Bitcoin is going up alright, but DON’T BUY IT!
There’s been some big moves in the markets, everyone is talking about the approaching bitcoin halving and the pundits are all starting to make some big price predictions again…
$10,000… $20,000… $100,000…
I even saw one guy talking a million dollars, but that was very much a long-term prediction and not relevant to this discussion on getting into the market.
I’m also quite positive if I only owned one coin I’d end up cashing it in long before it got to that price.
The thing is, buying Bitcoin is still highly speculative and not too many people have got the ready cash laying around to buy a few Bitcoin ‘just in case‘.
Especially when there’s a real chance it could all disappear overnight.
You Do Have Much Better Options Though
The good news is, there is a much better way to cash-in on a big move in Bitcoin.
A quick look at the price charts will tell you that, up or down, Bitcoin tends to drag all the other crypto currencies with it.
Think of Bitcoin as the tide and all the other Cryptos are boats… so when the tide goes in… or out… all the others respond as well.
Now some of those Cryptos are going to experience bigger moves than others, but most of them are going to move in the same direction.
Generally speaking, the major cryptocurrencies tend to track the Bitcoin price much more closely, while the smaller emerging cryptocurrencies can show a lot more variation…
Basically the rubbish Altcoins with no real business plan or reason for being, don’t move much at all…
While the interesting & innovative Altcoins can often build on the momentum of the Bitcoin moves to skyrocket in value.
Sometimes the very best of them can even defy the Bitcoin moves and increase in value when everything else is going down, though these tend to be short terms moves..
So you should see where this is going by now…
Lets say you’ve got a bit of cash free and your confident this is the start on another bull run for Bitcoin… and you want in on it this time.
Option 1. You simply buy Bitcoin and sit on it.
If the bull run eventuates, you’re sitting pretty. Your big challenge is to pick the top and get out with maximum profit, but most people should manage that OK..
However, all your crypto-eggs are in one basket. So if there’s any sort of reversal or significant correction, you’ll have to sit tight and watch your investment shrivel… for however long it takes… and wait for the continuation… if it comes back at all.
Option 2. You buy a bit each of a few of the major cryptos.
This seems to be the approach most of the web-gurus recommend, usually a percentage of your portfolio in Bitcoin, then the rest split between 4-5 of the majors.
Unfortunately the majors track the Bitcoin price moves pretty closely, so the ‘safety net‘ is an illusion and you face the exact same risks as buying just Bitcoin.
Option 3. Buy only Low-Cost Cryptos
This is a better option, but the trap is, when a low cost crypto does appreciate, people tend to cash out and convert those holdings to Bitcoin or fiat currency… which brings the price back down, fast.
So if you’re in it for the long haul and you’re OK with a bumpy ride, you can just hang in there. But for most people watching your gains all but disappear is a pretty stressful experience… so there’s another option…
Option 4. Buy Only Low-Cost Cryptos and Trade Into Bitcoin
This is my preference. Look for the new/emerging cryptos with real potential and buy them cheap. Often they’ll be just a few cents each. Always under a dollar.
When they take off, I book some profits and then watch for Bitcoin price pullbacks and exchange a portion of my holdings for some Bitcoin or other major cryptos.
You benefit from the low cost and high potential of the emerging cryptos, but then you secure your profits in the major cryptos, which are less susceptible to price moves driven by profit taking.
For the price of a single Bitcoin, you can buy hundreds of thousands of Altcoins…
If the bull run starts, most will move in a similar direction and some will skyrocket.
Of course if Bitcoin was to tank again, so would most of these… but…
When you pick currencies built on a solid business model and an innovative blockchain application, there is a very good chance they’ll hold most of their value through any correction and some will even recover long before Bitcoin.
And the strongest emerging Altcoins can even move independently of the majors.
Other Altcoins might only make smaller moves relative to Bitcoin’s moves, but that’s OK too. That tells me the Altcoins’ price is based more on it’s merits than broader market moves, which adds a bit of balance to my portfolio.
OK, But Which Coins Do I Buy?
The obvious problem is, there are hundreds of low-cost cryptocurrencies that ‘could’ be potential candidates. You can’t buy them all. So there’s going to be some real FOMO going on if you just buy a few…
So the best thing is to start with the clear understanding that you are almost certain to miss some big winners. That’s OK though… if you do the work and take a strategic approach, the winners you do find will more than make up for it.
So What Makes a New Crypto a Winner?
There are three criteria I look for in any low-cost crypto I’m considering buying. Basically these are all different ways of assessing whether the Altcoin is likely to generate interest, excitement and uptake… which in turn drives market share and price.
There’s a little bit of flexibility because this is not hard-science and much in this field is still unknown, but any time I start making allowances I also reduce my stake accordingly!
1. Innovative & Understandable Use of the Blockchain.
I’m looking for great new ways of doing things that could have a revolutionary impact on an industry.
A lot of Altcoin developers are breaking new ground but it’s incremental change. What I really want to see is the giant leap forward that’s going to leave everyone else behind… that’s what locks in market share.
Almost as important is that the developers can convey that mission in a way I can easily understand.
I like to think I’m reasonably tech-fluent, so if I can’t make sense of their info, then most other people won’t either. And if the developers can’t convey their ideas clearly and simply, their Altcoin is going to struggle to attract users.
2. Business-like Presence and a Real Plan
As important as the underlying idea is, it’s worthless if they don’t have the practical skills to plan, develop and implement a sound business model.
So I look at the information they put out, their documentation, timelines & milestones, their websites, social media profiles and even the personal profiles of the company principles, to ensure there’s a solid plan in place and the expertise to implement it.
A lot of the Altcoins are obviously in their early stages and all the pieces might not be in place just yet. So there is a bit of leeway here, as long as I get the sense that the techies are starting to bring in any specific admin & marketing expertise they might be lacking.
3. An Engaged Community or Market
This is the X-Factor. It’s hard to explain but you’ll know it when you see it.
It’s largely be dependent on the first two criteria… ie. a solid plan for developing a great idea… plus the ability of the idea (and people) to get their audience excited.
At a Market level, that might be an application that has revolutionary impact on the way things are done… market participants see the potential and get on board with the idea in order to reap the benefits already visible.
On a Community level, it might be more about a possible outcome if the idea is supported and shared as it develops. A lot of web-based services achieve this by focusing on issues like privacy, security, limiting advertising and intrusive practices etc.
Either way you end up with an audience that will include people who become passionate about the project. They become fans and evangelists, and when you have all three, then you have the kind of perfect storm that can see an Altcoin skyrocket in value 100 times or more.
So How To Find These Crypto Winners?
Well clearly there’s a certain amount of work that’s going to be required, but the good news is, a fair amount will already be done for you. A lot of websites are constantly scouring the internet looking for new crypto opportunities, so it’s easy enough to find out when some new Altcoin is generating some interest.
Anytime I spot one of these, I just add it to the list until I’ve got time to look it over.
- A quick look over the website will usually let me assess criteria #1 and #2.
- Checking it’s social media accounts will give me a pretty good feel for how it’s community is developing.
- A visit to Changelly or Binance will let me assess past price action and current market capitalization.
- Searching Medium and Reddit and a few Crypto News sites will tie it all together and let me decide if I want to own it.
Then it either goes on the Buy Now list, the Watchlist or the Blacklist.
The Blacklist holds anything that I’m confident I can ignore from here on. It’s actually quite surprising how many recommendations from other sites end up on this list… usually a good indication the recommendation was only made to earn referral or bounty credits.
The Watchlist contains those Altcoins that have a great idea or application, but haven’t yet convinced me that they’ll be able to do much with it. I’ll usually subscribe to their newsfeed, and keep an eye on it just in case… but I’ll hang on to my money for now!
The Buy Now List is just that… the Altcoins I want to own ASAP. I’m a bit of a technical trader, so sometimes I might wait a while if I think there’s a price pullback due, but more often than not I’m only spending a couple of hundred dollars worth of coin, so I’ll dive straight in.
The Long-Term Trading & Investment Strategy
For me, the risk factor in cryptos is far too high to call it ‘investment‘. So I keep it real and view everything I do as trading…
So I make an initial purchase based on my assessment above, and wait for a significant move. Until then I pretty much ignore it… but once it make that move I start paying attention to the technical analysis so I can identify a logical profit objective.
That’s a point where I’ll take the opportunity to sell a portion of my holdings to recover my initial stake… and some profit.
After that I pretty much forget about it and let it ride.
If the Altcoin keeps going up, fantastic!
If the fundamentals back it up, I’ll watch for a pullback so I can add to my position.
Alternatively, if it goes nowhere, that’s OK too. My capital has been freed up, so I’m happy to wait for as long as it takes.
The only catch is, the big moves are going to happen all at once for most of the Altcoins in my portfolio.
That’s OK, but it can mean you are sitting on a bunch of coins that are going nowhere in particular for a fair amount of time. Waiting, waiting, waiting…
So you do need to be patient.
But if you choose cryptos that you ‘understand’, with an active community who are just as excited about the project as you, then you’ll find the waiting is all just part of the journey.
And if you do your homework and pick quality cryptos with real potential and a solid plan, then you should see some of them move irrespective of the broader market.
So Where Do I Start?
Your first step is to start your own list of possible buys. Ignore ICO Referrals and Bounty recommendations… and focus on Altcoins that are established and already listed on various exchanges.
Spend a bit of time searching for ‘cryptos to buy now’ and you’ll find plenty of lists where someone else has done the initial work for you. Here’s my own list of…
Just make sure you also do your own assessment!
No matter how carefully you research these Altcoins, you’ll almost certainly end up with some lemons in your portfolio. That’s OK… that’s just the way it works.
But if you do your homework and research your choices carefully before you buy, you’ll give yourself every chance of bagging some real winners that will seriously out number your losers.
My only other recommendation is that you take a long term approach.
If you have a bit of cash to get started, that’s great… do your research and split it up over a few different coins.
But don’t stop there! Make a plan to add to those holding on a regular basis.
It won’t take a lot of cash… if you put $50 – $100 into one or two different low-cost Altcoins each month, you’ll have a pretty handy portfolio in twelve months time.
If things start to take off before then, you can reinvest some of those profits in some additional coins, to expand your portfolio even further.
Now back at the start, I did mention the upcoming Bitcoin Halving, and that can give you a sense of urgency. To a certain extent that’s true… the market is starting to move and if you have a bit of free cash, I’d be looking to grab a few of these cryptos here while they are still cheap.
But realistically, if you follow the process above, you’ll be identifying and buying high quality cryptos with real LONG-TERM potential. Cryptos that should continue to appreciate for many years to come!