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Crypto is everywhere. And while it’s hit the mainstream, it’s still early.
There are only about 78 million crypto-holding wallets and there are 7.9 billion people on the planet. So less than 0.98% of the world’s population holds crypto.
This is an opportunity — perhaps a once in a lifetime investing opportunity.
Not only has the value exploded, but so has the number of coins and altcoins you can invest in. The choices are immense and now there are more altcoins than all the Bitcoin that will ever exist (only 21 million BTC will ever be circulated).
You can invest in pretty much any coin or token around any topic. Want to own a virtual plot of land in Decentraland? Check out MANA. Want to invest in Defi (decentralized finance)? Check out SOL or ETH. There are an infinite number of use cases for crypto and Web3 is accelerating at warp speed.
There has never been a time in history when you can get so rich with just a few clicks on your phone in the middle of the night.
Fortunes are made and lost in minutes. There are also a ton of scams.
Just in the last few weeks SQUID, a token marketed as being an invite to a future game modeled after the popular show Squid Games, was actually a “rug pull,” which is when the creator of a currency cashes out and disappears. In this instance, investors lost over $2 million.
So how do you best invest in crypto?
While I’m bullish on blockchain technology and do believe it’s the future, it’s too early to take too much risk investing in any cryptocurrency. I see far too many investors putting all, or most, of their net worth in crypto.
I get emails every week from people who have taken out loans, second mortgages, or leveraged their crypto holdings to buy more crypto. This is dangerous and dumb. Why risk so much of your life security and freedom in one investment?
While some will strike it rich, would you bet your financial life on a coin flip? I’m a big believer in taking risks, but it needs to be calculated risk.
It doesn’t make any sense to invest more than 5% of your net worth into crypto — and even less if you’re just getting started. You should be investing most of your money in more historically predictable asset classes like stocks, bonds, and real estate.
As your net worth grows and you learn more, you can definitely invest more of it in crypto, but you need to feel comfortable with your risk. Are your crypto holdings keeping you up at night? Would your life be ruined if your crypto portfolio went to $0? Then you likely have too much invested.
Humans are terrible at predicting the future. Most of the coins and tokens on the market will be worth nothing in the next few years. Just like over 90% of individual investors can’t beat the stock market, it will be extremely difficult to pick the long-term crypto winners.
This is why it’s important to diversify. Don’t just hold a few cryptocurrencies, hold a diversified portfolio of traditional coins and altcoins.
While this is by no means an endorsement or investment recommendation, my current portfolio is spread across BTC, ETH, and the following alts (LINK, SOL, LUNA, SUSHI, and LDO). This gives me exposure to both the most popular coins and some alts I’m curious about or believe in. My three biggest holdings are BTC, ETH, and SOL.
Investing isn’t gambling. I’m not a fan, nor do I recommend, that you invest in meme coins — which is gambling at this point.
Sure, SHIB has had an insane run-up over the past month, but I wouldn’t put my money in. The biggest reason why is there’s nothing but the hype behind it. It may reach $1 and I might miss out on some gains, but there’s no reason for me to add that much risk to my portfolio.
One of my friends recently invested in KEANU, a meme coin created in honor of the actor Keanu Reeves, and when Keanu himself threatened legal action, a bunch of people lost their money. There is an infinite number of these stories and examples. They just aren’t worth the risk.
Just like with traditional stock investing, it makes sense to dollar-cost average your investments over time. This simply means that instead of putting all of your money in at once, you invest smaller amounts over time (weekly, monthly, etc.).
Over time this allows you to buy when the asset is both low and high, effectively averaging out your cost and protecting you from a big price drop right after you buy.
If you have either a bucket of money, or you want to invest some of your paychecks, consider dollar-cost averaging your investments. Most crypto trading apps have this feature to make it easier to automate.
Last but not least, it’s important to remember that underlying crypto is the exceptionally simple and beautiful idea of a decentralized blockchain. This is a revolutionary concept that will disrupt many of the industries on the planet over the next few years.
Like any investment, only invest in what you understand. While you may or may not have the tech or computer science background to understand the ins and outs of some projects, at least understand their mission and get to know their founders before investing in them.
Listen to podcasts with their founders, join their , check them out on Reddit, read their work. Invest in projects and founders you believe in, not just coins you have a hunch will double overnight.
It’s an incredible time in history to be an investor and to be alive, but I encourage you to be cautious and never invest more than you can afford to lose.
There is always something to invest in, and if you miss an opportunity, there’s always another one around the corner.
That’s one of the best things about crypto: you’re in the top 1/10 of 1% if you start investing in it now. The rest of the world has a long way to catch up. Play the long game.
Grant Sabatier is the cofounder of BankBonus.com and the author of the international bestseller “Financial Freedom” (Penguin Random House), which has been published in 14 languages.
Do you have unique story about investing in crytocurrency? Email Jenna Gyimesi at [email protected].
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