This is the next asset class going to the moon
As Congress continues to push through the US digital currency in the next stimulus package, are you missing out on making millions with cryptocurrencies? In case you’re wondering, digital currencies, cryptocurrencies, bitcoin, and other alternative currencies (also known as altcoins) are quietly making noise.
Banks and financial institutions are creating their own arsenal of cryptocurrencies. Facebook is creating their own digital currency when only a few years ago they banned cryptocurrency advertisements. Twitter’s Jack Dorsey is a big fan of Bitcoin. As people and institutions are buying cryptocurrencies, are you ignoring this asset that is happening right under your nose?
Before I go on any further, I want to make sure you understand some terms as I mention them. Not everyone is a financial expert. Bitcoin evolved after the great stock market crash in 2008. Satoshi Nakamoto wanted a cryptocurrency that was not backed by a government or financial institution. Soon Bitcoin was created followed by thousands of other cryptocurrencies.
Since 2008, a few people have become millionaires driving their Lamborghini. Bitcoin the first cryptocurrency has increased faster in price than the stock market, gold, and silver since it was created. If you understand numbers, hopefully, you are paying attention. Making money in an investment is a numbers game as well as understanding what you’re investing in.
For years people thought investing in stocks was risky. The same goes for precious metals. Neither investment is risky as long as you know hat you’re doing. No one can wake up one day and start investing without doing some research and understanding where they’re putting their money.
You don’t understand cryptocurrencies
The same holds true for investing in cryptocurrencies. If you don’t think you can invest in cryptocurrencies, don’t worry because four years ago I was in your shoes. I had no idea what a cryptocurrency was. I had no idea what a bitcoin was. These terms were a foreign language to me.
When someone mentioned Bitcoin to me four years ago, I couldn’t understand it. To me as an investor, I understood making money. But I couldn’t understand how could you make money from something that doesn’t even exist?
Bitcoin is a digital currency that you can’t physically see. Just as you pull money from your bank account, it’s similar to how to transfer Bitcoin and cryptocurrencies. You send and receive cryptocurrencies electronically from your phone or computer.
For me, I don’t like to sell cryptocurrencies because you can be taxed heavily. So I try to buy and hold. When I do sell, I’ll have a better way to track my gains. Then I plan to make one payment for my taxes.
Cryptocurrencies are taxed similarly to how stocks are taxed. If you hold cryptocurrencies for a year or longer, they’ll get taxed as a long term hold. If you buy and sell cryptocurrencies under a year, then you’ll get taxed as a short term hold which is a much higher rate.
Additionally, you need to track every time that you buy and sell your cryptocurrencies. Some cryptocurrency exchanges send you a transaction receipt but not all of them do. So you have to be the bookkeeper tracking every time that you buy and sell your cryptocurrencies.
You can’t buy cryptocurrencies at a bank, at least not yet. Maybe one day they’ll have these available. For now, you buy cryptocurrencies from an online exchange or a cryptocurrency ATM. Buying your cryptocurrency online is probably the easiest. When you buy your cryptocurrency from an ATM, some charge a very high transaction fee.
Some of the popular online cryptocurrency exchanges in the US are Coinbase, eToro, Binance, Kraken, KuCoin, Coinmama, Coinbase Pro, Local Bitcoins, CEX.io, BitQuick, Athena Investor Services, and Liberty X. Other countries use different cryptocurrency exchanges.
Cryptocurrency prices can move slow but when there is a bull run, they can move very fast. Studies show that Bitcoin can rise in price within 30 days or less to reach a new high. During the next bull run, it’s hard to say how fast it will go. Today there are a lot more investors involved in this market as well as financial institutions such as bank and investment brokerages. This time could be different but we’ll see how it goes.
So once Bitcoin goes into its run, during past bull runs Bitcoin’s price dropped just as fast as it went up. If you’re looking to make money, be ready to sell. Also, don’t be greedy. Many people had mortgaged their homes and were buying bitcoin during the last bull run in 2017.
Selling your cryptocurrencies
Personally, I plan to sell most of my cryptocurrencies in the next bull run. The market is very unpredictable but I’m trying to be smart next time. After Bitcoin reaches its peak, the big investors, aka the whales in the Bitcoin market sell their Bitcoin. They take their money and run. Basically, they take their profits from Bitcoin and convert it into cash.
So if Bitcoin reaches $30,000 or $40,000, I plan to sell most of my cryptocurrencies. Eventually, some whales will sell their holdings and the Bitcoin price will take a big fall. I’m not prepared for that and I want to get out when I can. If Bitcoin goes a little higher, I won’t be mad. I’ll just be happy to get out when I did.
Investing versus speculating in cryptocurrencies
If Bitcoin reaches a new all-time high, my altcoins will most likely increase as well. Some altcoins will possibly 10X their price in relation to Bitcoin doubling or tripling in price. At this point, I am not investing but speculating.
In the past bull run in 2017, many altcoins went up 10X the price in value. Bitcoin made a tremendous climb but didn’t go up 10Xs in value.
Will the altcoins do the same in the next bull run? It’s possible. But this is where speculating comes into play. I’m speculating that the altcoins will go up much more than Bitcoin.
Speculating can be dangerous if you don’t know what you’re doing. I have other investment assets and cryptocurrencies make up a small portion of my portfolio. So I feel I can take a chance.
If the altcoins go up as much as I estimate they will, I’ll be one happy person. So this little risk will be well worth it.
Are altcoins penny stocks?
You shouldn’t invest in every single altcoin. It’s not worth it. You can compare some altcoins to penny stocks. Some are worth less than a penny and they are a true gamble. One day these altcoins could vanish overnight. There have been instances when some exchanges removed altcoins from their listing. So selling these altcoins will be harder than before and hopefully, your altcoin doesn’t get removed from the exchange you use.
This is why I recommend investing in several different altcoins. If one altcoin goes down or doesn’t perform as you expected it to, you’ll have another altcoin that will do well.
The gold standard of cryptocurrencies
You can compare gold as the equivalent to Bitcoin in the cryptocurrency market. All of the altcoins are similar to other precious metals such as silver, copper, lead, and so on. Right now Bitcoin is the king in the cryptocurrency market. There is a chance one cryptocurrency may take its place one day.
Bitcoin in the cryptocurrency market is considered a slow-moving cryptocurrency. Bitcoin moves very slow when it comes to buying, selling, and transferring the cryptocurrency. Other altcoins move a lot faster, some as fast as a few seconds. Bitcoin sometimes takes days to move in this fast digital space we’re living in today.
Bitcoin gets a lot of attention these days. Bitcoin is well known and most people have heard of it though may not know much about it. If you bought Bitcoin earlier this year, that would have been the best time to buy this digital currency.
Now with Bitcoin over $10,000 apiece, it is getting more expensive. So your money will not go as far when it comes to buying this cryptocurrency. You can compare it to buying gold at $10,000 an ounce. To me, that is expensive so that’s why I am buying altcoins.
I mentioned previously altcoins that I was buying. Basically, I’m chasing down penny altcoins which I think can get me the most return for my money. If you haven’t guessed, I’m not like most cryptocurrency investors talking about the progress cryptocurrencies can do for the world. I think that’s great what a cryptocurrency can do but that’s not why I got into cryptocurrencies.
For me, I’m an investor and look for what can give me the best return for my money. Right now cryptocurrencies are the best place to park your money as they’ll have the next bull run out of all of the asset classes including gold.
Based on the cycle cryptocurrencies go through, they are primed to take off. Cryptocurrencies normally follow Bitcoin though some altcoins take off on their own. In general, most cryptocurrencies took off when Bitcoin takes off though they may rise on a different schedule.
This year Bitcoin has risen from a low of $4074 to its current price of $1172. Some cryptocurrency investors believe we’re in a bull run. It is hard to say when Bitcoin will take off but when Bitcoin does, it moves very fast.
In previous bull runs, Bitcoin makes its move in 30 days or so. The rise is very fast. So if you’re sitting and watching on the sidelines, you’ll miss the run Bitcoin goes on. Then you’ll have to wait for the next cycle.
Most people I talk to have heard of Bitcoin and want to learn more. Other people I talk to can’t understand Bitcoin and the cryptocurrency market because it doesn’t make sense to them.
You have to think of cryptocurrencies as digital currencies that you can’t see, taste, touch, or feel. Cryptocurrencies are not backed by anything which is similar to the fiat currency we use today. The dollar used to be backed by gold but former President Richard Nixon took the dollar off the gold standard in 1971. Now the dollar is backed by the faith and trust of the US government.
Because some people believe in cryptocurrencies, there is value and worth to these assets. Even some governments believe cryptocurrencies are worth something. That is why the US government wants to tax cryptocurrency users for every transaction they make. They understand that this is millions of dollars the government can use to support the government system. Some cryptocurrency transactions are taxable but be sure to check with your accountant since this rule continues to change.
What I have seen is you can not learn and understand cryptocurrencies in one meeting, reading one article, or watching one video. This is an area you need to continue to educate yourself on since this is a new market and unlike any market you have seen.
Personally, I read and watch videos almost daily to stay up to date on what is going on. There is so much to learn and understand what is going on. As of today, there are 6099 cryptocurrencies according to CoinMarketCap. That is a lot of cryptocurrencies. Some have value and others are not worth your time. I compare many of these to penny stocks.
If you decide to invest in cryptocurrencies, do your research. This is a good way to make money and also a good way to lose a lot of money very fast.
Are you invested in cryptocurrencies?
See my other articles on cryptocurrencies.
How to Make Your Millions in the Cryptocurrency Market
Bitcoin is not the only way to get your Lamborghini
Tom Handy is a top Finance, Investment, and Bitcoin writer on Medium, and the father of two kids. He retired from the Army and sits on several non-profit boards. You can find him on Twitter @tomhandy1.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.