitcoinworldwide.com/wallets/
You can purchase a whole BTC or fractions (Google: Satoshi) with your bank account or a credit card. After your purchase, hold onto it until you become a millionaire and just let me know when you want to buy me dinner. =)
METHOD 2: Invest into BTC or any other cryptocurrency Indirectly.
At last, you’ve reached the real bread & butter of this guide. As an investor into Bitcoin, Ethereum, and Litecoin, I can tell you that the volatility is not for the faint of heart. You are excited about making money but the reality sinks in that you could lose considerable chunks of it and it is not FDIC insured or backed by anything. If you are new to BTC and crypto, this is the method for YOU and the method I am the most excited about as it pertains to cryptocurrency investing.
Method 2 is how you can invest into the cryptocurrency craze without the high risk. For this method, you will need to have a means to purchase stocks. I personally love Robinhood App and I use it for most of my stock investments. Use my referral link and you’ll get a FREE stock just for signing up. I also get one so it’s a win win for all. http://share.robinhood.com/johnnyl25
So Johnny, how do I invest into cryptocurrency indirectly with lower risk?Glad you asked. Let’s get into it.
My overall approach to investing is really to find the product or services that are essential to an industry or the public. For example: These days there is considerable amount of technology/computers that are being built into cars, even base models. So while the car companies struggle with their stock prices, there’s a well-hidden benefactor.
All the car manufacturers are purchasing this technology from someone else. In other words, all that GPS stuff in your car is not made possible without another company that is tasked to create it.
If I’m a maker of GPS software or in-dash technology and Ford or Nissan call me up for a million units, chances are, my company’s stock is going to go up. So rather than investing directly into Ford or Nissan, I’m going to invest into the companies that are leading the components sector for the automotive industry.
As an example, check out STMicroelectronics N.V. (STM) which makes components for Apple and the automotive industry at large. They are a semiconductor business and as you know, semiconductors run the world. STM is up just over 150% this year.
I have applied that exact same strategy to Cryptocurrency. Let’s make a quick list. What are some basic things you need for cryptocurrency infrastructure to exist?
1. Computers/Mobile — for trading, buying, selling, and researching
2. Digital Wallets — to secure your cryptocurrency
3. Graphics cards — to mine Bitcoin and other alt coins
4. Power Supplies and other hardware — for mining rigs
Investing into these basics is a great way to cash in on any trends for cryptocurrency because they all basically need these items to exist. Whether you mine Bitcoin, or you just buy/sell. Whether bitcoin goes up or down, you still need these basic elements to do anything crypto related.
Well DUH Johnny! Yes the best strategy is sometimes the simplest one.
Now these basic elements don’t rely solely on cryptocurrency to exist or else you’d be mounting very similar risks as directly investing into Bitcoin.
Let’s get into one specific example and one of my favorites. NVIDIA!
Nvidia makes graphic cards for an ever growing video gaming industry. I’ll say this once: Cryptocurrency would not exist without Nvidia’s products because you need Nvidia (and other manufacturers) to make graphic processors to mine for Bitcoin. It’s as simple as that.
Let’s look at the facts. Nvidia’s stock was priced at $103 per share in May 2017. It is now touching $217 just 6 months later. That’s > than 100%. So if you put in $5,000 in May, you’d now have a beautiful $10,000+ all while you’re just lounging around liking random photos on Instagram.
It also helps that Nvidia is deeply engaged in Gaming, professional systems/virtualization, and Artificial Intelligence. So if the demand for mining or crypto drops, you can still rely on other industries that Nvidia serves to hold you down. It’s kind of a micro-diversification if you will.
If you’ve got the guts to jump into cryptocurrency and ride the waves, go right ahead! However if you’re like most and you want to join the action but you’re not into risky business, Method 2 is your new BFF.
So there you have it. That’s right, Dude. The beauty of this is its simplicity.
-Johnny
IG: @waltzinthestreet
P.S. Interested in learning more? Feel free to send me a message with any questions and I’ll do my best to get back to you!
This story is published in The Startup, where 263,100+ people come together to read Medium’s leading stories on entrepreneurship.
Subscribe to receive our top stories here.
