Which cryptocurrency is best to invest in, and how do you decide on the right one?
It's simpler than you think, but most people skip steps in the process and it hurts them. I'll outline my 3 step approach.
Notably, this approach has done pretty well. I sold my biggest position in Ethereum days before the crash and let my subscribers know in advance, for a 17.7x return. I correctly called the end of the crypto bull market, even though people hated me for it here on Quora (and sold the rest of my crypto before that post). And I used the same approach to trade cannabis for a 782% gain in about 90 days in the first part of this year. I trade bubbles across all asset classes, and I have the history to back up my successes. Here’s the basic process.
#1 The Basic Economic Cycle
I use an image to explain how this works. Our economy is like the following pyramid (explained in more detail here).
The most fundamental level is the basic economic cycle. If we are in a depression, no trades make money (at least no long positions do). From Bitcoin (BTC) to MillionMeme (MM) to Karen Coin (KAREN) -- they will all crater.
So, you need to make sure that the economy is generally healthy (I explain in more detail here how I do this). I began by writing algorithms to measure basic economic measures like unemployment, credit spreads, volatility, futures markets and the like to get a sense of good and bad economic conditions.
If you don’t have the time or ability to do that, then just follow someone who does. The world has changed and now you can buy access to your own quant for cheap.
Obviously, I think my services are great and well priced, but you don’t have to pick me. Just find someone who does this and ignore the talking heads who are getting paid to create buzz not make you a profit.
The only way I knew what was coming is because I had these signals. I even used them to know that I should Diamond Hand my ETH position through the COVID dip (and buy even more later).
Step 2 - Industry Cycles
If the basic economy is ok, then you need to make sure that the industry you are investing in is fine.
Cannabis depends on increasing legalization at a national level. The oil industry (I’ve “only” made about 90% on this over the past 9 months) depends on the price of oil (duh). Crypto health is probably still best measured by Bitcoin’s price momentum.
I correctly called the end of the bull run because Bitcoin’s price crashed. As the crypto-universe develops, a more fine-grained measure will be needed. But as long as Bitcoin has better than 36% dominance, then just checking for the 200-day simple moving average is likely to be successful.
You can check for Bitcoin dominance here. You’re looking at the level of the big yellow line.
Step 3 - Specific Coins
Now that you’ve made sure the general economy is ok, and that the crypto industry is ok, you need to pay attention to specific coins.
There are a few types, but I like to be ham-fisted about this and draw crude distinctions. Basically, you have:
Platform Tokens (like ETH, BNB, ADA, SOL, LUNA),
Decentralized Finance Tokens (UNI, CAKE, BNT, BAL, MIR, ANC),
Exchange & Lending Tokens (OKB, NEXO, CHSB, VGX),
NFT Tokens (CHZ, ENJ, RARI),
Meme Coins (DOGE, SHIB, MM, KAREN),
Speciality Tokens (SIA, GLM)
That’s a set of divisions based on purpose, not based on how the coins describe themselves. The divisions are also loose and some of those coins belong in multiple categories (e.g BNB). These just reflect my personal preferences and they happen to be the coins that come immediately to the top of my mind.
I put most of my money in platform tokens. We’ll probably get 1 - 3 winners there, and those coins will be massively successful with market capitalizations as high as $10 trillion.
Decentralized finance is the best application for cryptocurrencies right now. This is the area that, if it succeeds, will effect a paradigm shift in financial infrastructure in the way that the internet changed mail and telephone correspondence.
I like NFTs and make money on lending exchanges. They do well after a bull run has taken place and are usually nice 10x bets even when you’re late.
I buy meme coins for fun!
So, to summarize: I prioritize my investments in coins in the order of that list because that’s the way I see consistent growth happening.