How to Choose Good Cryptocurrency Purchases

How to Choose Good Cryptocurrency Purchases

Speculating is not a game — but the best speculators treat it like one. (How to)

It makes them fearless and competitive.

They play to win but they aren’t afraid to lose

Fear is a speculator’s worst enemy. Fear of losing will keep you out of the game completely. Fear of missing out will have you chasing unicorns and catching donkeys.

Trust me, it’s not as fun as it sounds.

I’ll teach you how to get in the game, but first I have to do my duty and tell you what not to do when you’re in it.
The Simple Truth

It’s by no means guaranteed that you’ll profit from cryptocurrency speculating.

If you’re going in with the intention of supporting what everyone else has already become rich from, then you may as well give them a quarter of your money and walk away right now.

When it comes to speculating there is a simple truth.


If people have already made money from an asset, when they cash out their positions the value will go down, and you will be left holding an asset that is worth less money than what you bought it for.

Buying cryptocurrencies is no different in this respect than most other aspects of our capitalist society.

The stock market, real estate development and financial services all work on the same principle: an asset is a good investment only if its purchase price is less than its anticipated future value, and that future value will always be dictated by future demand.

In simple terms, by stepping into an investment that someone else already has a stake in, you are raising the value of their stake by increasing the demand for it. Similarly, you are making that investment in the hope that more people will invest after you, raising the value of your stake as well.




However, once the value has risen high enough, it’s more likely that people will want to realise their profit.

In doing so, the balance shifts from people wanting to buy the asset (inflationary pressure) to people wanting to take their money out (deflationary pressure) and so the value of the asset will decrease.
The Value of Critical Thinking


“Be fearful when others are greedy and greedy when others are fearful.”

— Warren Buffett

I’ll add to Mr. Buffet’s quote by saying “Be fearful when your heart tells you to be greedy, be greedy when your gut tells you to be fearful. Never ignore your common sense.”

That’s why every crypto trader in your crypto Facebook group will parrot the words “Buy low, sell high”, as if they’re doing you a favour.

That’s why you should prospect the coins in the red — not the ones in the green.

That’s why you should look outside of the top 20 for your next purchase.

It’s all very counterintuitive and goes against one of our most fundamental survival instincts; that the odds of success are heavily dependant on being part of the pack.

Fight that instinct.

Cryptocurrency speculating rewards leaders, and punishes followers.



Playing a reactive game of investment whack-a-mole by jumping on every coin that’s skyrocketing is a great way to watch your portfolio whither away.

Remember, if the value is not rising it is falling, and being late to the party is far worse than not going at all.

 
How to Find a Good Purchase

Don’t search for the hyped, search for the yet-to-be-hyped: those cryptocurrencies that deserve more attention than they’ve received so far.

 

Good speculators think predictively.

We search for hidden gems and support them through their early stages of development, hoping that once they find their legs, we can share their success.

Here’s 13 questions you should ask yourself before buying a specific cryptocurrency:


1. Is there a real world problem that the company is trying to solve?

2. Will their proposed solution drastically improve the way things are currently done?

3. If the company was to solve this problem, would the solution be newsworthy, profitable and useful to society?

4. How will they monetize this currency? Is there enough of a need for the coin or token to fuel increasing demand?

5. Does the company’s roadmap outline a sound strategy towards achieving their goal?

6. Are the milestones listed on their roadmap realistic, and will they be newsworthy?

7. Is the company currently on track with their roadmap, and do they have a good track record of meeting their milestones?

8. Based on their past experience, do the team demonstrate the ability to achieve their roadmap?

9. Is this company the one most likely, amongst its competitors, to succeed at creating a blockchain solution for the problem they’ve identified?

10. Does the company have any pre-existing businesses, apps or products that you can review and, if so, are they any good?

11. Is the currency undervalued? Is the market cap low? Is there room to grow?

12. Are you satisfied that there are no foreseeable changes to society or technology that will alter the need for the company’s proposed solution?

If you cannot answer “yes” to each of these questions then you are thinking emotionally, not predictively, and emotion is the enemy of the astute speculator.

 

You will find that answers to the above questions are readily available, provided that you are willing to do your homework. Here are 6 places that will help you find the information you need:

1. The company website. Be sure to study their whitepaper, roadmap and team. If any of this information is missing, don’t buy it.

2. Competitors websites. Compare their whitepapers, roadmaps and teams. Which project is most likely to succeed?

3. LinkedIn. Make sure the team has achieved what they say they have.

4. Facebook. Search the project name in the search bar and review public perception on the offering. Sometimes the less you find the better, it can be a signal pointing towards a project that is under-hyped, but it can also mean their marketing is weak.

5. Google. Search for anything that you can find on the company. Especially articles, news and interviews. Avoid rumours and pay attention instead to past statements from the team making promises of things to come. Have they missed deadlines? Have they developed any tangible product worth talking about?

6. Ask their community. Join their Facebook Group, Telegram Chat or Discord Group and ask questions to fill any knowledge gaps.
Be Studious, Patient, and Disciplined

If you’ve done your research and you’re confident the project will succeed then you will have no real reason to panic when the price dips, which it inevitably will.
 

It’s normal for people to sell their stake, and they do so for any number of reasons. If you follow this guide, the most common reason will be that they haven’t done as much research as you.

 

Make informed decisions and trust them through your uncomfortable emotions. If you were confident enough to buy the coin in the first place, and the company has done nothing to lose your trust, then leverage that confidence and invest additional amounts during the dips.

 

If you have an opportunity to buy at a price lower than your original purchase, doing so will bring down your dollar cost average.

If you lose, and from time to time it may happen, then at least let it be from supporting a project that you know deserved your support.

 

You may slip up, we all have. At some point you will probably try something that you know isn’t smart. You’ll either take a big hit and learn quickly, or you’ll gain a small victory and try it again.

 

When you’ve finally had enough of the big hits, you’ll reel in your compulsive behaviour and once more focus on predictive thinking.

It’s all fun and games until it’s not — and then it is again!

Save this article; at some point you’ll want to come back to it and review these principles.

Speculating is not a game, but by becoming a great speculator you will grow to treat it like one.