In this series, Newconomy will be exploring the multitude of ways in which people can make money in the cryptocurrency ecosystem. As with all developing markets, the opportunity to earn a side, or full-time income, is substantial. Identifying sub-areas of interest will help to narrow down the necessary skills and expertise required within the chosen field or specialty. To start with, let’s examine the most obvious way to make money in cryptocurrency – speculating.
Speculating – the basics
You’ll have heard it all before, TA triangles, EMA resistance lines, ‘the bottom’, bear/bull markets, all-time-highs and more. And whilst all those tools and insights can certainly help one make an informed decision of when to invest, there are more relevant fundamentals that we need to pay attention to in order to stand the greatest chance of successfully speculating on cryptocurrencies.
Firstly – research. It needn’t be said that reading Twitter and Reddit comments don’t count. Understanding what the project or currency is actually trying to achieve, the market they are trying to achieve it in (or create), the market share they are aiming for, business partners/notable investors, the competition and more all form part of the core ‘package’ of fundamental research. If an accredited investor, angel investor and venture capitalist would research and analyze it, so should you.
Value proposition and potential market size are therefore paramount. Just because cryptocurrency is ‘new’ and ‘exciting’ doesn’t’ mean that traditional value proposition and market-size potential aren’t relevant. Dig deep and read up, it will help you build a more substantial and informed picture than the majority of cryptocurrency speculators.
Diversify (and minimize your losses)
Successful angel investors become extremely accomplished (and lucky) at picking the startup winners. They do it through thousands of hours of research, meetings and networking events. And then they also get a ‘bit’ lucky. So many angels plowed money into the one-before-facebook or overlooked Twitter and Uber. So how do they mitigate the poor odds of backing a startup (which is no different from backing a cryptocurrency startup)? Diversification. All of your eggs (money) should not be in one basket. In order to hit that home run, you probably need more than one swing at the ball. How much money, and with how many cryptocurrencies you diversify with, is up to you.
Calculate your returns (and how much you can afford to lose)
‘It’s going to the moon!’ you hear the subreddit cry. And hopefully, it is. But what is the moon? Well, apart from the interplanetary object orbiting our home planet, the moon is very subjective for each individual. How much money are you investing? What is the potential size market share of your cryptocurrency startup? What are your profit targets and time frame? What can you afford to lose? All of these questions are imperative in building a complete speculative cryptocurrency investment strategy.
Working out how much you can afford to lose is the most critical. Professional traders mitigate risk and only then set profit targets. Time frame is also hugely important, especially long-term. 2 years? 5? A decade? All of these dictate your tolerance for risk and help increase your resolve with terrifying crypto-price swings. Entry point also becomes less important. So what for the daily price fluctuations if you’re aiming for that $500bn market cap and 100X your original investment.
There are many more fantastic insights into the art of investing and speculating, including our analytics and invaluable resources here at Newconomy. If you can ignore that noise, clamor, and hype, and dig right into the heart of what the prospective cryptocurrency startup is offering, their team and potential future-value proposition, then you will be giving yourself a great head start.
Notes: Due diligence should always accompany investing in cryptocurrencies, and the projects listed here does not constitute as investment advice.