Early Investing

The Investor’s Guide to Making Money in Crypto

The Investor’s Guide to Making Money in Crypto
By Adam Sharp
Date January 28, 2022

I talked with an old friend this week. After we caught up, he asked, “You still doing that crypto stuff?”

He wanted advice on various coins, trading and people to follow. So I told him what I know. Here are the key points.

Don’t Trade

Just don’t trade crypto. Instead, buy and hold coins long term. Trading fees eat into your potential profits constantly. And most people time trades poorly.

And if you think trading stocks is hard, wait ’til you try cryptocurrency. There’s a reason “HODL” is a mantra in crypto.

Perhaps most importantly, holding long term means you don’t pay taxes until you sell. That allows your money to compound far more effectively.

See more in “Why You Should Avoid Crypto Trading.”

Start With Bitcoin

Bitcoin is in another class compared to other crypto projects. It has an amazing security track record. And it has by far the most real world use. It is used as an inflation hedge and emerging store of value around the world. 

I continue to believe bitcoin has the best and most durable catalyst for future growth: inflation. I expect bitcoin will separate from most altcoins in the near future and outperform the overall altcoin market significantly going forward. 

If you’re just beginning to build a crypto portfolio, I suggest starting off with 70% to 90% bitcoin, 10% ethereum and 5% to 15% altcoins. But only buy altcoins if you have the time and inclination to do it correctly.

Read more in “Bitcoin vs. Altcoins: A Lopsided Battle.”

Buy Altcoins in Bear Markets

Altcoins can be ridiculously profitable. But they are also crazy risky. Right now a lot of hot altcoins are getting absolutely slaughtered, and that could continue for a while. 

Successful buy-and-hold crypto investing takes years. You need to be patient. I don’t think right now is the best time to buy altcoins. 

I told my friend that during the next altcoin bear market — when the average token is down 90% and many are down 99.9% — that’s when you should really buy. 

When everybody hates crypto and knew it was a scam all along, that’s when you go shopping. 

Look for crypto projects that keep going strong throughout the bear market — projects with real communities you can join. There won’t be many of them left by that point. 

That is how you can make big money in altcoins. (Some people did make money in Dogecoin and Shiba, but far more people lost it all trying to trade their way to riches.)

I also told my friend to watch a bunch of episodes of “UpOnly TV.” It’s my favorite crypto podcast by far. They focus a little bit too much on trading for my tastes, but it’s some of the best content you’ll find about emerging crypto projects and altcoins. I recommend following the hosts and guests on Twitter as well.

I hope that helps anyone looking for a little guidance.

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