As we enter the third year of the COVID era, we see tectonic shifts in the financial industry. From the debt limit crisis, the failure of Gold as a safe asset, Brexit and the looming default of the major financial markets, there comes a need to be flexible.
The way you invested in the past will not likely achieve the yields necessary to fulfill your retirement goals. Willie Sutton, a famous bank robber, was asked why he robbed banks. The oft-quoted reply is “Because that’s where the money is”.
It is time to move your investments to where the money is.
Remember how you got started with investing. In a time when simply holding stocks made a profit, or a safe company like IBM was considered a safe investment. Everyone trading now knows full well that robots dominate the market, and the major wall street firms are stealing your money by trading ahead of you.
Fifteen years ago, I hired a major bank’s investment advisor to invest $78,000k of IRA funds – representing 10 years of my savings. Over the subsequent 10-years, he took the bank took $22,000 in fees and achieved a $2000 return. The APY on that is tiny – one-quarter percent. At this time, even a simple CD returned 0.5%. With inflation running about 2% per year, my funds decreased in value by about 25% during this time.
My Banker retired and put another guy in place, so I pulled my funds and started doing it myself. In the following four years I have made about 50% using index ETFs. i still feel burned that during the middle part of my earning years, the majority of my retirement savings was locked away in an account that only made the bank money. I thought I was getting wisdom and instead all I got was fees and declining assets.
Every time a Financial Advisor tells you not to trade Bitcoin – keep in mind that the value they are protecting is their own fees, and that they may not have your best interest in mind.
Bitcoin was invented in 2009 as an electronic form of value and exchange. In the early days, it was easy to say that it was made of nothing, worth nothing and would go nowhere. In the following 12 years, the value and adoption have exceeded all expectations. If you are not currently invested in Bitcoin, here are some easy ways:
1. Purchase Bitcoin Using a Traditional Stockbroker
Popular brokers are Robinhood which operates as a high-tech operation. You deposit your funds to Robinhood and purchase Bitcoin. They claim to not have a commission. However, they are entirely funded by order flow – a market consolidator that trades ahead of you – scalping higher prices in the process.
2. Purchase Bitcoin Through PayPal or Other Payment Provider
At this point, everyone and their brother handles Bitcoin, including PayPal. You can simply run your purchase through them.
3. Use a popular Crypto Exchange
The most popular exchanges in the US are Coinbase and Binance.US (Binance-dot-US). Note that Binance.com (Binance-dot-Com) the global company is banned from operating in the US.
My quick suggestion is to make accounts on both of them. Coinbase is handy because they will give you $5 for just opening an account and you get about $40 of free crypto for watching a few movies. My experience is that the UI for Binance.US is easier for me to understand – which is important when moving my hard-earned money.
4. Invest in an ETF that trades in Bitcoin
The SEC and Bitcoin have a fraught relationship. If Cryptocurrency becomes successful, a considerable number of financial corporations and brokers will be unemployed. The SEC runs front man ensuring that Bitcoin is a second class asset in its tax treatment, rules to limit firms from trading it, and ensuring that regular people cannot invest.
While there currently is no ETF that trades Bitcoin directly, the Grayscale Investment Trust (
) allows you to own an investment based solely on Bitcoin assets. In general terms, one GBTC share is about 1/100th of a Bitcoin. Recently, due to changes in their management, the “premium” value has moved from positive to negative. GBTC trades with the Pink Sheets, so you can only trade it during market hours. You can trad GBTC from your IRA account.
5. Invest in Etherium
Bitcoin’s younger sibling is Etherium, and Grayscale now offers Grayscale Etherium Trust (
). Again, this is a trust and not a real ETF, but it gives a vehicle that can be easily traded from a common stock account.
6. Invest in Blockchain Related ETFs
In addition to GBTC and ETHE, 2021 has brought us some new blockchain-based ETFs – And finally, some new ETFs for blockchain – Vaneck Digital Transformation ETF- (
), Amplify Transformational Data Sharing ETF (
), Siren Nasdaq NexGen Economy ETF (
7. Invest in Companies that are Bitcoin Merchants or Miners
Bitcoin Stocks – Some companies are so involved with Bitcoin that they trade relative to Bitcoin’s price. None as directly as GBTC but enough to be worth mentioning. Coinbase – (
COIN 280.61 +20.61 +7.93%), Marathon Digital – (
), Riot Blockchain – (
), Sphere 3d – (
8. Do NOT Invest in Bitcoin Technology – Soon to be Obsolete
Some call NVIDIA (
) a “Bitcoin stock” because their GPUs are used for mining. But this is not trading on the broad cryptocurrency market or even in a sustainable market. You are merely trading the merchant of the current mining technology. The method of bitcoin mining is wasteful both in electricity and electronic waste products. It is already obsolete. You are trading Coke in the era of Rockstar or IBM in the era of Microsoft. Trade Robinhood, not Lehman brothers. Everyone knows that you need to trade emerging technologies and not get distracted by the dinosaurs you see on the road.
9. Move your Money to Where the Action Is
Bitcoin (BTC -1.879%) and Etherium (ETH -3.04%) average about 200% gains per year. However, they tend to run a pattern of going up 400% one year, then going down as much as 80% the following year. So half of Bitcoin investors are thrilled because they’ve been through a couple of cycles and made 400%, and the other half are somber because they lost 80% in their three months of trying it.In 2022, both Bitcoin and Etherium have enough history to become dependable. They have even spawned an investment style to put a fixed amount in per month so as to slowly grow an account without having a considerable risk at the start. For instance, if you want to invest $10,000, you have a massive risk if you invest today – since Bitcoin may drop by 50% next month – burning $5000 of your investment. But if you instead move $500 per month over a 20 month period – you are likely to bridge a number of up and down cycles and good chance to end up with a higher balance at the end of the period.
I can tell you from experience that I own the equivalent of 2 bitcoin at a purchase price of $8,000 each. A couple of years ago, I was on the seat of my chair for every drop. But in 2021, I really don’t care if Bitcoin is worth $40,000 one day and $20,000 the next. I just do not care. It is improbable it will ever again hit my break-even spot and is very likely to hit $100,000. I can state from experience that once you have hit a 400% gain, it becomes far easier to ride out the swings.
10. Investing in Altcoins and 2nd Tier Cryptocurrencies
Once you have a Coinbase and Binance.US wallet, you will see that they allow you to invest in about 100 other cryptocurrencies. It is easiest to look at these in terms of market share. Bitcoin (BTC -1.879%) and Ethereum (ETH -3.04%) still account for 80% of the market. But the next 15% of the market is held by a small number of Altcoins. Cardano (ADA -2.753%), Binance Chain (BNB -0.803%), XRP (XRP -6.318%), Solana (SOL -1.367%), Dogecoin (DOGE -2.15%) and others. These are easy to trade and have regular chart patterns.
Anyone experienced in chart trading of stocks will quickly find comfort in trading the Alt-Coin market. Even if you are not experienced, use this simple formula –
- Find any coin trading in a zigzag that represents an upward moving channel
- Watch when it hits the bottom of the channel
- Buy when it moves up off the bottom (confirming the move),
- Sell when it hits the top of the channel and turns over (confirming the end of the move).
The past channel will show you your holding term, and ideally, a channel that runs 14-60 days gives a good ROI. Day traders like to trade intraday channels, but I have always been a fan of 60 day channels. Finding channels that run 14-60 days give you a nice in and out cycle. Just sell when the coin breaks the channel or goes “weird” on you. Not every investment keeps to channels, but finding the ones that are regular is better than trying for a wildcard win.
My own experience is that the Alt-Coin market generally trends in-line with Bitcoin. So the best time to trade is when Bitcoin is rising. This is easy to spot because all the coins follow the same general trend. In an uptrending market, even your wrong decisions become right. Then when Bitcoin falters, move your money to the stable coins.
11. Stable Coins and their Use
There are a number of stable coins – Tether (USDT), Center (USDC) and Binance USD (BUSD) which attempt to remain parity with the US Dollar. When you encounter a down-drafting market, it is often faster and cheaper to park your funds in a stable coin rather than withdraw them to a US Dollar account.
12. Easy Way to Minimize your Risk
A reasonable way to invest in Alt-Coins is to wait for a time when market analysts predict Bitcoin will rise. Currently, with the debt ceiling looming and the COVID cloud on the economy is a good time.
Then invest a small amount of money broadly in many vehicles. I like to put $50 or $100 in a coin for a month or two, so that I can track the action to be sure it looks sane.
Then if it starts trending, I double and quadruple my investment. Right now, I have an alphabet soup of Altcoin investments with $40-60 in them (depending on whether they went down or up) and only about 5 of them with more than $400 in them. If these coins follow the general trend for Bitcoin, which goes up nearly 400% every-other-year, then I am anticipating returns of about 1,200% per year from Altcoins. Keep the tax treatment in mind – as these investments are taxed as income and not as long or short-term gains.
13. Another Warning
Crypto markets trade 24 hours a day. If you have spent any time trading penny stocks or trending stocks, you are accustomed to the rhythm of pre-market, market and post-market hours. With Cryptos, the market runs 24 hours a day, 365 days a year. The market commonly trends as soon as the US stock market closes. On many weekends you can see Bitcoin takes off just after 4 pm Eastern Time on Friday and carries that momentum through the weekend, only to lose it on Monday morning. Beware of the effect on your sleep and worry that your new investment will lose value if you fail to execute a 2am trade on your phone.
14. Investing on the Wild Side using DeFi (DEX) Markets
Starting in 2019, the DeFi markets have come into their own. This is a place you can make significant gains. The DeFi markets allow you to invest in the virtual birth of a Coin, and there are thousands of them. You can easily have a coin with such a low value that 1 trillion of them is not even $100. It raises the imaginary circumstance that if they rise to a penny, you can retire for life.
The DeFi coins all have convoluted reasons for existing and features that their designers hope will bring them into prominence. From the silly coins like WIFEDOGE (-2.717%) because DOGE needs a wife to the super-serious Greentrust (GNT -3.837%) which promises to offset the investing with green technology. GNT is now my most significant loss so far at about 85% lost (nearly $60 or 1.5 Chinese Dinners). Trading in these coins is speculation in its purest form – you buy a currency foolishly, hoping only to sell it for a higher price to the next fool.
15. Getting a DeFi Wallet
The vehicle for trading Defi Markets is a Defi Wallet. Popular wallets are MetaMask for your browser or Trust Wallet for your phone. These wallets give access to a trading Blockchain, like Binance Smart Chain or Polygon. Finally, within that chain, you can purchase DeFi tokens.
It is challenging to move money from your Bank to the top tier exchanges, to the DeFi chains. This is convoluted because you are moving through levels of deregulation of your money. So be careful to only move money you can afford to lose – and never borrowed money or your emergency funds.
The Crypto markets use the term “Fiat” to mean US Dollars, which are worthless without the trust of the US Government. So in their words, Crypto is Real because it tangibly exists on the blockchain, and Fiat is Fake because it has no value except that people agree to honor the face value of a piece of paper. So you are moving your money from the Fake world to the Real-world, which takes time and effort.
Both Coinbase and Binance have holding requirements of about ten days before you can withdraw funds to the blockchain world. Then you need a third-party utility like Uniswap or Binance Wallet to effect the withdrawal into the blockchain.
16. Procedure for Moving from Fiat to DeFi – from Dollars to Pancakeswap
- Withdraw US Dollars from your bank account into a Binance.US. You can purchase BNB OR BUSD here, but you need to let it sit for ten days.
- Then withdraw into a compatible chain – like Binance Chain.
- Once in the chain, convert it to a DeFi chain for the token family you want to buy. So convert Binance Chain BEP2 to Binance Smart Chain BEP-20.
- Finally, move the money into the more obscure coins supported by that chain. Sift through the features, and make some test investments.
Again, my experience is to start with a $50 investment to start, and then $100 and only if it feels right to work with more significant amounts of money. For me, $50 is the cost of a takeout Chinese Dinner, something we do once or twice a month (with leftovers, it makes two dinners for my family).
17. Staking Rewards add Up To 90% APY to DeFi Profits
One of the things you can do with DeFi coins is to stake them. Staking a coin assists the market and gives you access to staking rewards. When other people trade the coin, or “stake” is rewarded. For this activity, I am most impressed with Pancakeswap and their CAKE ( -3.367%) coin. Currently, if you stake CAKE, you can earn about 80% APY – that is – about 5% per month. Your earnings are dwarfed by the movement in the underlying coin, which has gone up 25% in the last three months. Like Bitcoin – from its recent High in April 2021 to its low in June 2021 was an 80% drop. On the other hand, if you had purchased CAKE in January 2021, you would now have a 2,900% profit.
The 2,900% profit in 9 months is completely dwarfed by SAFEMOON ( -1.737%), which launched in March 2021. If you had invested $1,000 at launch, you would have made $3.5 million two months later.
As Willie Sutton observed – “Because that is where the money is.” For 2022, where you want to be is in Altcoins, Staking and watching the breakout opportunities.
If you ever dream of being one of the early Bitcoin investors, spending 10,000 bitcoin for a Pizza, only to have that amount grow to be worth $400 million in 10 years, do not think those days are over. A simple strategy of investing $100 evenly over 100 coins, total $10,000 investment, will likely yield 50 complete losses, 40 break evens, and 10 winners. But if even one of those winners makes $100,000, you would call this the best investment of your life.
Stay safe and only play with money you can afford to lose. But it may be worthwhile to skip a Chinese dinner tonight and to push the $40 over to walk on the wild side of DeFi and DEX Cryptocurrency.