In investing and trading you have to know at least one thing: which way the market is going. If you don’t know, you shouldn’t be in the market. Yet this simple question is extremely hard to answer and when you think about it that must mean it’s tricky to make money in the market over the long term. Most people don’t get the gift of winning by fluke for long, except in a boom bubble. The crypto boom bubble is long dead, so we have to go back to the basics of: is the market going up or down? With crypto that call is even simpler: will crypto market or a crypto become worthless or will it retain value? If you believe crypto is a passing fad you should keep away but if you think crypto will be a ‘thing’ for the long term, then it’s just a matter of having a strategy to make it worth your while buying it.
Diversification is always an excellent thing to do with your money and crypto is a good diversifier as it is a novel and unusual but liquid asset. Not many people will buy crypto to diversify their investments even though they should; most will buy because they hope for unrealistic returns. This tack is almost guaranteed to lead an investor or trader into horrible losses.
Markets only reward people for the risk they are taking. This is not magic, it’s just a function of the competition people in the markets create. Baby Boomers with their money in US treasuries are competing for returns as much as the crypto trader, who is buying some funky token. This means there is a spectrum of possible profit levels and they are connected in a chain of risk. It is simply nearly impossible to snag more than 30% profit on your pile a year without there being something strange and short lived going on.
As such, investors and traders need to start from this point of view and only extend their expectations if they have a high confidence that what is ahead of them is real and not a mirage conjured up by greed.
Having said that, I believe after a final crash Bitcoin – and crypto in general – will have another major boom and there will be an opportunity to make huge profits. Sadly, as we have experienced it’s easy to make huge profits in a boom but very difficult to keep them. That will be the trick to learn for the next cycle of the crypto-boom, because you only win what you get to keep.