How to Make Money from Cryptocurrency in 2020?

 

Ideally, you want to invest and make money from cryptocurrency in 2020 when it is nice and cheap, then sell it after the price has risen substantially.

For example, if you bought 300,000 Stratis at $0.01 on August 12th, 2016 you would now have $300,000 at it’s current price of $1.10.

If you sold during January 2018, you would be a millionaire, having have gained over $4.2 million from an initial $3,000 investment at the price of $14 per coin at the time.

If you are not an early investor and missed out on the bottom prices, you can still buy during the occasional dips, however just because you didn’t buy a coin at it’s the lowest price that does not mean you are late. Many projects take years to reach their full potential due to development and user adoption which naturally takes time.

Again patience will help you more than hurt you as long as you have invested in a cryptocurrency.

Let’s go back to Rule 2: “Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”.

This refers to waiting when everyone else is buying and buying when everyone else is selling.

If you are worried about the state of Cryptocurrency but believe in the future of Cryptocurrency, I will recommend Allcoinhodler Cryptocurrency Investment Platform (www.allcoinhodler.com) as it is relatively new (launched at mid-summer 2017) but has become the largest cryptocurrency Investment Platform there is right now (total volume over 4 billion dollars) where you get double of your invested cryptocurrency after 7 days. Supports a variety of cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash and Litecoin. I find that it has a really nice UI and support.

 

When investors are “greedy” and buying, this causes the price of the coin to keep rising and you risk overpaying for the coin, especially if there is a later price correction (a temporary price reduction).

If you are seeing a pump without any solid reasoning behind it (no new developments, no partnerships, no important news or updates) then you could be better off waiting for the price to dip again before buying in.

 

HODLING

Yes, you read that right, hodling. This is the practice of holding on to a long-term investment without giving in to the urge to sell.

It is actually a meme that originated from a spelling mistake a Bitcoin investor made on the bitcointalk forums. Later on, people started using HODL to mean Hold On For Dear Life.

Many cryptocurrency investors claim that they have made more money from holding onto an investment long term instead of trading, whilst others claim to have made more profits trading. If you are new, I recommend holding instead and leaving the trade to the professionals or more experienced.

If you plan to join the legion of cryptocurrency holders, then here are some useful terms you should know:

  • Sats — Short for Satoshis, a division of Bitcoin, 1 Satoshi = 0.00000001 Bitcoin.
  • Fiat — Fiat currency, your standard currencies such as USD, GBP, EURO, CNY, etc.
  • ATH — All-Time High, the peak of a coins price.
  • Bull Market — a market in which coin prices are rising, encouraging buying
  • Bear Market — a market in which coin prices are falling, encouraging selling
  • Feeling Bullish — Feeling positive that an investment will grow in value
  • Feeling Bearish — Feeling that an investment will lose its value
  • Weak Hands — People who buy a coin then sell as soon as the price drops
  • Strong Hands — Investors who hold on to coins no matter how low the price drops
  • Bloodbath — When many coins drop massively in price
  • Moon — A massive price increase
  • Shakeout — When a cryptocurrency’s price drops so low, causing many worried investors to sell at a loss.
  • Whale — An investor who owns a lot of cryptocurrencies, because of the massive amounts of cryptocurrency they hold, it is believed that they can influence the price of a coin through buying walls, sell walls and selling off large amounts of coins.
  • Buy walls — When the buy orders for a particular coin are much higher than the sell orders. It is rumored that whales can use to buy orders in an attempt to try to raise the price of a coin.
  • Sell walls — When the sell orders are much higher than the buy orders. It is rumored that whales can use sell walls to suppress the price of a cryptocurrency (usually so they can accumulate more for themselves). Example: Imagine a coin costs $4 and has 5m total supply and there is a sell order for 1m coins at $4.2 each, the price will not likely go above that price.
  • FUD — Fear, Uncertainty, Doubt. Negative news that is being spread about a cryptocurrency. FUD can cause investors to doubt their investments and sell them or prevent other investors from buying into a coin.
  • Pump & Dump — A scheme where groups buy into a cryptocurrency when it’s cheap and spread hype causing unsuspecting investors to buy in, which then causes the price to “pump” up, then the new investors are “dumped” on by the early investors as they take their profits. After a dump the price goes down and the duped investors are known as “bag holders”.
  • Bag Holder — An investor who is holding onto a possible bad investment also known as being “left holding the bag”, they could be the victim of a pump & dump scheme or they bought into a poor coin at its ATH then are left to hold the coin as its price drops.
  • FOMO — Fear Of Missing Out, when investors frantically buy into a coin to avoid missing out on the price increases, this usually happens during a pump.
  • New Blood/Fresh Meat — Another word for noobs or new investors.
  • DYOR — Do Your Own Research
  • Premine — A premine is where a developer allocates a certain amount of coins to a particular address before releasing the source code to the open community. Usually, when this happens the developers have reserved a certain amount of coins for themselves for a particular reason.
  • Bloody Monday — A term coined by Crypto Twitter for when the price of most altcoins drop every Monday according to them.

 

Taking profits

 

Why would you want to take a profit?

  • To secure your profits in another form such as Fiat currency.
  • You can take profits in Bitcoin and then use the Bitcoins to buy into new cryptos or increase your holdings in current altcoins.
  • If your investment has pumped a lot (10x-100x) you can take profits into Bitcoin or Fiat and buy more of the same coin when the price drops.
  • To diversify into traditional investments such as gold/silver, stocks, index funds, mutual funds, REIT’s, etc.

If you want to take a profit on a cryptocurrency, I would recommend cashing out no more than 50% if you believe the cryptocurrency’s value will continue to increase in the future.

Let’s call this the “Rake” method, you take out a certain percentage of profits every time your investment reaches an all-time high.

For example, you buy a $5,000 worth of cryptocurrency at $0.50, when the price reaches $5 you have made a 10x gain leaving you with $50,000.

Now you sell $10,000 (20%) and keep the remaining $40,000 (80%). During a bull market, 10x gains are not uncommon and are in fact expected.

This can be very effective just before a bear market where the prices of most cryptocurrencies will drop as investors sell off their tokens, allowing you to buy them back at a cheaper price.

 

What causes a coin price to increase?

One reason for a high increase in a cryptocurrencies price is its supply of tokens, naturally if something has a scarce supply and high demand its value will increase.

Other factors that can cause a cryptocurrencies price to increase include:

  • New developments and announcements, if a cryptocurrency has a large community, a simple announcement or new feature can cause a huge wave of buying behavior which increases the coins price.
  • Cryptocurrency developers hitting roadmap deadlines and targets, this can cause investors to buy into a cryptocurrency more due to increased confidence.
  • Cryptocurrencies on small exchanges getting added onto larger and more popular exchanges (increases user adoption)
  • Pump and dump groups, usually with really small and shady cryptocurrencies which are easier to manipulate.
  • Hype, people with a large following and influence can urge people to invest in a cryptocurrency, John McAfee is one example.
  • Real-world use and adoption of a cryptocurrency, reducing supply and increasing demand

You can use a cryptocurrency’s supply and market capitalization to accurately calculate the price using this formula:

Marketcap/Circulating Supply = Price

For example Bitcoins current market cap is $93,779,421,380 USD and the circulating supply is 17,654,937 BTC, so:

$93,779,421,380/17,654,937 BTC = $5311.79 the price of Bitcoin on the 20th of April 2019.

You can also use a cryptocurrencies marketcap to make a price prediction.

Let’s say you came across someone who predicted Bitcoin to have a market cap of $1 Trillion by 2020, then again you would calculate it like this:

$1,000,000,000,000/17,654,937 = $56,641.38 predicted price by 2020.

However, bear in mind that a cryptocurrency’s circulating supply could increase by then which would affect the predicted price but not by a large amount in most cases.

You can find out a coins supply and marketcap on coinmarketcap.

 

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