How can you build wealth with your investments in cryptocurrencies? What are the practical actions you need to take to ensure this? We will be answering these questions in this week’s article.
First and foremost, I will like you to know that the advent of every technology cycle ALWAYS CREATES WEALTH. Technology cycles prints fresh millionaires and billionaires. Be it:
- The dawn of the industrial revolution
- The advent of the steam engine (Vanderbilt)
- The steel technology revolution (Andrew Carnegie)
- The internal combustion engine/motor car revolution (Henry Ford)
- The information technology/internet revolution (Bill Gates, Steve Jobs, Mark Zuckerberg, Jack Dorsey, Jeff Bezos etc)
Every technological cycle in history ALWAYS produces several thousands of newly rich. People who adopted the technology early and who held strong through the various phases of these cycles. You should note that the vast array of those who created wealth from these various technological revolutions were lay people who simply invested. The point should be clear. Not all of us have the genius of Bill Gates to code, program and produce the windows software. But the opportunity to be able to analyze trends, see an evolving trend and jump in early is open to us all.
Here, in 2019, we have what is probably the biggest of all technological revolutions. It is the advent of the DECENTRALIZED LEDGER TECHNOLOGY. You and I have the opportunity today to begin investing in the next big thing. Let me be clear. Bitcoin/cryptocurrencies/crypto-assets are going to be very huge. Smart and sophisticated early investors are going to be rewarded immensely for their investment. Having made the point. It is pertinent to understand what it takes to be able to properly invest and reap the returns.
What you need to understand…..
- You need to understand the psychology of the markets: there is a way huge gains are made in all markets be it
- Fixed income markets
- Futures etc
The global cryptocurrency market is no exception. The huge gains are made by savvy investors who understand market psychology. Only the top 10% of investors understand this and they are the ones who make humongous gains in the financial markets. The average individual only feel comfortable investing in an asset when the asset is in an uptrend. When the asset is in a bull run and its price is climbing high. When the asset price collapses (all assets experiences boom and bust cycles) the average joe flees. The irony is that most of the average Joe/Jane (dumb money) buy in when the asset price is climbing and its at or close to an all-time high. When the market turns. They continue to hold on in hope of a reversal. When that does not happen and the price collapses to a point, they sell at a loss. This is the psychology of your average market participant.
Now, contrast that to what the legendary Warren Buffet once said, “be fearful when others are greedy and greedy when others are fearful”. That, right there is the secret to success in this evolving asset class-cryptocurrencies/crypto-assets. You need to know how the big gains are made- The big gains are made by understanding the psyche of the average market participant and betting against it. Whenever there is full-blown hysteria in the market and everyone and their cats want in on the action. That is probably the right time to begin cashing out. Whenever the average person doesn’t want anything to do with Bitcoin/cryptocurrencies (right now is a perfect example). Google queries about Bitcoin/cryptocurrencies has dropped a whopping 96% from its all-time highs of December 2017. Now is when you need to be buying aggressively. Its called investing against dumb money. Its called being CONTRARIAN and its what separates dumb money from smart money. If there is any secret of the great and legendary investors-Warren Buffet et al. It is the understanding of market psychology and INVESTING AGAINST THE INVESTMENT BEHAVIOUR OF AVERAGE INVESTOR. The big money is made by investing when no one wants the asset and cashing out when the masses of the people are FOMOing (Fear Of Missing Out) in
- Dollar cost average in: now that we have established “when is the best time to start investing?” The next question will be “how do I know when to start buying up the asset?”- in this case Bitcoin and other cryptocurrencies. The short answer is you begin to buy at the bottom of the market cycle. The problem though is it very hard to time market bottoms. The easiest way to gauge when it’s the right time to begin to buy in is to look at the historical price chart of the asset and determine how much percentage loss it normally surfers whenever it enters a bear market. When that is established, you can use that as a guide in your current situation. For example, before this current bear market (2018-2019) Bitcoin has had 3 bear markets before (i.e it is a time in the cycle of the asset when it just continues to lose money). During these bear markets, it suffered between 85-92% loss from its all-time high, it will be a good time to begin to accumulate aggressively when the price hits between $3,000-$5,000 range. Which is between 70-90% down from the last all-time high it made in Dec of 2017. I can begin buying any time it dips down within this range. It gets to $5,000, I buy some. Then it dips to $4,500 I buy some more. It hits $4,000 I buy more. It falls to $3,700 I buy and so on and so forth. Its called dollar cost averaging. It’s a way of getting the asset as cheaply as possible without risking missing the opportunity to buy the very bottom which is very hard to do.
- Understand Bitcoin’s All-Time high Multiple: now you have accumulated some Bitcoin and altcoins. You are anticipating the next bull market. The question now would be “how would you know when to exit the majority of your position and cash out?”. You can have a rough guide if you once again study Bitcoin’s price history and behavior.
In 2011, from a price of $32 Bitcoin moved to $260 by early 2013. A price appreciation of about 860%. So had a multiple of 8 from its low of $32 (*8). From early 2013 to Nov of the same year. Bitcoin moved from $260 to $1,200 a price increase of about 600%. A multiple of 6 from its previous all-time high. Lastly, from a previous all-time high in early 2014, Bitcoin hit $19,450 in Dec of 2017 a price appreciation of about 1,600%. A multiple of 16 from its previous all-time high.
If we add these three figures together (8+6+16) and we divide the sum by 3 to get an average (8+6+16)/3= 10. So we can safely assume that in the next Bitcoin bull run it will at least go up a multiple of 10 from its previous all
-time high. Since its previous all-time high was $19,450, a multiple of 10 of that figure would be $194,500. It would be safe, in the next Bitcoin/cryptocurrency bull run to begin taking profit from when it hits $150,000 per bitcoin.
The next Bitcoin halving is expected around May of 2020. Block rewards drops by half and the scarcity of this asset increases. The litecoin halving is this year (August 2019). These are exciting times in the cryptocurrency sphere and there is no better time to begin your investment in cryptocurrencies than now!!!
If you would like to know how to begin to get involved and invest in decentralized blockchain startups, bitcoin and other cryptocurrencies click here
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