Article contributed by Tin Money. Follow them on Medium here.
Waiting for the Bottom
I would argue emotional self-regulation is the hardest thing for crypto investors to master. I certainly have not mastered it. Not even close.
If you’re new to crypto investing, and indeed, even if you are a seasoned investor, The Intelligent Investor by Benjamin Graham should be on your reading list.
It’s an old school book that deals with stocks and bonds, but many of the principles apply to crypto investing. Two key points from that book are relevant here:
Investing versus speculating; and
Dollar cost averaging (DCA)
When it comes to volatile markets, especially highly speculative ones like crypto, understanding those two points can do wonders for your emotional self-regulation.
Fear, Euphoria & Impatience
I imagine most have heard of the crypto “Fear & Greed” index. It’s a fun little tool that I think is mislabeled. If I were king for a day, I’d change it to the “Fear & Euphoria” index.
Why? Because I believe those are two of the most important emotions that we must master to be effective crypto investors/speculators. Fear and euphoria are the primal emotions that drive terrible decision making.
When you add impatience to the mix, you’re just about guaranteed to get rekt.
Have you ever chased a pump and bought the top? That’s fear and impatience.
Have you ever rode a pump all the way back down to where you started (or worse)? That’s fear and euphoria giving you long slow kicks in the bean bag.
Have you been “buying the dip” from the recent highs? If you did, I’ll bet you a $Satoshi it was a coin that pumped after you first bought it. That’s euphoria and impatience.
It’s also called “putting good money after bad” and they are expensive lessons. No judgement, I’ve done it a hundred times myself.
Investing vs. Speculating
Both are valid ways of approaching crypto. The short-hand version is hodling vs. trading.
Prior to my Bitcoin conversion, I was primarily a crypto speculator. I’m very much a tech-nerd and almost always jumping way out in front of tech trends.
That’s one of the reasons I’m so fond of tinkering with crypto. The tech is interesting and exciting to me. I think crypto tech is going to fundamentally change how the world works.
I’m also an old-school monetary contrarian. I believe long hodling debt-free real estate and physical gold are the two safest financial plays an individual can make.
Between those two worlds, my thesis is: crypto is an experimental technology that is probably going to fundamentally change the world. Until that happens, I’ll long hodl real estate and gold and tinker with crypto just in case.
Most of my portfolio is in equities through a 457b (the government version of a 401k). And I (theoretically) have a defined benefit pension and Social Security.
I guess you could call those speculative investments too.
Dollar Cost Averaging (DCA)
DCA is great for a number of reasons. Most importantly, it takes a lot of emotion out of your investing decisions.
Trouble is, it’s kind of boring. But it works well, whether you’re a speculator or an investor.
The idea is you buy (fill-in-the-blank) token (or stock) on the regular. There are calculators that can give you an idea of what kind of returns you can expect with various cryptos.
From my perspective, the optimum time frame is buying once a week. And now that the crypto markets have crashed from their ridiculous bubble highs, I’m starting to DCA back into some projects.
Why DCA now?
Because I think it’s a good time. I’m almost certain the markets will continue to dump for a few more months (at least).
I also know timing the bottom is going to be nearly impossible. From here down, every new low will bring the fear that it will go lower.
But every pump that inevitably comes will also bring the fear of missing the recovery. DCA helps mitigate those emotions.
If the market recovers (or just bounces), I have some skin in the game to ride the pump. If the market keeps dumping, I’m not all-in, and eventually I’ll be buying at the actual bottom.
To keep it interesting, I have a small account to trade with. It’s a fraction of my portfolio, but it lets me tinker and feel like I’m doing something.
It’s like having a bowl of candy on your desk to keep you from eating all the donuts in the break room.
The trick is to not eat all the candy at once.
Six Tokens I’m Dollar Cost Averaging
This list is broken down by my perceived risk and by the amount I’m allocating. I am buying each one every week, and started a couple weeks ago.
I have been sitting in stable coins since April. When I started DCA, I allocated about 30% of my stable coins to each of these projects as a “base”, except for PING and BTC, which I already had.
My DCA is coming out of my monthly salary. I’m keeping the other 70% of my stables in reserve to ramp up the DCA if (when) the market dumps again.
There are a ton of other projects I can’t wait to speculate on when the market bottoms. Cosmos, Polkadot, Fantom, Rune, Axelar, Layer Zero, IOTA, Hedera, the list goes on and on.
They’re just not on my radar right now for long-term accumulation.
$BTC is almost a no-brainer for me. I believe the thesis that Bitcoin is going to massively appreciate in value over time.
I also know Bitcoin can absolutely tank to zero. Nevertheless, I think the risk of that is far lower than the potential that Bitcoin becomes a major force in global finance.
I believe the central banks of the world are in an inescapable debt trap. The only thing they can do to keep the wheels spinning is debase their currencies. I also believe that debasement will lead to ruin for 95% of the world.
I think Bitcoin might provide an escape route from that trap.
Put another way, I think it’s likely enough that 40% of my DCA budget goes to $BTC every week.
Image: Constellation Network
Three weeks ago, this wasn’t on my radar. It’s still super speculative and not at all a guarantee. But after doing in-depth research, this is 100% a long term play for me.
Constellation and the native token $DAG represent an L0 solution that merges big-data tech with crypto. If it works as advertised (and I think it will), this project is the crypto promise delivered.
I’m so bullish on this project, 20% of my DCA budget goes to $DAG.
FRAX Shares / FRAX Price Index Shares (FXS / FPIS)
Stable coins have made a lot of waves in the crypto space lately, and rarely has it been anything positive. The (very foreseeable) LUNA debacle absolutely rekt the entire space.
FRAX is different. The lead developers write stunningly rock solid code. They’re also thoughtful, conscientious, and committed. FXS was fair launch, with no venture (vulture) capital swooping around.
FRAX currently has too much exposure to USDC to be the stable coin that crypto really needs. But with FPIS and the innovations Sam Kazemian and Travis Moorekeep writing and deploying, I think it’s only a matter of time until FRAX is the de facto stablecoin of the crypto space.
Not to mention, with all the stable coin FUD, FXS is practically free right now. When it hit $3.95, I bought with zero fear. I continue to buy with zero fear.
I acknowledge I may well have drank the Kool-Aid and I still put 20% of my DCA budget into FXS.
When FPIS expands beyond the Ethereum chain, that will change to 10% FXS and 10% FPIS.
Alkimi Exchange (ADS)
Image: Alkimi Exchange
Admittedly, with ADS I’m being a bit of a degen baboon. Alkimi is built on Constellation and is a decentralised marketplace for digital advertising.
It is also one of the reasons I am so bullish on Constellation and $DAG. The digital ad-space is a multi-billion dollar industry and drives the phat profits of names like Meta (Facebook) and Google.
Alkimi has the very clear potential to disrupt that space. I haven’t done as much research as I should, and my opinion might change after I do.
I’ll do a deep-dive one of these days, but from what I’ve seen, the team behind this project is uber legit in digital advertising. Plus they’re building on Constellation, so if one pumps, I think the other will follow.
All together, the narrative is strong enough for me to put 10% of my DCA budget into $ADS.
Planet Finance (AQUA)
Image: Planet Finance
I have been following this project for ages. It’s a juicy DeFi platform on the Binance Smart Chain. Truthfully, DeFi has a black eye right now, and it may not recover.
But if any project will, I think Planet Finance has a great shot. The UX is a little wonky, and they did have some fallout from the LUNA debacle. Amazing devs though, and they’re still building.
I made a nice chunk of money on $AQUA when it pumped from $90 to around $500. For once, I fought off my emotional baggage to actually realise those profits.
AQUA was fair launch, it has really solid stablecoin staking rewards, and ridiculously investor friendly tokenomics. AQUA is the governance token and it is hard-capped at 100,000.
If Planet Finance survives this crash and pumps in the next bull-run, the scarcity alone is going to make the AQUA price move stupidly fast. The risk to reward on this project is a no-brainer for me.
I’m putting 5% of my DCA budget into this until pump time, and then I’ll brag to everyone about how smart I was to call it early 🙂
Image: Sonar Platform
I have a real fondness for Sonar PING. Admittedly, PING was a “fear and impatience” buy for me.
A couple of my friends had gotten into PING before the big summer pump and did really well. I FOMO’d the crap out of PING shortly after and have been watching my bags deflate ever since.
PING is the utility token for the Sonar Platform, which is still in Beta. The team behind Sonar is as solid as I’ve seen in the crypto space.
They’ve been steadily working on, and building the project the whole time. The company is a registered corporation in Malta, and they are well-positioned to be in full MiCA compliance.
That might not sound like a big deal right now, but I can just about guarantee you a ton of crypto projects are going to get stung by regulations in the coming years.
Sonar is way out in front on that aspect. Of course, it’s a super micro-cap and there remains a lot of work to be done.
Even though my bags are super upside down on this one, I’m still putting 5% of my DCA budget aside for PING.
Will that end up being “good money after bad?” Maybe. But the token price is so low now (as is my average buy price), just getting back to where I started will make me a nice profit.
Could sink, but that’s crypto. I believe in the team and for a long-shot, low-cost, potential moon coin, I think PING has the stuff.
While I remain confident the market will continue to suffer until the Fed pivots, I think these tokens are worth accumulating.
Will I get burned by any of these? Maybe. Just from a probabilities stand point, and given the really brutal market conditions, I’m more likely to be wrong than right.
But that’s part of what makes crypto fun. As has been said by anyone offering crypto advice ever, the trick is to invest money you won’t mind losing.
Anything involving crypto markets is ridiculously high-risk. If you’re “all-in”, you are running an extremely high-risk of getting seriously rekt.
But if you can keep emotions out, you manage your risk intelligently, and you have a lot of luck on your side, crypto can bring life changing wealth.
To that end, I think DCA is a great way (especially for beginners) to safely dip their toes in the deep ocean of crypto. Regardless of what you do, just realise that in the beginning you’re going to make (a lot) of mistakes.
After you’ve spent 1000 hours or so tinkering with this stuff, you’ll start to see how money really gets made with crypto. You’ll find your path that works for you.
The trick is to stay solvent until that happens.
Remember, these are just my opinions. I’m not a financial advisor, this isn’t financial advice, and always DYOR. Following any of these ideas might cause you to lose all of your money. I am 100% serious about that. I like tinkering with this stuff, but I’m on record acting like a total baboon. Invest accordingly.
Until next time, be safe, be smart and be sure to tie the camel.
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