Trust the technology not the market
tl;dr For a buy and hold strategy for any kind of crypto I suggest to allocate a budget for every month and every week to buy for the same amount.
At any time in history, humans seem to over or underestimate the value of pretty much everything - that’s why there is so much volatility in the markets (stocks, crypto and other ressources). If we look a litte bit deeper its not so much that we get it right and wrong at the same time, it’s rather that the same resource has a different value to different people at the same time. For some the price of Bitcoin is relatively low for the potential they believe the (undelying) technology (~ blockchain) has in the long term. For others it is incredibly high because they compare it to stocks and other long established trade’ables.
Some people buy, others sell. Thats the nature of any market.
The core of the matter is, that the volatility in the price of many things comes from a back and forth of (dis)trust and believing that there is unrealised potential.
The volatility is largely caused by the current focus of making money of the volatility(buy low, sell high, rinse, repeat) rather than creating value ontop of the technology (like second layer protocols, signing legal documents, writing verifyable and enforcable contracts, etc).
As I believe in the technology, but I don’t want to fall victim to the short term speculators driving the prices up and down I’m adapting a rather old strategy used to profit from low prices while still buying when the stock is rising.
This is called cost-dollar-averaging - most people familiar with ETFs are used to buying in a regular interval, mostly once a month, sometimes every quarter. Since the volatility in ETFs is comparatively low (not in the 10x range) and slow (trends take usually more than a month to peak in either direction) it is feasable to have relatively long intervals.
For a buy and hold strategy for any kind of crypto I suggest to allocate a budget for every month and every week to buy for the same amount.
This can be done in either of two ways:
- Put fiat currency into your favourite exchange and use this to trade directly
- Buy stablecoin and trade this way
I only ask one thing: Don’t try to beat the market, if you are into crypto because you believe in the technology. If it’s the short term earning potential, this strategy is not for you.
What’s your take on long term investment? Let me know on twitter @rabbitholediary or let’s start a conversation via email rabbitholediaries@protonmail.com