Jun 3, 2019
My Simple 5-Step Cryptocurrency Investing Strategy
By crypto talk on ALTCOIN MAGAZINE
If you want to become successful in cryptocurrency investing then you need to follow these steps:
1. Valuation
Investing is always about the long term, not short term if you ask me. So when you want to invest long-term then you need to know the valuation of the crypto project. Why ? because it will help you to understand what you are paying and what you are getting. Remember what Warren Buffet says,
“Price is what you pay and value is what you get”
So don’t buy at a very high price even if you think the project is next to Google. It is smarter to buy cheap and gamble to buy at a high price. When you go shopping you always ask the price and compare it with other things to confirm whether I am paying more or less. Similarly, you need to know the real price when you are investing in any cryptocurrency.
Valuation method in this market is still in the infancy stage but I simply look at the market cap and divide it by the real demand of the coin. If this ratio is less than 20 or max 25 in special cases then I start looking for the next thing mentioned below. Even I heard Peter Theil saying that I should look at Facebook's valuation and it was not that high and the project seemed really good so, I decided to invest in it. Even Peter Thiel looked at Facebook's valuation before investing in it.
2. Durability
After doing some valuation, I try to find out the durability of the project. Remember I said in point one that investing is about the long term, not short term. So I try to find out what are the reasons 9 out of 10 customers keep coming back? if they have an app then I try to check if the app has 4.7 stars on play store or app store with minimum 1000 reviews. If this kind of criteria is met then I get more interested. If above-mentioned things are not available in any case then you should try to find out other similar criteria.
If users keep coming back and keep using the coin then it is probably a good coin. If this is true in any project then it might lead to the monopoly in the future. So this kind of metrics is more than necessary to find out the durability of the projects. And generally, if you can invest in a project which is durable and has a monopoly then it has a very high chance of growth. This is what the data shows.
3. Virality
Remember what Steve Jobs has said,
“what is built to show is built to grow.”
You have to find out some sort of virality factor in the product. One of the virality factors is word of mouth but I am not going to talk about it much because we are all aware of it. You just have to find out if people are spreading the coin or not. Will you tell someone about a particular coin you want to invest in?
After that, another virality check is when someone is using the coin, are other people watching it? Just like an Apple computer. When someone opens it everyone watches.
Another method is that if there is any incentive-based successful campaign going on by the coin. Just like Dropbox. Just like Binance’s campaign.
In nutshell, there are many different types of methods but you have to just find one in order for you to make sure that the coin will grow in the longer term. Even if you can’t find that, don’t worry coz’ I will show you one simple trick which will give a good hint about the virality of a coin.
4. Steady Growth Chart
Now, this thing is very important and I guess very few people use this simple but powerful method to analyze a coin. I bet you won’t find this in a maximum number of coins.
When Warren Buffet invests, he invests for 10 years at least. In fact, he says invest like you will never sell your stock. For predicting the price of a stock after 10 years, he watches the price of the last 10 years. If he finds a steady growth in the price of stock then he can expect the same thing for the next ten years, of course, with other checks like valuation, monopoly and many more.
So, I have tried to convert the same principle in the crypto market. Because this market is very volatile you should expect a 15 to 45 percent(range is big but I have no other option but to measure a steady growth by this method and it works ) growth in the project every month for at least 6 months. If this is happening and you buy at the right price then you probably are in a treat, my friend.
5. Avoiding The Pitfalls
When it comes to avoiding pitfalls look for the team first. Are they working as if they have a single common goal? If you go to the Telegram group of any coin you will be able to find out by the tone of the admins and other team members how serious they are in working as a team.
Another interesting thing is to go to the Telegram group of a competitor coin and check out if they are saying anything wrong about the project you are going to invest in. When you find that the competitor has nothing negative to say about the coin, it is actually a very good sign.
If there is a sudden drop in a coin’s demand then find out what was the reason for that. Is it very serious? or is it just a fud ?. Generally, if a coin is growing at a good rate and a sudden drop in the demand, if the coin again comes up quicker then there’s nothing to worry about but still, you have check what was the actual reason for that.
I hope this article helps you become a smarter crypto investor(read this if you are a beginner ) in the cryptocurrency market. I also help people in designing and managing their portfolio so if you are interested in that, then you can join me in my Telegram group here. It is free to join.
Even if you want to manage your portfolio by yourself only, I would recommend to try me with just 10% of your portfolio so you can see some difference. Thank you very much. Your comments and claps are also welcomed here.
