Crypto investment

So you want to dip your toes. Please note I am not an expert, and definitely not giving advice. But if you want to dip your toes and have a little money you can look at a number of strategies.

Risk

Image Credit

Before you start, what is your risk profile? What will happen to you if you lose all your money you are investing with? How long can you leave the money? Investment is about reward versus risk. Generally the higher the reward the higher the risk is. When you get to investment opportunities the risk could be in completely losing your money (playing ICO's has that risk) or having to wait for a long period to get your money back (where you bought and the market went lower, and as to not sell at a loss you have to wait).

Know your risk profile, or you will make bad decisions.

Risk v Return

Image Credit

The easiest is to buy Bitcoin (BTC) and hold as an investment. You back the long term growth, and will get an inflation beating investment, but at current BTC prices will battle to ever get enough to make a living. Your risk here is probably the lowest it can be in the crypto trading game, unless talk of the BTC bubble or another currency challenging its position materializes. Or governments get it right to shut it down. All of this is very unlikely, and even if some of these scenarios take place it will take lots of time to manifest, giving you enough time to move your money. Also there are to many people with large amounts of BTC and the keep the value high as it is to their financial benefit. BTC has moved at around a 6-7 multiple this year alone though so if you invested $1000 you now had $6000-$7000! But from here it is less likely to give anything near to those multiples in the same time. So risk is lower and return is lower

IF you want to chase a little higher returns, but still want to limit your risk, you can trade BTC to your fiat currency (POund, Dollar or Rand) on a daily basis. The strategy is very simple, buy low in the day and sell high. Single day trades can make anywhere between 3% and 7% margins. Some days you can not trade as price only move in one direction. So you need volatility in price, not a single big up or down. Last few weeks have been tough on my Rand v BTC trades as BTC just cept going stronger.

But let us use $1000 again. If you can make 3% on that every day (take into account trading cost that I work at 1% - that is high), that is $30 per day. If you trade 20 days a month, you can make $600 + per month. With compounding (if you leave the profit in and trade with that too) you can see how this snowball. If you trade the 20 days a month, make 3% every time, you will turn 1000 into 1450 in month one, and you can make this nearly $50 000 in a 10 months. That is a 50x multiple based on the BTC growth of 7x.

Image Credit

What is the risk, simple, you buy at a price and BTC falls heavily. Big losses. Or you do not get your daily moves. In last few weeks I could trade once in 3 days .... but I am still doing nicely. IF the bottom falls out though, or BTC moves back to $4000 I lose lots. And then my strategy is dead till I make it back.

Now moving to more risky

So you want to make sure you get those high multiples. You can trade crypto pairs (say BTC v Steem). Here the moves are far more volatile so you can make more a day. If you do well you can push that 3% per day to a 7-10. But you need to pick carefully as there could also be more fundamental moves (one drops and stay low, or stay there for longer). Higher reward, but I will manage my risk by playing multiple Alt coins to BTC.

Major Risk

So you want to buy low and sell high. No where do you get a better chance than in an ICO. But there is an immense amount of risk for potential gold pots. The guys that got in at 50c to the BTC though can tell you the reward. Even Ether (ETH) at $300 has given many people 500x plus returns in last few years. That is wealth creation, but you need to find the next one. IF an ICO offer you a 20c per coin and a 100% bonus, you get coins at 10c. If that coin then moves to $5 you get a 50x return. So if you put $1000 into this ICO, you could get 50 000 back, often in a matter of less than a year. And you do not have to trade every day.

Image Credit

However, there are many risk factors. Is it a scam? Does it come of the ground and have any value? Even if it goes above what you paid, how long and is there enough hype, demand or proper management to take it to that 5 dollar mark? Every now and then you will get one that can go to $300 though, and then you cash in. My advice is NEVER put all your money into one, make sure you understand what they are doing, and talk to the ICO team.

What to do?

I will always tell you that there is not get rich quick scheme, or a silver bullet. If you do not research or put in the hard yards, you are simply gambling. Even if you do, there is no guarantee, but get it right and you can change your life. Happy investing, start small, and hedge your bets.