In this article we discuss a 5-year cryptocurrency investing strategy. Although this is not financial advice, we believe that cryptocurrency will be successful over the long term. In addition, it is a strategy that we at Piggy Bank Coins have been using for some time and has thus far proven successful.
There has been a growing interest in Bitcoin and other cryptocurrencies over the past few years. In fact, many crypto investors believe that cryptocurrency like Bitcoin will replace our current fiat currency system with electronic currency such as Bitcoin. Cryptocurrency supporters tend to have an evangelical passion for Bitcoin and blockchain, and as a result, have ruffled the feathers of the status quo of the financial industry.
Investing in cryptocurrencies such as Bitcoin is risky. Cryptocurrency is a new technology that has attracted fevered speculation from day traders, Wall Street, foreign investors and everyone in between. Bitcoin has been criticized by many reputable finance experts and called a Ponzi scheme, fake internet money, “rat poison” and many other names. However, as we lay out the 5-year cryptocurrency investing strategy, it will become clear that Bitcoin and many top cryptos are here to stay. There is no guarantee when investing in anything; however, Piggy Bank Coins believes adding a small amount of risk to your portfolio with investments like Bitcoin may pay off big in the long term.
Before sharing the 5-year cryptocurrency investing strategy, it’s important to understand some basics about cryptocurrency.
Satoshi Nakamoto and the Bitcoin White Paper
In January 2009, Bitcoin was born. It is unknown who invented bitcoin; however, a developer named Satoshi Nakamoto (probably a pseudonym) released a 9-page white paper entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System.” The Bitcoin white paper describes Bitcoin’s purpose and how it works.
Finally, Bitcoin was the first cryptocurrency to experience widespread use and adoption. However, its use case has evolved over the years from a peer-to-peer payment method to a store of value model. Many Bitcoin users hold bitcoin much like you would hold silver or gold in an investment portfolio.
What is Bitcoin?
Bitcoin: Designed to be a Peer-to-Peer Cryptocurrency Payment System
Bitcoin is an open-source, block chain-based technology that was designed as a peer-to-peer payment system. It is designed to be a decentralized electronic payment method that can be conducted semi-anonymously among individuals. It is intended to be a digital cash. The other intent of Bitcoin is to solve the double spend; trust problem that had been encountered in the past with electronic currencies.
It should be noted that Bitcoin has become a model for real money and a store of value, instead of a payment method. Many investors buy bitcoin and hold it, sometimes for many years. In practice, few people use Bitcoin for payments because the network is slow, prices fluctuate and the legacy banking system and governments have created obstacles to using Bitcoin for payment.
What is Block Chain?
The block chain stores data on a public database. The blocks of information include transaction data, participant data and distinguishing data. Each block of data stores thousands of transactions under cryptographic lock and key. A network of computers operates the blockchain. They make the network run and keep it secure by solving algorithmic hashes. The network computers earn cryptocurrency for their work. The bitcoin block chain technology uses a distributed ledger. Bitcoin’s network security hinges on the distributed ledger that the network participates in.
Bitcoin Limited Supply
Only 21 Million Bitcoins Will Ever Be Mined!
There is a limited supply of Bitcoin, which directly effects the Bitcoin price prediction. Only 21 million Bitcoins will ever be mined for circulation. Therefore, by definition, Bitcoin is a deflationary money. This is in stark contrast to how central banks around the world like the Federal Reserve Bank print more money, continuously creating inflation.
Currently there are approximately 18.5 million Bitcoins that have been mined for circulation. In theory, there are only 2.5 million Bitcoin left to mine. This means that 88% of all Bitcoins that will ever be produced are already circulating. When 21 million Bitcoins have been mined at some point in the future, no more coins will be produced and the mining of Bitcoin will cease. In addition, limited supply of Bitcoin is what is so exciting about the prediction of Bitcoin price.
Clearly, a case can be made for Bitcoin’s growing demand. In addition, there is a demonstrable limited supply of this cryptocurrency. These two simple factors of supply and demand alone point to a possible opportunity. As a result, analysts believe that Bitcoin may be an addition to a 5-year cryptocurrency investing strategy.
The Rapid Growth of Bitcoin
There are a couple of things to understand about Bitcoin growth. First, Bitcoin is growing in popularity and use worldwide. Users are adopting Bitcoin as a store of value like gold and using it as a payment method in places where banks don’t exist. Second, Bitcoin is growing in price.
When users began mining Bitcoin on laptops in 2009, it had little value. Yet, today one Bitcoin can be exchanged for approximately $40,000-50,000! In 2020 and 2021, billions of Dollars of institutional money began to flow into cryptocurrency investment.
Examples of Institutional Money Investments in Bitcoin (converting dollars to bitcoins):
- ARK Investment Management and Kinetic Portfolios Trust, two large investment funds representing wealthy clients, have begun investing in the Grayscale Bitcoin Trust.
- Wall Street billionaire investor Paul Tudor Jones has invested approximately 2% of his investment portfolio in Bitcoin
- Michael Saylor, Founder and CEO of MicroStrategy invested over $400 Million in Bitcoin in 2020.
- Twitter/Square CEO Jack Dorsey invested $50 Million in October 2020 in Bitcoin.
- PayPal announced on October 21, 2020 that it would be launching a cryptocurrency service that allows users to buy and sell cryptocurrencies.
There are many other known examples of institutional investors who have begun investing in Bitcoin. In 2021, investment continued on a large scale in Bitcoin, with big players such as Elon Musk (Tesla), additional investment from MicroStrategy, and many more.
It seems clear that in 2021-2022, Bitcoin will begin its next phase of expansion and adoption. As a result, Bitcoin’s price will likely go much, much higher. Furthermore, Bitcoin may be a good addition to anyone’s 5-year cryptocurrency investing strategy.
Anthony Pompliano and Max Keiser, two well-known investors in the Bitcoin space believe that Bitcoin price will exceed $100,000 in the next few years. Investors like Mike Novogratz and Chamath Palihapitiya believe Bitcoin price will go higher. In fact, their predictions are $400,000 and $1,000,000, respectively. The investors mentioned are millionaires and billionaires. They clearly understand money and markets. As a result, their predictions are very serious.
Investing 101 Basics
Take Control of Personal Finances and Dollar-Cost Averaging
Once you establish your goals and how much money that you want to invest each month, you can then determine what kind of investments you wish to make. However, every adult should learn to budget, save money and pay off debt first. If you have a family, it is critical that you begin planning your financial future.
Many investors use “dollar-cost averaging” as a part of their 5-year cryptocurrency investing strategy. Dollar-cost averaging is simply dividing up the amount of money you have to invest over a longer time frame. This investment methodology means that you invest the same amount of money each week or month, no matter if the market goes higher or lower. Dollar-cost averaging takes the emotion out of buying stocks.
Obviously, with higher risk investments like Bitcoin and cryptocurrency, many investors choose to invest a small percentage of their money. This usually means less than 5-10% of their investment portfolio will be in risky investments like cryptocurrency.
What is Your Level of Risk?
Aggressive and Conservative Investing
Determine if you are an aggressive or a conservative investor. Aggressive investing is utilized by those who want to take more risk and capture greater returns. This type of investing is considered acceptable for younger investors and for savvy investors who want to dedicate a small portion of their portfolio to higher risk. Conservative investing is a lower risk style of investing. Returns tend to be lower than the aggressive style, but come with lower risk. This style is best for those that desire lower risk and those who are getting closer to retirement age.
Piggy Bank Coins 5 Year Cryptocurrency Investing Strategy: Diversify
Diversification of investments should be a core tenet of your 5-year cryptocurrency investing strategy. This means spreading your money over different investment sectors, which can protect your money over time. For example, you may want to have some stocks, bonds, real estate, cryptocurrencies and precious metals in your investment portfolio. The idea is that when one market declines in value, some of your other investments will do well. As a result, your portfolio will then find a balance and weather the storms during the long term.
Investors’ methodology for how they divide their portfolio allotment varies. It will be up to each individual investor how they portion cryptocurrency, equities, gold, etc. in their portfolio. Obviously, younger investors can take more risky positions than a person who will soon retire. However, we believe that putting a small amount of your investment portfolio, such as 5%, in cryptocurrency is reasonable.
Since there are thousands of cryptocurrencies to choose from, we recommend selecting more established, well-capitalized cryptos that have demonstrated a use case. For example, Bitcoin has been around since 2009, has a market capitalization of approximately $800 Billion and is considered to be a “digital gold.” Furthermore, Ethereum may be another solid choice in your portfolio, given it’s use case in smart contracts.
Investors who want to capture bigger gains (which may increase risks) may add smaller cap cryptocurrencies to their portfolio. One method for adding younger, less proven cryptocurrencies to a portfolio is to simply choose the top 10-20 capitalized cryptos. This gives investors exposure to higher growth, more volatile cryptocurrencies without spending hours researching each individual project. Again, keep in mind that these newer projects can be risky and it is important to research projects that you invest in.
5 Year Outlook: Huge Expansion of Cryptocurrency
Piggy Bank Coins believes that cryptocurrency will experience tremendous growth in the coming five years through 2026. It seems clear that many projects will continue to grow over the next 5-10 years with some seeing 10-100X price valuation increases. As a result, investing in cryptocurrencies such as Bitcoin and Ethereum (and others) now may be a wise investment.
Wrap Up of 5-year Cryptocurrency Investing Strategy
Hopefully this article has helped you better understand the 5-year Cryptocurrency Investing Strategy. Although there are risks associated with investing in new technology such as Bitcoin, we believe that cryptocurrencies are the future. In addition, there is still time to include cryptocurrencies like Bitcoin in your 5-year Cryptocurrency Investing Strategy and personal investment portfolio.
It is important to note that Piggy Bank Coins does not provide financial advice. We don’t endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.
In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, in order to help you make the best choice for you.