How to invest in cryptocurrencies smartly with an Altcoin farming strategy
How to invest in cryptocurrencies smartly with an Altcoin farming strategy
If you’ve been following the world of cryptocurrencies, you’ve likely heard of the term “crypto millionaire.” You may have heard this specifically in reference to Bitcoin, Ethereum or your favourite dog related meme currency. No matter which currency or NFT you aim to “get rich” with, there is a specific strategy you can employ to ensure you accomplish this faster than your average investor.
The idea is to use small market cap coins to double, triple, quadruple or even 10X your investment and then buy safer coins such as Bitcoin and Ethereum with those profits.
The way to maximize your crypto investment ability is to pay attention to market caps. But first, some definitions.
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Please note, these don’t just apply to investing in cryptocurrencies, but also to the stock market, commodities or pretty much any asset class you desire to invest in.
Two Types of Investment Strategies
Lump Sum
This is exactly what it sounds like. You invest a large amount of money that you have lying around in a single or handful of transactions. The pro is that you’re most likely to profit immediately if the market is down when you invested, and it goes up shortly after. If the asset you’re investing in is volatile, you may see some months where your total investment is in the negative. Be patient through these periods and don’t sell!
NFTs benefit tremendously from lump sum investments and essentially require them since you buy the NFT for a specific “floor price” (aka minimum price, more on NFT trading later). Checkout my thread on Psychedelics Anonymous.
The Rapid Growth of Psychedelics Anonymous, an NFT project | farezv.eth
With fungible assets like cryptocurrencies however, this can be a mistake if you invest at all time highs or local maximums. I made a mistake with BTC and bought in a large chunk of BTC worth at $49k in early March 2021 as a FOMO investment. Then I spent all summer crying at how it was basically nearly half the price and how I could’ve doubled my money if I was patiently DCAing.
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Fear Of Missing Out is an investment strategy where you jump in when everyone is talking about a particular investment and have already made their money. Aka the asset is at an all time high price when you invest.
It’s incredibly important to not sell during these downtimes as they’re quite normal during any bear cycle, which can last months to years. Look at BTC's price between December 2017 and now. There’s some massive dips and those who sold during those dips are likely kicking themselves now with Bitcoin’s all time high (ATH) of $69000 in Fall 2021.
Dollar cost averaging
This is the strategy where you consistently invest small amounts of money every day, week or month into your favourite asset (individual stock/crypto) or class of assets (such as index funds). The benefit here is that you’re minimizing your immediate risk but foregoing a large profit in the near term. You’re also creating a healthy habit of investing consistently and treating your investments as an expense in your monthly budget. Dollar cost averaging will still net you high returns as long as you hold your assets for a long time. And a long time is generally defined as at least 3 to 5 years to even a decade or longer. Having said that, cryptocurrency cycles seem to be volatile so it's fair if you prefer to buy/sell frequently and your definition of long time is different with these.
Both strategies are a fair way to invest, with people generally doing a lump sum investment initially, when they have a large amount of money lying around doing nothing and dollar cost averaging otherwise from their monthly pay-checks.
Just remember the golden rule of not selling when the prices are lower than you bought. When in doubt, be patient and zoom out. Market downturns are very common, especially in crypto. If you can’t stomach a negative crypto balance for a short period of time, please don’t play this game.
Market capitalization
Market cap is defined as the total value of money that’s currently locked into the asset class of interest. Bitcoins all time high market cap is over a trillion dollars.
Cryptocurrency market cap hits $3 trillion for the first time ever
For BTC to double its ATH market cap, it needs to cross two trillion USD. This will obviously take longer than a small cap altcoin doubling, such as Decentraland (MANA) or Sandbox (SAND) which have market caps of $2.02 billion and $1.8 billion as of this post being published according to https://coinmarketcap.com/.
Altcoin Farming
While I thought of this independently, I can't take inventive credit for this strategy as plenty of other investors practice this as well. The idea is to use smaller capital coins to double, triple, quadruple or even 10X your investment and then buy safer coins such as Bitcoin and Ethereum with those profits.
This is because it’s much more likely that smaller capital coins in the 0.5 to 10 billion range will double or more than really large cap coins like the top 5 currencies.
You’ve bought at most people’s tops by the time you’ve heard about a cryptocurrency on the news or once it lists on flagship crypto exchanges like Coinbase. For instance I bought SHIB at $0.00000725 in late August 2021 a few weeks before it listed on Coinbase. I also dollar cost averaged and bought at $0.00000754, $0.000008xx and lastly at $0.000024. Then I sold it all for $0.000075 & bought more bitcoin.
Don’t FOMO invest. Please realize that by the time you’ve heard about the project popping in the news, you’re providing exit liquidity for early backers and long term holders. You may want to learn or review buying currency on decentralized exchanges as centralized exchanges usually list a cryptocurrency once enough momentum is built in the growth of any given project.
Hopefully this simple altcoin farming strategy along with lump sum investing and/or dollar cost averaging can help you in your investing goals. Volatility makes it hard to time the market, but we can minimize our losses by using our cash effectively.
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Please recall, we do not provide investment advice here at farezv.com as all information is presented for informational purposes only. Please do your own research & invest at your own risk.
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