My Crypto Investing Rules
Rule #1 in a series on the rules that I follow for investing in crypto currencies.
Rule #1 Understand why you are getting into crypto investing.
I think the number one rule everyone should have before they begin their crypto investing journey is to understand why they are investing in the first place.
Are you investing for short-term reasons to pay off student loan debt or to buy your first house?
Are you investing for more longer-term reasons like growing wealth or investing for retirement years in the future?
You could even be like me and be investing because you think cryptocurrencies are the future. Over time more and more people will understand that Bitcoin and other crypto coins may be the best place to invest in today’s market.
Knowing the reason you are investing will help inform your decisions on which crypto coins to invest in and what to do when you start to see market swings of 10% to even 30% in a short period of time.
If you are in it for the long term, these swings won’t bother you. You will just keep investing regardless of what is happening in the market because you think, long-term, that the markets will recover and continue going higher.
If you are in it for the short term, you should be watching the markets a lot more closely, and if you think there may be a significant dip in the market, you should consider taking some profits or pulling out of the market altogether
Look at the market today. In the last week are so the crypto market has been in a pretty steep decline. Bitcoin itself, at the time of this writing, is down 16.89%. Etherium, another popular coin, is down 24.35% in the last 7 days.
Am I scared or nervous about what I have invested? Nope, not at all. I know that swings of this magnitude are pretty standard. This is just the nature of the crypto markets. The more stories I hear of companies investing in Bitcoin a billion dollars at a time, the more sure of my thoughts I become.
None of these companies would be investing that amount of money if they weren’t already concerned with the U.S markets. When the U.S. government prints money faster than an A-10 Warthog can go brrrrrrr. You know we have a problem.
Crypto Currencies are a store of value
It is pretty easy to understand where the value of cryptocurrencies comes from. Take Bitcoin, for example. Currently, there are 18.64 million coins in circulation. So far, the market capacity for the entire Bitcoin space is $882.974 billion dollars. If you divide the Market Capacity by the number of coins, you will get a Bitcoin price.
$882,974,000,000 / 18,640,000 coins = $47,369.85
The current price, as I am looking at the market right now, is $47353.56. So pretty close. Now try that with the stock market. With stock splits and hedge funds shorting stocks 140% over the numbers of available stock, how do you figure out what the value is?
The sad fact is that the markets are being manipulated and have been for a long time.
Individual sovereignty and ownership
Individual sovereignty and ownership are pretty important to me. I like to believe that I am in control of myself and can and should make decisions and take actions in my own self-interest.
In the U.S., however, you really are at the mercy of others.
Oh, did you want to capitalize on market fluctuations? Sorry, we froze all trades for that stock.
Oh, you expect money in your account when you needed it, but it was stolen? Sorry, we are freezing your accounts and preventing you from selling your stocks. Why yes, the markets are still trading.
With crypto investing, you don’t have to rely on someone else to hold the money for you. You can keep your crypto coins in a wallet that you control. Does this mean that if you screw something up, you are responsible for it? Absolutely. To me, that is the way it should be. The more control you give someone over your finances, the more they will have control over you.
A global unit of accounting
Another advantage of Bitcoin and cryptocurrencies, in general, is that they can be used as a global system of accounting that no one country owns. Today, the U.S. dollar is the world’s reserve currency. Because of this, the U.S. can manipulate the value of its currency, and other countries really just have to take it. So far, there haven’t been any repercussions for the government printing of trillions of dollars per year. But one day, it will.
What would happen if the dollar was no longer the world’s reserve currency but another country like China? If you yuan became the reserve currency, China would be the one who would influence the world markets. Even more than they already do.
