Cryptocurrency: Buying Smart and Choosing When Not to Buy
In a lot of ways, the crypto market is similar to the stock market (feel free to disagree with me). My point here is that when you are buying a crypto coin you are buying a piece of a business. And in the past few years many startup businesses have chosen to raise funds for many different business needs in many different industries from healthcare to marketing to sports wagering by offering a new coin to the marketplace.
The last report that I saw said that there are currently about 900 active cryptocurrency coins being offered on the market for sale. And if you take a look at ICOalert.com on any given day you will find many upcoming ICO’s that are offering more coins to the marketplace.
Finding Your Own Investing Niche
Just like in the stock market, there are various ways to invest in crypto such as:
· Buying into ICO’s
· Buying lower value coins en masse and wait for a market surge
· Buying and holding coins that the market has rallied behind and that have a strong history
· And the list goes on
Everyone has their own strategy that works for them and they have gotten comfortable using, some investors use multiple strategies to gain many revenue streams for themselves.
I have built multiple revenue streams for myself and my family because I believe highly in diversification and would recommend it to anyone. In fact, I have money in many different investments outside of crypto, but that is a story for another day.
Value Investing
What I want to talk about today is “value investing” in cryptocurrency because I don’t feel like it gets enough recognition. If you are passionate about business and follow the big name investors in the world then Warren Buffett’s name should definitely ring a bell for you.
He is the biggest advocate for value investing in the stock market. He has also said that he doesn’t invest in anything that he doesn’t understand so he has warned many investors against buying cryptocurrency. He brings up an excellent point in mentioning that you should never buy anything that you don’t understand but I disagree with him about not investing in crypto at all. Either do your research heavily or move on to an investment that you do understand.
Buffett has also stated “People get excited from big price movements, and Wall Street accommodates. You can’t value Bitcoin because it’s not a value-producing asset.”
Bitcoin, and many coins like it, were designed as a currency without really having a business model to invest in. When you buy Bitcoin, it’s like exchanging your US dollars for pesos, pounds, Euros, etc.
Changing your investment mindset
Buffet’s mentor, Benjamin Graham in his book “The Intelligent Investor” in 1949, initially discussed the way that Buffett invests, value investing. Obviously, no one had even thought of anything like Bitcoin in 1949, but the concept is still relevant if applied properly.
Essentially, an investor looks at the stock market and chooses companies that have strong backgrounds and are likely to be around for a long time. This can be hard to translate into the crypto markets since the entire crypto market is so young but I believe it is possible to determine some variation of business longevity.
Buffett forms a kind of long-term relationship mentality with whatever company he chooses to buy into because he knows going into it that he doesn’t want to sell the stock. So, he only chooses to invest in companies that he really, really likes.
He has established twelve tenets that must be met by the company before he will consider investing in them and sticking to this investment formula has been the key to his success.
After evaluating the company for longevity, Buffett is looking for companies that are strong companies with solid management and great financial statements but he wants to buy for a very low price and in large quantities because that is when the money is made. Because he bought low and held on for the long term, he has made his money on the buy immediately so he can realize his gains whenever he chooses.
Adopting Value Investing for the Crypto Market
Value investing does not seem to be common in the cryptocurrency space because many investors are buying and trading constantly in order to make the quick money, much like day traders on Wall Street. But, I would urge new investors to consider learning how to read whitepaper for crypto companies and building a solid, long- term portfolio of coins that seem like they have strong businesses behind them.
By learning to read whitepaper and evaluate based upon business models, you will limit the amount of money that you put into scams that are just trying to take your money, as well.
I still play in the various markets and day trade myself but I have a portfolio of long-term holds that I believe will be around for quite a while. I hold them in wallets and check on them once in a while but it is not something that I check on constantly.
I would love to hear your experiences in crypto, day trading, value investing, and anything else that you would like to talk about! And if you found value in this article then I invite you to share with others via social media.
