What Is The Best Investment In Crypto

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Last week, we argued against investing all of our money at once in simple dollar-cost averaging (a constant and balanced investment) crypto and hanging on for dear life.

What Is The Best Investment In Crypto

But when you look at things risk-adjusted and mathematically, neither dollar value nor long-term holdings are the best way to invest. Today, I want to introduce a better framework for investing in cryptocurrency.

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Using risk-adjusted levels, dollar price averaging is neglected in favor of simpler models. Most of those who have been in the crypto space for a while will recognize its simple beauty: frameworks reduce risks while increasing returns.

Although there are many variations on the concept, the one we see most often today is: rainbow graphics.

The famous rainbow chart created in 2014 attempts to predict the fair valuation of cryptocurrencies by fitting existing price data using logarithmic regression.

Although the rainbow chart occasionally deviates by thousands of dollars, the original regression has excellent predictive value: It predicts that Bitcoin will pass the $100,000 mark on July 16, 2021, seven years ago, when Bitcoin was trading at about 1. / 100 of its current value.

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Given this year’s $64,000 high, if you have an older, more accurate model, please let me know.

No, the rainbow chart isn’t perfect (and it shouldn’t be), but it’s very good at predicting high valuation events and getting consumers to take advantage of phenomenal buying opportunities.

The model does not have to be perfect, it should identify the periods when the risk is higher or lower than normal.

If we dive into the rainbow chart, the blues and greens here indicate relative undervaluation and therefore buying potential. After spending time at these risky levels, prices rise, and we should try to maximize the amount of capital invested at those levels.

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Red and orange are overvalued and represent high risk and potential for profit. If we sell at these levels, we can make a profit to reinvest at the bottom of the cycle.

The middle yellow band is a theoretically “fair” estimate, centered around the original regression line. It can be used as a sell signal for conservative investors, a signal for moderate investors or a buy signal for aggressive investors.

But at the end of the day, we don’t think too much about math, logarithms, or optimal paths. We care about how to make money in cryptocurrency. Let’s see how the average investor can take advantage of the framework in real-world execution.

As always, we need to compare our investments to some benchmark. Last week, we compared a one-time investment of $1,800 to a simple dollar-cost-averaging investment using $100 over 18 weeks. Today we’ll add this model to the mix and see how it performs compared to the two strategies, using the last two months as our benchmark.

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For a fair comparison with other models, we’ll try to invest as close to $1,800 as possible during this experiment. Here’s the strategy:

Since Ethereum and Bitcoin rainbow schemes are free, we will take a look at these two investments.

First, a disclaimer: the rainbow graph has no predictive value against a black swan event (global internet loss).

And the model can fully expose several possible bear cases for Bitcoin (strict government regulation, an innovation that obsoletes the asset, another cryptocurrency that far surpasses Bitcoin in terms of usage, or a security flaw in the underlying technology). ). But it’s useful so far.

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These ideas are rarely talked about and are often dismissed as FUD (fear, uncertainty, doubt), but they could completely disrupt the upside of cryptocurrency and truly disrupt the investment models that work today.

I think this is a fair question and an easy criticism of any DCA strategy. If you buy at a low price, over time you will outperform any DCA strategy.

The difference comes from looking at volatility. Here is a table of the biggest drops in the observed time window for each strategy:

That’s why choosing dynamic DCAing over simple recurring purchases makes more sense. If we buy a dynamic DCAing measure and hold it with one-time capital:

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Is there ever a time when a simple DCA can outperform a dynamic DCA strategy? Yes, but at a very risky level, you would continue to invest in your investments even though they are at their peak. Dynamic DCA should keep you profitable throughout the market cycle.

Then, inevitably, he falls to a lower risk level, continues to invest the same amount of capital without making a profit, and the dynamic investor increases his investment. A risk-adjusted investor will always outperform complex strategies by taking into account overall price growth over time.

Today, the Bitcoin valuation sits very comfortably in the “hold” group, and I think it’s indicative of the overall market sentiment: Investors know that Bitcoin is not as valued as it was two months ago, but many are waiting. Movement. to a higher price level.

So if a dynamic DCA strategy appeals to you, check out those rainbows from time to time. Right now is a good time to hold, but armed with this knowledge, a move up or down can be a good sign to take any action.

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Recently, we are experiencing a huge boom in the cryptocurrency market. I remember a few years ago, cryptocurrencies were mostly for tech savvy people. Today, people are wondering whether to invest in them with a common question: What is the best cryptocurrency to invest in?

Unlike today, there were several hundred cryptocurrencies. Back then, the only people who invested were those who loved cryptocurrency.

But now the demographics of the market have changed significantly. Instead of hobbyists, serious investors flood the market with large investments. Along with this, the number of cryptocurrencies has also increased. Instead of a few hundred, the number reached 1270 to be exact.

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So right now, investors are spoiled for choice when it comes to cryptocurrencies. In 2013, it was Bitcoin, Litecoin, Dogecoin, etc. was a choice between

Having multiple cryptocurrencies helps diversify your portfolio and gives you options, but it can also be confusing at times.

In fact, this is the most common question we hear from newbies looking to invest in cryptocurrency.

Veterans like Bitcoin, Litecoin, Ripple, Ethereum, and Ethereum, Dash, Neo, Zcash, etc. There are relatively new players like

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Naturally, new investors are worried whether to invest in this coin or not. I hope to answer this question once, at least for 2018.

In this section, I have compiled a list of the best performing cryptocurrencies. But remember, this list is in no particular order.

First introduced in 2009, Bitcoin is the first introduction to the cryptocurrency network. Satoshi Nakamoto, an unknown person or group of people, sent the Bitcoin page to prominent cryptographers and programmers in 2008. Thus, Bitcoin was born.

The document titled “Bitcoin: A Peer-to-Peer Electronic Money System” revealed all the details about Bitcoin and its plans for it. In January 2009, Satoshi launched the first Bitcoin blog, the Genesis blog, for a reward of 50 coins. Mining the Genesis block led to the Bitcoin network going live.

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Unlike traditional currencies that rely on government and corporate bodies to create currency, Bitcoin is different. Bitcoin is an open source decentralized peer-to-peer protocol that relies on its users to create more units. But never the first.

Nick

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