As the masses are just now learning about digital assets and the exciting world of cryptocurrencies, I see many cases of FOMO (Fear Of Missing Out) causing people to jump onto a fast moving ship in volatile waters with no idea where it is going.
Breathe. Cryptocurrency is not a fad. It is a change in monetary and investment paradigms that will truly shift how we think about our investments as the Internet shifted how we think about shopping. (Get any Amazon deliveries over the holidays? Of course you did!)
So, treat your foray into this crypto-verse like any other investments you have – with a strategy. Unlike the well-established stock markets, this is highly speculative, and I recommend getting involved only with money you can afford to lose.
Strategy #1: Invest in the long-term. This is a buy and hold strategy you probably already use in your retirement savings. You (or a broker you trust) makes mutual fund or stock purchases for you, and hopefully you watch it grow over time. Same philosophy for your digital assets.
Make an informed, smart purchase and hold on to that investment and hopefully watch it grow. This is what I am doing with my Bitcoin. I made a purchase and I have it stored for the long term in order to watch my investment grow over time.
Strategy #2: Short-term investing. This is a more aggressive play in the market place. This strategy is to identify under-valued coins and ride them up to a point where you decide you want to sell and take your profits. There are thousands of coins in the digital asset arena and more coming out every day through initial coin offerings (ICOs). This is the opportunity for speculators to research these new coins and find one they believe they can ride up in price. Obviously, this is highly speculative and requires hours of research and a gambling mentality. I have a much smaller position in this strategy.
It is also a way to make some fast money if you are lucky enough to time it correctly. For example, Ripple has been meteoric in the last 30 days. I imagine there will be some profit-taking very soon and the price will drop; however, investors will make a nice return on their short-term investment.
Strategy #3: Revenue-generation investing. A revenue investor, or sometimes called a day-trader, makes a job out of watching the variability of the market place looking for pure revenue generation opportunities through timely buys and sells. Revenue-generation traders have a dollar amount in mind they want to make monthly that they can remove from their investments to cover their home expenses. This can be time-consuming. More so, during downturns in the market or when speculative plays go bad, this strategy can be kind of scary, not making enough revenue to cover your income needs. These investors like to play the pump and dump game (watch the coin spike (the pump), then sell it off for a quick profit (the dump).) This is truly a eat-what-you-kill type of investment strategy and not for the faint of heart.
By all means, now is a great time to get involved in this new marketplace. Stay within your comfort zone, start slowly, and find a strategy that works for you.