Crypto 101: Expanding on a Few Investing Strategies
In a previous post, we discussed how to get ahead of the money inflows to the cryptocurrency industry and benefit from it. There were some clear points where fiat would be converted (or flow) to crypto, and that money has already been committed, making the trades lower risk.
Stablecoins as an Indicator
There are two trends that also have potential to bring alpha to your portfolio. The first was discussed in the previous article, and detailed how stablecoins would be a safe haven investment during bear markets in the cryptocurrency industry.
This means that users will sell tokens and buy stablecoins when they sense the euphoria is hitting a peak. Trades like this allow them to lock in some profits without fully withdrawing that money from the ecosystem. But how do we profit from this?
Stablecoins, as the name suggests, should remain stable in price, otherwise they technically aren’t fulfilling their purposes. So we can’t just buy stablecoins and wait for the price to increase. But what we can do is look at purchases of stablecoins as an indicator that smart money is selling out on their position.
It essentially becomes an early warning for investors to be careful, since others are selling volatile tokens to own the “cash” of the crypto world. Booms are great until they go bust, and this is a solid way to identify those moments. When you see this happening, it might be time for you to follow suit and buy some stablecoins.
A Trend Towards Micropayments
The other trend that is tricky to benefit from is the movement towards micropayments. Our current banking system makes it prohibitively difficult (and unprofitable) to collect payments of a few cents (or even fractions of cents). The cryptocurrencies that are enabling micropayments, such as Litecoin or Stellar, will benefit massively if this trend begins to catch on. Assuming they are capable of facilitating the transactions, the business applications would be massive.
One company doing something similar is Earn. Right now, users can only get cryptocurrencies in one of three ways: buying it, mining it, or earning it. Originally founded as 21.co and later rebranded to be Earn, the company is all about creating value for users in unexpected ways.
Most people hate reading their emails, and that especially applies to networking emails. What Earn has started to do is enable users to pay other users to read an email from them. Busy individuals are rewarded for their time in small payments of Bitcoin.
And the beauty of the platform is a lot of this cryptocurrency doesn’t get sold. Earn acts as a “Bitcoin sink” because it moves money into the system that is often not moved out. Instead, it is spent within the ecosystem, which results in a net add to the overall crypto-economy. The obvious way to profit from Earn is to try using it, as it can be an easy life enhancement that also pays well.
Any time another use for cryptocurrency emerges, that is more fundamental value that can be assigned to tokens. A lot of speculative investing depends on volatility and short-term bets, but when you get deep into the question of how many people are using a coin, much of the risk disappears.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.