A Gambler’s Strategy to Spreading Risk on Cryptocurrency and Altcoins
Have you ever pulled up CoinMarketCap or CoinGecko and you see 6000+ cryptocurrencies and you sit there and think: “How in the heck do I know which project(s) to invest in?” Overwhelmed, you read a random article or get a tip from a friend who has made loads of paper gains, put some money in Coinbase and buy some crypto. Chances are that during a bull market you will have success. After all a rising tide raises all boats. But what if you are investing in coins that are doubling when you could be investing in coins going up 5x or 10x? Unfortunately, not all altcoins do this. However many do. I have found some and here is my strategy that I use to build my portfolio. This is not financial advice and I am not a financial advisor. This is my strategy on building an aggressive risk-adjusted portfolio in a bull market.
It’s important to have a strategy when investing in cryptocurrency. Otherwise you will be overridden by emotion and forced to make decisions that you will later regret. A strategy includes how much to invest, how to invest, and when (if ever) you want to take profits. Everyone’s strategy will be different depending upon their goals and risk tolerance. My overall strategy for investing in cryptocurrency is three pronged: I have stablecoins earning interest on Blockfi, Celsius, Nexo, and now Voyager. To read more about these, please refer to my article: Nexo vs. BlockFi vs. Celsius Network. I have also included referral links at the bottom of the article where we both can get bonus Bitcoin if you decide to use them. My second strategy is to dollar cost average into projects that I feel are the cornerstone of a portfolio. For me, I purchase Bitcoin, Ethereum, Pax Gold, and Chainlink every day. I do this on BlockFi and it helps me in growing my Bitcoin stack and giving me the pleasure of purchasing crypto every day. I recommend researching these projects or any other projects before investing in them. This article will detail my third prong which is my speculative portion of my portfolio. I like to use what I consider a Roulette strategy.
Have you ever been to Las Vegas or any casino and noticed a large crowd of people around a Roulette or Craps or a Blackjack table? Five other adjacent tables can be empty and you see everyone cheering, kissing, high fiving, and clapping at one table. This is how a bull market in cryptocurrency feels. When you are a part of it, your endorphins are flowing and you can get a rush of euphoria after realizing that you just made more in one day of crypto investing than you made at a week of work. If you are familiar with a Roulette table, you will see that there are many options to choose from on what to bet. Here’s a picture of what a Roulette table looks like.
The different bets pay different odds depending upon how much risk is involved. For example, if you bet $100 on red and a red number falls on the wheel you get paid $200, a 100% gain. The even/odd and 1 to 18 and 19 to 36 pay the same two to one odds. If you want to increase your payout and still maintain a tolerable level of risk, you may opt to bet the 1st 12, 2nd 12, 3rd 12 or the 2 to 1 bets to the right of the rows. On a $100 bet, these bets will pay $300 if the ball matches your bet’s criteria. And if you are feeling really lucky and risky, you can bet individual numbers and if you hit one of those, you will be paid $3600 on a $100 bet! The odds for these bets vary, but in Roulette, your best odds are the first bets that pay $200 to $100. But in a crypto bull market, many would argue that the opposite holds true and that your best odds lay in betting the individual numbers. For example, is Bitcoin with a 1 trillion dollar market cap and 100 million investors more likely to triple quickly or is a small cap coin with a 15 million dollar market cap and 2000 investors gonna have a better chance of tripling, quadrupling, going 10x?
Before reading any further, if you don’t want to devote the time, energy, or effort into research, it’s probably best to just stick with Bitcoin and Ethereum. These two coins give you exposure to a large percentage of the crypto market and over the long term, they have been very forgiving to long term holders and provided excellent gains. Most of the institutional money is going into these two coins and Bitcoin is the king of cryptos and Ethereum is king of the altcoins. These two coins make up the largest percentage of my portfolio and I consider both to be long term holds.
But if you are seeking higher returns and are open to taking a greater risk with your money, than employing the Roulette strategy may work for you. Before we go any further, let’s draw a comparison to cryptocurrencies and the different sections of the Roulette table. I break down cryptocurrency into four different groupings: Large cap (Bitcoin and Ethereum), mid cap (any coin that isn’t Bitcoin or Ethereum and is over a 1 billion dollar market cap), small cap (coins under 1 billion market cap) and micro caps (coins under 50 million market cap). You can view the market cap by checking on CoinGecko.com or CoinmarketCap.com. Investing in large cap coins is like betting on Red/Black or Odd/Even. It’s the safest bet on the board and you will probably last longest sticking to these bets. Investing in mid caps is going to be comparable to the bets that pay $300 on a $100 bet (1st 12, 2nd 12, 3rd 12 and betting individual rows). These are going to be safer and more conservative than your small and micro caps, but can still provide greater upside when they gain against Bitcoin and Ethereum. That leaves us with the small and microcaps where we can really make some enticing gains. And you don’t have to look very hard to find coins that have 10x’d or even 100 x’d in the past twelve months.
Now you have to decide how you want to divide your investments between these different bets. Maybe you want to put 50% in the large caps, 25% spread among mid caps, and then scatter the remaining 25% in small and micro cap projects. Or perhaps, you are more aggressive and you are taking a YOLO approach and want to do a greater percentage in the micro and small cap projects. This is up to you to decide based upon your goals, risk tolerance, and belief in the bull market. One approach that I like to take is if I hit a big win on a small or micro cap, I like to take out my initial investment and move it into a large cap or a stablecoin to lock in some of the gains.
In my next article, I will go into more detail on how I research and get ideas on which coins to invest in. The nice thing is that they don’t all have to 10x in order for your portfolio to be profitable. It’s important to remember that the hot table in Las Vegas doesn’t always stay packed. Eventually a seven is rolled on the Craps table, a dealer hits a six on a fifteen to make twenty one, and the dreaded double zero comes on the Roulette table. Be sure to take some chips off the table throughout your journey to remain solvent and happy. I’m hopeful that this time is different, but no one regrets selling a piece of there winners and booking a profit. Thank you for reading my article. I hope that it has been helpful and insightful!
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