This article is the final part of my three part series on crypto investing strategies to build wealth. Part one and two will be posted at the end of the article for anyone interested.
Strategy: Buy Value NOT News
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When trying to decide what project to invest in a lot of investors rely on the word of mouth from others as well as the fluctuating price of the coin. As such, many investors buy into projects when the coin price increases, believing this to be a good indication of the projects value.
However, the price of the coin does not necessarily suggest that the project is actually a good one, especially in unregulated markets like crypto. Price increases can occur because of market manipulation and pump and dump schemes and a variety of other tricks that are concocted trick people into parting with their money. With this in mind, I personally believe that one of the biggest mistakes an investor can make when investing in crypto is
Buying News instead of value
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An example of this type of scenario would be the following:
An investors does an extensive amount of research (ideally) and determines that a certain project or coin is not a very sound project – it doesn’t have good tech or a trust worthy development team, its support is low and it generally does not offer any sort of real world use or solve any sort of problem. Ultimately, the investor determines that the project/token does not have value and because of that, they decide not to buy into it.
Now, let’s imagine that in a few days the price of the coin begins to climb - 5% one day, 10% the next and then a whopping 20% the following day. The price of the coin is now 35% higher than when the investor first started to watch it. Upon seeing this “News,” the investor gets nervous and FOMO sets in and instead of trusting their initial gut reaction towards the project, they instead decide to buy in at the new high price.
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However, the investors gut instinct (thinking that the project had no value) turns out to be correct after all. After a few days or weeks of maintaining its new high - it’s price begins to fall. It falls and it falls until finally its price stabilizes close to where it was when the investor initially started to watch it. As such, the investor bought in at a high price based on News and then lost money because the project did not have any true value.
This scenario demonstrates the concept of buying because of News rather than value.
Determining Value
In all honestly value is not something that is easy to determine because it is mostly subjective. As such, some people see value in a coin or project that others do not. However, if an investor determines through research that a particular project has value then it is likely that others will eventually see value in it as well. Overall, I personally believe that buying a project because we see that it has value, is a better indication of the projects overall success than simply watching its price or listening to unverified news.
Some indications of value (in my opinion) may include things like: a well recognizable brand, large support base, real world solution to a problem, good technology and development team, good marketing that is verifiable…and others.
Take home Message
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Do extensive research and determine if the project has value. Though “value” is a subjective concept, some indications of value include: a well recognizable brand, large support base, real world solution to a problem, good technology and development team, and good marketing that is verifiable…etc. If the project does not have value, do not invest in it and especially do not invest in something based solely on News. News includes things like: unverifiable evidence or announcements and/or price changes and fluctuations. Though it is possible to succeed when buying because of News, this strategy ultimately increases the investor’s risk of buying into a shitty project or scam. So... to avoid this...
Buy Value NOT News!
Thanks For Reading. Feel free to share some of your own investment strategies in the comment section :)
Previous articles in the series
Crypto Investment Strategy: Invest to NOT Lose Money
Crypto Investment Strategy (PII): Collect Dividends
Good arcticle. Do your resarch and think with your head.
Thanks. Yeah pretty much