If you’ve recently gotten into crypto, your goal may be like many others-to get completely filthy rich. Let’s entertain the idea on how to get rich in crypto.
The answer, well it’s pretty damn simple. Buy low, sell high.
Just do this:
And there ya have it. That’s the article. Hope you enjoyed it.
Ok ok I’m joking, although that’s what you want to do. But it isn’t that simple. So we need to talk about some things.
Now the chart above is Terra Luna ($LUNA). LUNA was one of the big stories last year. As you can see a year ago one coin was going between 70 and 86 cents, and now it’s worth about $77 after reaching an all time high (ATH) of just over $100.
So yeah, had you invested in LUNA a year ago today, well it would have brought you a 100x if you held for a full year. So in other words, $1,000 invested would be worth $100,000 (if you sold at a 100x). And that my friends, is how you get rich.
But, there are plenty of other ways to look at this outside of just picking a winner like that and holding onto it. That’s what we need to talk about here.
Before we do though, I need to let you know that NONE OF THIS IS FINANCIAL ADVICE, we’re simply going to be talking about crypto and how you may be able to get rich in theory, but ultimately you need to do your own research.
That being said. I would have to speculate and say that if you want to get rich in the next decade the best or fastest route would probably have to be cryptocurrency.
I mean people buy lottery tickets all of the time in “hopes” of getting lucky. How about this, every time you want to throw away $10 or $20 on a lottery ticket buy a microcap (small market cap) cryptocurrency instead.
Your chance of making money is thousands of times more likely that way, even if it’s a more “risky” play.
Look, crypto is basically the stock market on steroids. It moves insanely fast (or at least has recently) and you have a legit shot of getting some insane returns if you play your cards right.
But…most people won’t. And crypto has already ran up like CRAZY the last twelve months. So now that it’s January 2022 how do we approach this after 2021 had such large runs?
Well, instead of asking yourself how to get rich from crypto, we should be asking a different question now.
How Not to Get Rekt in Crypto
That’s the question. How do you avoid getting completely rekt in crypto? FYI “rekt” is crypto slang, I didn’t just spell that wrong. But anyways, if we look at from this perspective it will likely give us better odds of high returns and therefore, could even make you rich.
But like I said, this isn’t financial advice, this is more so what I’m telling myself after being in crypto the last 8 or 9 months and seeing how this industry moves. Clearly there are more experienced investors than myself, so that’s why you should take all of this with a grain of salt.
And let me make this clear from the beginning. I’m not rich. I’m an ordinary regular middle-class American who started investing after the stock market crashed from Covid and it brought me to crypto. That’s it.
My style of investing won’t at all be the same for you. For example, I invest as a form of “3-6 months of savings“, if you’re someone already wealthy then you can probably look at this much differently.
But if you’re of the near 80% who more less live paycheck to paycheck then this strategy could make sense to you. Again, do your own research.
Alright, enough of this. Let’s get into it.
Take All Emotions Out of It
If you want to do well investing in crypto….or anything for that matter, you need to take ALL emotion out of it. Not 90%, not 95%. All.
Of course if you’re a human being then you have emotions. So this is easier said than done.
But what I’ve noticed is you can use your emotions to your advantage.
What do I mean? Well it tends to go something like this. The more you look at your portfolio and smile…the more you should probably think about selling.
And just the opposite, if you look at your portfolio and you’re disgusted by your losses. That’s probably a good buying time. This is a general rule. And you’ve heard it from one of the greatest investors ever.
Now of course Warren Buffet is completely against crypto, but that beside the point!! He’s a great stock market investor. This isn’t about that, this is about crypto.
Again, crypto is the stock market on steroids. If you want to get rich, then you have a shot with crypto.
Now, just to explain what I mean here. What I mean is that if I would have played my cards right over the last 8 months, then I could be a millionaire now. And I’m not. So there’s that.
But, here’s a simple way to think about it.
Give AltcoinGordon a follow on Twitter. He’s entertaining for sure. And that makes it sound so stupidly simple. And honestly it’s not that simple…I mean it is….but it isn’t. (We’ll get into this more in a bit)
However, this strategy of trading coins that have run up into other coins that have yet to run is a terrific way to make huge gains. Now, let’s get into first things first. And that’s when you should buy crypto.
Only Buy Dips
For the love of God. You need to understand this. First of all, we’re going to use Bitcoin as the example here. Now there are thousands of “alt coins” but in general, they all tend to run with Bitcoin.
Kind of like how stocks go as the S & P 500 goes.
Sure, there will be coins that run when Bitcoin is down, and coins that fall when Bitcoin is up, but for the most part they tend to follow Bitcoin.
So when we talk about dips here. We’re going to use Bitcoin as the example.
With that being said, if you want to get rich from crypto then buying alt coins is likely going to be a much faster route. Anyways, here’s the 1-year chart on Bitcoin per CoinMarketCap:
Look at this chart.
It’s pretty obvious to see where you can make a ton of money. Is it buying after a run up? No.
Use logic. It’s after buying the dip. The bigger the dip the better the buy.
And this is where so many people get completely rekt in crypto. FOMO buying (fear of missing out).
Don’t FOMO buy. This rarely ever works out.
But if you really want to get rich. You can’t be buying a lot on run ups. I mean look at this chart. In early May we saw a huge fall off. It basically went from an all time high of about 64k all the down to 29.8k over a period of about 3 months. With the major drop being in May where it shot straight down from 58k to 37k.
So we saw a drop of about 54% overall in the 3 months. And a super quick drop of about 36%. This is where (hindsight 20/20) you should have been going all in.
Now we saw another decent dip in early September and then another run up. After the run up there has been another significant drop to where is stands today at 43k (by the time this gets published it will probably be different).
But here we are.
A massive dip overall that went from about 68k down to about 43k now.
So that’s about a 37% dip. That’s where we’re at today. Is this a buying time? I’ll leave that up to you.
But next, we need to talk about selling…something I seriously need to work on myself. Here we go.
Sell Rips (Have a Plan!!)
Now, when you invest in a crypto that starts flying. It’s hard to know where the peak is…and if you’re investing in the “next Bitcoin” and you’re holding long term then it may not matter too much whether or not there are several dips in the middle of it’s long journey to a 100x.
But if you’re someone like me who’s using investments as a form of savings then losing a month or two worth of “savings” in 10 days absolutely sucks.
Hell I’m sure losing 37% on a dip (or more on alt coins) hurts already millionaires as well.
So we need to stick with a plan on when to sell. Now…there is a lot to get into here. But some of the best advice that I heard was that “you’re going to sell the next Bitcoin, and that’s ok”.
This has been one of my main issues-simply holding too long because I really like my investments long term, not just in the near future. Quick example-I recently had my first 10x investment in VXV. Could have sold at a 10x or more…now it’s more like a 3x. And that sucks. (You probably think I’m stupid, we’ll get to my excuses in a minute)
But, another good tip I’ve recently heard is that “you’re not going to sell the exact top, and that’s ok”. In other words, we need to have a strategy on selling.
So with my example on VXV. I bought in around an average of $1.40 or so starting at .70. It hit $18 (and allegedly more for a quick second) and I never sold a single coin because of my belief that it will eventually be worth over $100.
Anyways, regardless of that, looking back. A smart strategy based on the market at the time would have been to take profits on the way up. $7 drop off 10%. $10 drop off 20%. $14 drop off 50%. That means I would have sold 80% and held 20%.
However, I just told myself I’ll sell some if it hits $22 and it never did. And here we are as it sits in the low $4 range after Bitcoin had it’s huge drop. Ouch.
Exit Strategy on “Microcap” Coins
Now if you want to really get rich, then the smaller market cap on the cryptocurrency you go with, then likely the more potential for gains (albeit more risk).
However, you need to have a strategy to get out of them QUICK.
These run up super fast, and just like you made money really quickly you can lose it all (or a lot of it) just as fast.
The first thing is ETH gas fees.
If you’re swapping these coins into a hard wallet (this is a whole other article) then you’re going to be paying gas fees (paying miners). And the gas fees can be ridiculous.
So getting back to my above point about why I didn’t sell. This is my main excuse. I would have had to pay about 20-25% in gas fees!!!
I just recently checked this and swapping 2k worth of a coins into ETH would cost me about $400.
In addition to that I would have to pay short term taxes. So that’s roughly 30%. In other words my 10x investment after fees and after taxes would really be like a 5x investment. Ouch.
This means you need to be aware of this upfront. This is the price you have to pay to get into potential 10x coins!!
Or…keep them on an exchange if you know you may not be holding longterm. This is frowned upon in the crypto community of course, but you should pay no attention to that if you plan on selling run ups.
This way you avoid gas fees sending to and from a crypto wallet.
Have a plan, but also know what will get in your way as well. Know this up front then follow through. A good way to look at this is that the more a coin runs up, the more risk you now have.
What is your risk level? That’s up to you to decide. Speaking of risk…
Shorting or Longing the Market
We’re talking about how to get rich in crypto here so this has to be on this. I’ve never never done this because of the risk level to it but basically this means if you think the market is going to go down, you can short the market or if you think the market is going up you can long the market.
People do this with Bitcoin all of the time and there’s a couple of options. If you pick right you can make a ton of money but on the dowside you’re risking losing a lot more because you’re typically doing this with leverage.
I personally don’t know a whole lot about this topic so won’t go into too much detail, but the bottom line is that in bull markets you should be buying the dip, selling the rip, whereas in bear markets you should be shorting the rip.
Not my style of investing but knowing it’s a possibility gives you the advantage to make money in any market.
All of that being said, this kind of brings up the biggest question.
Is the Crypto Bull Run Over?
Crypto has went completely insane the last year. The entire market cap has basically doubled even after the drop off. So it started at about a trillion dollars and now it’s at about 2 trillion.
Per CoinMarketCap
Now it was just at about 2.9 trillion just a couple of months ago…and now it’s hanging around 2 trillion…hmmm. So being down from all time highs makes this an another inticing point.
BUT, there is caution!!!
And this is looking at Bitcoin’s history. We have to look at the previous Bitcoin bull runs of the past to get perspective. 2013 and 2017 were the big blow off top crypto years prior…and now we’re seeing a similar run again 4 years later. So let’s take a look what happened:
2013:
This is basically a 2-year period, Bitcoin was flat until it ran up at the end of 2013…as you can see it shot straight up, then began a downtrend the next year and a half.
2017:
Here is the 2-year span where Bitcoin shot straight up at the end of 2017. This time it built up a bit more slowly and then skyrocketed over a couple of months much like 2013. Then a long downtrend.
A couple of key things to notice with both of these…both times they went into a downtrend that basically lasted years until the next bull market.
But the other thing is the number they ran to…$1,100 in 2013…$19k in 2017…if only we had a time machine.
The downtrend is a bit scary right? Is that about to happen now too?
Well, let’s look at the chart here more recently.
2021:
So this is dating about 2 years back and we can see what it looks like…2013 and 2017 both fell off a cliff at the end of those years and it took years to recover.
Is that about to happen now? Well, one thing we can look at is the fact that this isn’t a straight up line like it was in those years. It’s more gradual. And this is why many “gurus” were calling for Bitcoin to end the year at 100-300k.
A lot of people were expecting a blow off top ending…but guess what? No blow off top ending then maybe no 3-year bear market right? Or maybe the blow off top hasn’t happened yet? Or maybe Bitcoin never hits 69k again?
Let’s look at some metrics to try and see if we can figure out what’s going to happen next.
Now hold up-again-full disclosure, this isn’t financial advice. NOBODY can predict the future. But let’s look at some things.
Here’s an excellent video from Games of Trades YouTube Channel:
Absolutely a terrific video to check out. Here are some of the highlights that really stood out.
The shakeout:
They went over the shake out and then consolidation periods. This current drop looks a hell of a lot like this could be another shakeout before we have a big run up.
Next, Bitcoin correlating with yields. It’s been eerily on the same track. Here’s a screenshot:
So as you see yields are up and Bitcoin is lagging. Looks a lot like September when Bitcoin ran up afterwards. However, when Bitcoin fell in May it fell before yields went down. Either way, the correlation has been there. But always, correlation doesn’t equal causation and past performance doesn’t equal future performance.
One more screenshot that’s important. And this is short term holders.
This is total supply in profits of short-term holders. Every time this number goes to zero Bitcoin tends to run up. If this trend continues then it looks like it could go lower before potentially making another run up.
Again, credit to Game of Trades YouTube Channel.
My Wild Guess/What I’m Doing (Not Financial Advice)
Well, what I already did was bought some of the dip…and I may continue to add more…aaaannndd as I’m writing this Bitcoin dropped to 41k!
Crazy. Anyways.
I’m not even buying Bitcoin. I’m buying alt coins. And I hold mostly alt coins. Look, this thing could go lower, my gut feeling says we could hit 35-38k. Who knows.
All we can do is look at the information at hand and make our best decision based on the data we have. That data tells me the most probable thing that happens is that we see another run, but it’s important right now to see what happens daily to get better signals.
One thing I can tell you is that if you pick right you have an opportunity to “get rich”, as we’ve discussed you can make money either way.
I’m looking for a run here at some point, keep in mind at this point it’s further along in the cycle so risk is up.
My guess is that we have a nice bounce back up, I’ll continue to reallocate accordingly and keeping my risk in check.
***update!!! as of 1/24/2022 Bitcoin missed these support levels and today just flashed a hair under 33k and is now sitting around 34k. Now technically we could still see a V shaped recovery with the bottom being 33k, but alts have dropped much more than I expected (at least this fast) and the market sentiment is very bearish. Bearish to the point that I doubt we’re at the bottom, but again who knows. Things are moving extremely fast and now my guess is that a bear market is much more likely since we’re missing support levels. I don’t see a V shaped recovery being as likely and I’ve been selling rips and buying dips during this time to try to stay above water (but haven’t been).
***update nearly a year later! Bitcoin, when I was writing this update that was the beginning of a nice bounce upwards to about 47k from the 33-34k I mentioned, then dropped like crazy continuing the bear market we were in, this is why managing risk is so important. The Game of Trades video I referenced basically just turned out to be wrong, although there was a nice bounce as I just mentioned, we were in a bear market already, hopefully you got out at 45k :)***
Personally, I don’t have enough fiat currency to “get rich” even if Bitcoin does make a run. I’m not investing to get rich, I’m investing to make money and pay off debt while gradually increasing my net worth.
I’m not willing to overleverage myself enough to get in that position, and honestly, I’m not as confident this time around as I was when Bitcoin halved in May.
I’m adding money into the market and I’m holding (see update above) but I’m not going in as hard as I did at that point (after the May drop) because of various factors mostly with the overall economy.
Look, I think we see Bitcoin make a run of some kind here in the somewhat near future (maybe late January/early February). That’s my thought process, but I could be off on that. Nobody knows the future, and Bitcoin could enter a bear market.
Hell Bitcoin could go to 10k for all I know. ***2023 update, Bitcoin hit a low of 15.5k and could go lower in 2023 (currently sitting above 20k)***
That’s the bottom line. If the potential is there to make insane gains in a short amount of time. The potential to get completely rekt is also there.
Understand this.
Use logic. Invest without emotion, or at the very least, invest using your emotions to your advantage.
If you read all of this I hope you enjoyed this article.
What do you think is going to happen next? Are you out? Are you adding? Hodling? Freaking out? Let me know in the comments below!