Ethereum leads altcoin bull market rally into december altcoins rally behind a black friday market r
The fact we got closer to it is actually quite healthy in the long term because it is a valuation that can be logically justified using the cost factors of the mining network. If you did buy in the last few months at or near ATH, the very worst thing you can do now is sell in panic and lose your principal. Unless there is a systematic breakdown like we had during Mt. Gox, the market always recovers. The other worst thing you can do is unload into Tether as your safety net.
If there is one thing that could actually cause a long term destruction of trust within the cryptocurrency investment ecosystem, its Tether having a run up on their liabilities and not having enough reserve to cover the leverage. It would not only bring down exchanges but lead to years of litigation and endless media headlines that will scare off everybody from putting fiat in.
Gox meltdown will occur but I can almost guarantee it will involve Tether. So stay away from it. For long term holders a good strategy to follow each year is to capture profit each December and swallow the capital gains taxation liability, park a reserve of fiat at Gemini whose US dollar deposits are FDIC-insured and simply wait till around late January to early February to re-enter the market at a discount and hold all year until next December.
You can keep a small amount in core coins in order to trade around various Q1 opportunities you anticipate. Others may choose to simply do nothing and just keep holding throughout January which is also a perfectly fine strategy.
The cyclical correction usually stabilizes toward late January and early February, then we see a rise in March and generally are recovered by end of April. Obviously this decision whether to sell in December to profit on the dip and pay tax liability or to just hold will depend on your individual tax situation.
Do your own math sometime in November and follow suit. Rather than seeing the correction as a disaster see it as a time to start fresh. If you have been FOMO-ing into bad cryptos and losing money now is a time to start a systematic long term approach to investing rather than gambling. Memes and lambo dreams are fun and all, but I know many of you are investing thousands of dollars into crypto, so its worth it to put some organized thought into it as well.
If you follow a set methodology, a checklist and template you will be able to do relative comparisons between cryptocurrencies, to force yourself to consider the negatives and alternative scenarios and also sleep comfortably knowing you have a sound basis for your investment decisions even if they turn out to be wrong.
Once I identify something that looks like a good potential investment, I first go to the CoinMarketCap page for that symbol and look at the website and blockchain explorer. This is the first pass of the bullshit detector and you can tell from a lot from just the website whether its a scam. Always look for a roadmap, compare to what was actually delivered so far. Always check the team, try to find them on LinkedIn and what they did in the past. You should fully understand how this crypto functions and how its trying to create value.
If there is no use case or if the use case does not require or benefit from a blockchain, move on. Look for red flags like massive portions of the float being assigned to the founders of the coin, vague definition of who would use the coin, anonymous teams, promises of large payouts…etc. How is the token distribution across accounts? Are the big accounts holding or selling? Which account is likely the foundation account, which is the founders account?
Try to figure out exactly what the potential use cases are and look for sceptical takes. Look at the Github repos, does it look empty or is there plenty of activity?
What is the roadmap they created? Is there a staking mechanism or is it transactional? I have a background in finance so I like to do Excel modeling. For those who are interested in that, this article is a great start and also Chris Burniske has a great blog about using Quantity Theory of Money to build an equivalent of a DCF analysis for crypto. Here is an Excel file example of OMG done using his model. You can download this and play around with it yourself, see how the formulas link and understand the logic.
Once you have a model set up the way you like in Excel you can simply alter it to account for various float oustanding schedule and market items that are unique to your crypto, and then just start plugging in different assumptions. Use a realistic monetary velocity around for currency and around for staking and for the discount rate use at least 3x the long term return of a diversified equity fund.
The benefit is that this forces you to think about what actually makes this coin valuable to an actual user within the digital economy its participating in and force you to think about the assumptions you are making about the future. Do your assumptions make sense? What would the assumptions have to be to justify its current price?
You can create different scenarios in a matrix optimistic vs. Even a simple model that just tries to derive a valuation through relative terms will put you above most crypto investors. Some simple valuation methods that anyone can do. So you can compare various currencies based on their market cap and square of active users or traffic.
Think of the market cap not only with circulating supply like its shown on CMC but including total supply. Use a realistic monetary velocity around for currency and around for staking and for the discount rate use at least 3x the long term return of a diversified equity fund.
The benefit is that this forces you to think about what actually makes this coin valuable to an actual user within the digital economy its participating in and force you to think about the assumptions you are making about the future. Do your assumptions make sense?
What would the assumptions have to be to justify its current price? You can create different scenarios in a matrix optimistic vs. Even a simple model that just tries to derive a valuation through relative terms will put you above most crypto investors. Some simple valuation methods that anyone can do.
So you can compare various currencies based on their market cap and square of active users or traffic. Think of the market cap not only with circulating supply like its shown on CMC but including total supply. For example the total supply for Dentacoin is 1,,,,, and when multiplied by its price in early January we get a market cap that is actually higher than the entire industry it aims to disrupt: Most cryptos are deflationary so think about how the float schedule will change over time and how this will affect price.
Once you have a model you like set up, you can compare cryptos against each other and most importantly it will require that you build a mental framework within your own mind on why somebody would want to own this coin other than to sell it to another greater fool for a higher price. Modeling out a valuation will lead you to think long term and think about the inherent value, rather than price action. I personally consider XMR to be safe as well. As you become more confident and informed you can move your allocation into speculative small caps.
You should also think in terms of segments and how much of your total portfolio is in each segment:. You should also think about where we are in the cycle, as now given so much uncertaintly its probably best to stay heavily in core holdings and pick up a few coins within a segment you understand well. This is actually a term Buffet came up with, it refers to your body of knowledge that allows you to evaluate an investment.
Think about what you know best and consider investing in those type of coins. This where your portfolio allocation also comes into play. If you had over 20 different cryptos in your portfolio you should probably think about consolidating to a few sectors you understand well. Read a bit each day about cryptocurrencies. There are decent Youtubers that talk about the market side of crypto, just avoid those that hype specific coins and look for more sceptical ones like CryptoInvestor.
Technical analysis was initially developed by financial professionals primarily to measure momentum based on historical data. It can be useful in regulated efficient stock markets for a very good reason: Its true that we also have movement that is based around insider information, however we have laws that keep that to a minimum. Add to this the fact that most stocks are held with large institutional investors and bought and sold by financial professionals who slowly add and decrease their position over long term plans, which is why its rare for the wild swings within short periods.
These different intrinsic and extrinsic events all have a correlation in price, and because the markets are regulated and efficient we can use them to predict movement within a reasonable degree of confidence. None of this is true for crypto. Its completely unregulated and insider trading and PnD schemes are rampant. Its also filled with weak hands who will dump on any sign of sellling pressure.
Technical analysis was meant to predict pricing movement in a regulated and efficient environment. If you use technical analysis, use it for long term trend confirmation. Any attempt to trade short term based on price momentum is pure gambling.
If you want to gamble get a girl and some friends and go to a casino and drink while you do it, its much more fun. Basically take this time to think about how you can improve your investment style and strategy.
Make a commitment to value things rather than chasing FOMO, and take your time to make a decision. Long term investment will grant you much more returns as will a systematic approach. What should you do if you recently entered the market? What should long term investors do? How to construct your portfolio going forward Rather than seeing the correction as a disaster see it as a time to start fresh.
Follow a methodology for evaluating each cryptocurrency Memes and lambo dreams are fun and all, but I know many of you are investing thousands of dollars into crypto, so its worth it to put some organized thought into it as well. What is their track record? How are they funded, organized? You should also think in terms of segments and how much of your total portfolio is in each segment: Blockchain Project Ecosystem — Infographic.
Facebook is banning all ads promoting cryptocurrencies.