The past few years have seen crypto to dollar valuations rise and fall. We’ve seen tremendous run ups and drops in terms of pricing all across the board in cryptocurrency valuation. Let’s look at Bitcoin specifically.
The overall trend in just the past 3 and a half years has been over 1,000%. That’s a tremendous return to say the least. Professional money managers can only dream of those kinds of returns. The markets on average they say return 7-8% when you factor in good and bad years over a long period of time. Achieving a thousand percent return in a few years is a dream to say the least.
Weighing Risk vs Reward
The next part is risk. A few years ago crypto/bitcoin was relatively unheard of basically an unknown. Who is willing to allocate significant capital into a pie in the sky unknown. Even today it is still not fully trusted. Looking back anybody would accept those kinds of returns to say the least. However while going through that period of the time the return is not guaranteed and the risk is lingering every second.
Living through the ups and downs minute by minute is a completely different story. Crypto/bitcoin is so volatile day to day that traditional money manager’s cannot fathom the swings that come with it. However, volatility can be a trader’s best friend.
Embracing Crypto’s Volatility
The point being illustrated is that bitcoin’s volatility is treacherous and unnerving to most, the faint of heart. However therein lies the opportunity for greater than average returns. Volatility rewards those on the correct end of it. There is no guaranteed foolproof method to profit from cryptocurrency, if such a magic pill existed, everyone would be rewarded riches and the relative value of your currency would be diminished. What can be done is taking a position based on informed decision and capitalizing on this new frontier of cryptocurrency.
Decide on a Comfortable Allocation
We recommend positioning yourself to have some kind of direct or indirect exposure to crypto. Preferably direct, mostly in straight up holding Bitcoin. We recommend using a hardware wallet and purchasing bitcoin first and foremost. Once you’re comfortable with the technology you may add a few other crypto coins into the mix as well. A good starting guideline would be a recommendation of 1-5% of net worth exposure to cryptocurrency according to WallStreetPlayboys.
Just to illustrate how parabolic returns can be life changing see the two graphs of Bitcoin below. You’ll see a Bitcoin’s price pegged to USD move from 300 to 5,000 roughly where it stands at today at this time of this writing. If you divide them you get a multiplier of 15, meaning whatever dollar amount you invested times 15 would be what your Bitcoin investment would be in just 3 and a half years. Say you had invested $25,000 that times 15 would be worth $375,000. This illustrates the power that can be unlocked through Bitcoin exposure.