Investing in Cryptocurrencies

We just released a video about investing in a volatile crypto market. We shared our experiences and how we personally started and how are we investing in cryptocurrencies.

Here is the transcript:

[GINGER] Hey everyone! We have another interesting episode here at GTV for you. I’m Ginger Arboleda and I’m EJ and we’re content creators and startup business owners who love sharing our experiences on personal finance, investing, business and parenthood.

[EJ] Investing in Cryptocurrencies has become more popular, but before getting into it, financial vloggers often warn you that the crypto market is very volatile and only invest what you can afford to lose. So, let us warn you, if you plan on investing in Crypto, especially if you’re new to the game, only invest what you can afford to lose.

[GINGER] Right now, our crypto and NFT portfolio comprise 6.30% of our total portfolio and, for us, that’s relatively fast considering we just got into it early 2021. We’re pretty new investors in this space, so at first we were really shocked at how high and then low the market could get. It was really stressful for us, seeing the number spike and dip the next day. But a year investing in crypto has taught us a lot, and we’d like to share what we have realized.

[EJ] First, you should look at that instrument over the long term and see if it increased in value over the years. If it does, then that’s a good sign that you’ll probably earn LONG TERM on the investment. Let’s take Bitcoin. Bitcoin was at around 1 dollar in 2011, now in 2022 it’s at 41 thousand dollars. Obviously it rose over that long term so, for us, that’s a sign that over the long term, we MAY earn on bitcoin. Now, Bitcoin is THE cryptocurrency, everything else is called an altcoin or alternative coin and people invest in those in the hopes that they find one that’s worth a dollar now but will be worth 41 thousand later – those are much riskier investments and the method we’re talking about may not work the best for those. Of course, it’s up to you and your risk appetite if you still wanna invest in that.

[GINGER] Now how do you invest? We advise that you use dollar cost averaging when investing in cryptocurrencies. Dollar-cost averaging (DCA) or Peso Cost Averaging, in our case, is an investment strategy where you invest a specific amount into that investment vehicle in regular intervals. By doing this, you reduce the impact of the volatility on the overall purchase. You won’t get the highest return BUT you also won’t be a victim of the lowest loss. That’s because during the bear or down seasons, you’re able to buy more with the money you invest. During the bull or up seasons, you’re able to buy less BUT the value of your overall portfolio is higher.

[EJ] As an example, let’s use a shorter time frame. Let’s say on January 1, you bought 100 dollars worth of token X at 10 dollars per token – that means you bought 10 tokens. Then on February 1, the prices dropped to just $5 per token – you still buy 100 dollars so you buy 20 tokens. Then on March 3, the prices increased to 20 dollars per share – you still buy 100 dollars so now you have 5 tokens. Over that period, you have 35 tokens for 300 dollars.

In Investing in Cryptocurrencies, we use Binance.

[GINGER] Now imagine if you spent all that 300 dollars in only one buy and not in regular intervals. If you spent 300 dollars on January, when tokens were at 10 dollars per token, you would have had 30 tokens for 300 dollars. With Dollar Cost Averaging you have 35 tokens so dollar cost averaging wins. If you spent 300 dollars on February, when tokens were at 5 dollars per token, you would have had 60 tokens. In this case, investing all 300 dollars would’ve been better. Now, let’s say you spent 300 dollars on March, you would’ve had 15 tokens only. So in that case, dollar cost averaging wins because you have 35 tokens. So yes, you don’t get the highest return BUT you are also not a victim of the lowest loss as well. If you are a person who’s really good at technical analysis and really knows the instrument, you can probably find a time like that February. But if you’re like us and this is not your full time job, you remove a lot of the risk by doing Dollar Cost Averaging.

[EJ] Next, do your own research and read about the token that you’re investing in. Invest in tokens whose intent and purpose resonates with you. The cryptocurrencies will often have a website where they post their whitepaper. Read this and see if you believe in what they stand for and what their plans are. An example of this is we invested heavily on an NFT game called Axie Infinity. We did this, because (one) as gamers, we enjoy playing games, (two) we’ve seen that their team has so far consistently delivered on their promises and (three) regardless if their tokens, SLPs or AXS’ or RON’s prices go up or down, we’d probably still play the game. This tells us that they’re plan is not to turn a quick buck but they’re also looking at it long term, like we do.

[GINGER] Next, DIVERSIFY. Diversification is basically spreading or splitting your investments across different vehicles so that your exposure to any one type of asset is limited. This will help reduce the volatility of your portfolio over time. If most of your money is in crypto, consider also investing in non-Crypto assets. If you’re 100% Crypto, then at least invest in different coins and tokens. Personally, we have different investments spread across VULs, mutual funds, index funds, stocks, and crypto.

[EJ] One important thing to always remember is to have a plan and stick to it regardless of whether the market goes up or down. FOMO is real and when you watch all the crypto bloggers saying buy this coin and that token and that NFT, it’s easy to get swept by the hype and put in 100% of your budget on what they say. This is all speculation though and no amount of well done editing can make up for a loss that you’ll just have to bite. For crypto, our plan is to invest 90% of our crypto investment budget on the coins and tokens that we believe in, and 10% on new projects that we want to speculate in. So far it has worked for us, there have been some bad calls but since we just invested 10%, they haven’t been that painful.

[GINGER] In a nutshell, how to survive a volatile crypto market is to have a plan, stick to the plan and don’t get too emotional, continue to research and study, diversify and, if you’re like us and this is not a full time thing for you, think more long term.

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P.S. The main platform that we use for investing in cryptocurrencies is Binance. If you want to try out Binance, sign up here. To read more about Binance, check out this post.