I want to focus on explaining a strategy I employ to grow cryptocurrency capital. There are several mistakes I notice people do with cryptocurrency;
- They think it is a get rich quick scheme.
- They buy high, sell low, and then when the price goes up, they buy high. Quickly, they lose all their money.
- They find cryptocurrency too confusing - which is strange as they all seem to do online banking.
- They believe everything in the news - absolutely the worst thing they can do, so they avoid getting into it as they believe it is for drugs dealers or other nonsense.
- They FOMO, they hear the price of Bitcoin is rising faster and faster, and they panic buy in.
- They are waiting for the price to fall before buying.
There are many other mistakes to make, and I have made many, but I now have a consistent way to increase cryptocurrency amount. At the end of this blog post, I explain why getting into cryptocurrency is vital, and there are no promises to any of this. Whether you are an advanced trader, or a beginner, this strategy will help you.
Any concepts you don't understand, please do further research to familiarise yourself with the space. None of this is financial advice yada yada yada. Finally, remember that most of what is in this post are shades of grey, so don't take these concepts as absolute.
Basic strategies to growing cryptocurrency value
Understand core concepts - fiat money, hard money, stable coins
Fiat - let it be done, is money by decree, that which has been ratified into existence by government. It is the currency you use on a daily basis. Hard Money is synonymous with many (Not all by a long way) cryptocurrencies. They are hard money because they cannot be created out of thin-air. They are typically created periodically by some form of computer algorithm. So, whereas your and government bank can create money out of thin air, cryptocurrencies cannot be created in the same way.
Stablecoins are a digital version of government fiat money. A clue here is that if you believe the government fiat money is going to collapse, what will a stablecoin be worth? Conversely, if you thought cryptocurrency (CC) was going to fall massively, sticking that in stable coins or fiat would be a great idea.
Understand what Limit Orders are
When you pay for something - anything, you either pay spot value for it, or you offer a price which is different to the current price. You may offer a lower price, because you think the price will fall, and the seller will only be too happy to sell it at a lower price. You could offer a higher price in the future, because you think the price will be far higher, but a seller may be happy to take some profits at some point between rather than risk waiting for the price to go even higher.
So, if you followed that - a limit order is setting a price you wish to buy or sell at which is to your advantage. Here is an example;
- CC is at £100 spot.
- You decide to put in a Limit Order at £90 spot.
- Eventually the order fills, as the price falls to £90 spot.
- You set a sell at £110, at some point in the future.
- The currency sells at £110, take £20 profit, you decide to put in a buy at £90.
So, a limit order is simply setting a price to buy and sell at which is different to today's price.
An advanced concept - would you ever offer to buy a CC at a price above today's price? Yes, you may think that if a price hits a value at X% above spot price, that this will be the start of a major price rally.
Accept your cash value may drop
You may put £100 in. You may buy a cryptocurrency (CC) and then see it drop to £60 in value. This can happen.
Only sell to buy back cheaper
The only time I sell a cryptocurrency is to buy back cheaper. One is a natural event, the other is more of a recovery event. A natural event is where I bought a CC at a lower price, I sold it at a higher price, and I am putting in a new order to buy at a lower price. This is the perfect approach because I know that I will end up with more cryptocurrency, even if it's fiat value is lower.
The firesale approach - the recovery event, is when your CC value is falling, but you decide to sell some because you are convinced it will fall lower, allowing you to increase your number of coins. This is effectively - shorting, but I call it the long way around shorting. If I try to explain it, I may lose the reader but I think it is worth doing.
Imagine if you bought 10 coins at £100 each. Their price drops to £90, meaning you have lost £100 in fiat value. You decide the price is going to drop to £80, so you sell at £90, and when the price hits £80, you buy £900 at £80. The order fills at £80, and you now have 11.25 coins. When the price moves to £100, you can sell them for £1125. That is £125 profit on your losing £1000 stake. Not bad.
Alternatively, it can go very wrong. Imagine if you bought 10 coins at £100 each. Their price drops to £90, meaning you have lost £100 in fiat value. You decide the price is going to drop to £80, so you sell at £90, and when the price hits £80, you buy £900 at £80. However, the price falls further, and you decide to sell at £70. You now only have £787.5 fiat value. The price returns to £100 and you can only get 7.875 coins rather than the 10 you originally had.
Understand that you do not need to put lots of savings and money into cryptocurrency right now
This is my overriding fundamental strategy. It is the hardest one to overcome, in my opinion. Everybody I speak to, decides to put a large amount of money in at one point, and then they call it an investment. It is not an investment because we are in the speculation phase of cryptocurrency. People who are far more experienced, and are more dedicated than you, are trading constantly. You do not need to become an expert trader, and you definitely do not need to put large lump sums into cryptocurrency - that will likely lead to ruin. You simply need to follow my strategy and it is for certain you will grow coins. There is no promise that it will be worth more in fiat value. My heart sinks when I hear of somebody who decided to just throw £10k, £20k, £30k into Bitcoin. It is reckless and not necessary right now.
Understand that claims of much higher value still will not make you rich
The temptation is to believe all the hype, all the spin saying that Bitcoin is going $200k, $300k, $1million. It probably is, but I live in the real world. I see the same thing with all the Gold and Silver bandwagon hopium merchants. They may be right, that Gold will be $10,000, and that Silver will be $300 an ounce. So, imagine you purchased 10oz Gold, and 100oz silver. That would be $400k when the prices rose, which nobody would be unhappy with. Would it change your life, especially given the obvious financial disasters heading our way? In this scenario, the only way to grow value is to have more Gold and Silver. There are three ways of doing this; earn gold and silver, buy more gold and silver, keep buying and selling gold and silver to gain more. I can guarantee, that any people on YouTube, who claim to be holding Gold and Silver for a rainy day are buying and selling a certain amount of their Gold and Silver. They will be buying and selling Gold and Silver stocks. A few may have bought Gold long ago, when the price was way lower, but most will be actively trading some of their portfolio.
It is exactly the same with cryptocurrency. You must be prepared to buy and sell a certain amount of your CC, to ensure you can grow the amount of CC you have over time.
Again, I hear of so many stories of people who throw a lot of money into CC, see the price rise substantially, only to hold onto the CC, and then see it fall below the value they purchased it for. One friend bought £4000 DOGE for $0.10, to see it rise to over $0.73 and fall all the way back down again. I did something similar on a much smaller scale with Pirate Chain (ARRR).
You must buy and sell a certain amount of your cryptocurrency holding
Although, it must be clear that this is a key aim of my strategy, I wanted to write a separate section on this. If you do not, buy and sell cryptocurrency to take profits, you will end up losing. This goes counter to all advice, most HODLers (Hold on for Dear Life) give out. If you buy £10,000 of BTC and just hold it, you will never own more than the BTC you bought. You will see that value spend a long time below the price you paid for it and some time above the price you paid for it. What is so bad about that? Other traders are increasing their allocation of BTC, whilst you are sitting still. If you decided to buy £10000 of BTC (I think that is too much at today's value, but this is your personal choice), trade £2000 or £200 of it - whatever makes you comfortable.
Understand about staking of coins
You can leave coins in a wallet, and even some exchanges. Staking is something I have done and want to do more of. It is effectively like depositing your coins in an account and obtaining interest. This means you can accumulate more coins simply by depositing them - in your own wallet, securely.
Understand downside and upside risk
Those more financially astute, will recognise that there is significant "drawdown" risk with my strategy. This is simply the risk that if the asset drops way lower, you have less fiat value. If you have been exiting, as I explained, this will not be as big an issue as it first seems.
Another major risk my strategy is upside risk - that you may sell too soon. This is a major problem, but is what burns people the most. Imagine if you sold all your Bitcoin at £20k, only to see it go to £50k. That will hurt you far more, than if you had held that coin to see it drop from £20k to £10k.
The easiest way to think of the upside and downside conundrum is that nobody can get it right all the time. By buying and selling with a goal to be in profit, without significant software at your disposal this is probably as good as you can do.
Understand about owning your own cryptocurrency
Just research "Not your keys, not your coins". At the same time, do be sensible about exchanges. Whilst it is frowned upon to hold all your coins on-exchange, by holding coins on different exchanges you are reducing risk.
I am in no doubt, that bad and terrible things are going to happen economically. Certain assets are going to collapse in value - don't believe this can happen? Remember the March 2020 Oil price collapse where the price went negative? Cryptocurrency may be worth trillions and be worth nothing. Keep a cool head because cryptocurrency is a;
- Medium of exchange.
- Unit of account.
- Store of value (speculative).
People will want something to exchange in and cryptocurrency serves that purpose.
Monitor the markets daily, never lose interest
I sometimes get handed BBC articles, or Evening Standard articles by normies. Other times, people say things like, it's a shame Bitcoin's price has dropped, or did you hear about that exchange hack? Schadenfreude, but what I can say is this. It is when markets are falling, when perhaps you are selling some to buy back cheaper, that sees much more upside potential during better times.
So the times which are most beneficial to be engaged in the markets are when others are least interested.
Another key benefit of keeping an eye on the markets on a daily basis, is you become less emotional over the market, which is vital to be able to keep calm when prices drop and fall significantly.
My key strategy to grow cryptocurrency
As I said, none of this is financial advice, and is based upon my opinion and experience around cryptocurrency. I will now outline my core strategy, which I think is vital. You may be not interested in cryptocurrency, think it is a government scam, are worried it may get banned. My specific opinion is cryptocurrency is the new financial system. Whilst the claims are government will own everything along with Klaus Schwab's World Economic Forum (WEF), this grand design will have many holes and flaws - cryptocurrency, along with other hard assets will have to be valued.
I am a technologist first, but see completely how most banking systems can be eliminated with the many blockchain protocols, and additional layers on the network. This does not mean I want banking and finance to end - as much as people think it is awful and corrupt, there are many, many good people working in the industry and the system is far better than many believe.
Have a clear strategy
Here is my strategy;
- Get back my original fiat amount invested.
- Grow coins.
- Get cash flow.
If you don't lose the money you put in, you have not lost anything other than the time invested. Learning about cryptocurrencies is a great thing to do. By growing coins, we aim to be in a position to sell some coins at a higher price than we paid for them, rinse and repeat. Get cash flow, eventually, you will be in a position to earn cash flow - at this point there may be tax implications. Note - in my specific situation, my cash flow is likely to be for providing online digital services on my upcoming cryptocurrency platform - Coming soon - Crypto Statto and my soon to relaunch Property Platform
Exiting - what does that mean? I am certain we will reach a point where Geographical opportunities exists for you to simply up and leave. Certainly with the political insanity we are seeing in the west. So my ultimate exit strategy is to exit. On a more realistic and smaller scale, I see it that by exiting positions regularly, for profits, by exchanging digital services in crypto and moving cryptocurrency assets into other asset classes - you will be far more successful.
I want to circle back onto "get back my original fiat amount invested". This is the most important thing. You do not want to be out of pocket, and whilst we are still in this "speculative phase" of cryptocurrency, you should not be throwing lots of money into cryptocurrency.
The trading strategy
I typically check positions (cryptocurrency online portfolio) 2 or 3 times a day. Sometimes, prices move a lot and I need to sell. Other times, they don't move much at all and nothing happens. The key thing is, I do not want to spend all day trading. I am certain fulltime traders make far more money, and many fulltime traders lose all their money too. My goal is to simply check if orders are filled and to then set in a new buy or sell order. This can be automated as I am a software developer. Whilst I do sometimes do more in-depth analysis, and do some slightly riskier strategies, I keep it simple. This is a strategy which is not a get rich quick scheme, and may take many years, but it is something with a clear exit.
So, here is the strategy;
- Set a limit order to buy a coin below the spot price.
- When that limit order fills, set a new limit order to sell the coin above the previous spot price.
- When the coin sells, set a buy at a price below the sell price.
That is it.
Variations on the strategy;
- Split your money into smaller trade amounts. So it is better, if you start with £1000, to set 10 orders at £100 each.
- Be prepared to split those smaller orders into different limit order prices. For example, rather than buying 10 coins at £100, maybe buy 1 coin at £90, another at £85, and so on.
- Work with different coins, as they tend to have different price fluctuations to Bitcoin.
Move some capital off-exchange and to different wallets
Don't keep all your assets on exhange.
You notice I haven't said anything about Technical Analysis, or fundamental analysis. I neither mentioned Dollar Cost Averaging, as actually, I think that DCA in crypto is missing the point fundamentally - you will have to sell at certain points as well as hodling. In addition to DCA being a good way to get exposure to an asset but reducing downside risk, a key problem is you are still putting more money in. Imagine, you decided to commit $1000 a month, that is still $36000 over three years, and it could collapse. Wouldn't it be better to put in $5000, and get your money back but grow to $36000 in 3 years?
I wanted to focus purely on the strategy, and core concepts to consider. Please do your own research. Please keep an eye on this blog and make a note of my upcoming website address for www.cryptostatto.com