What I’m doing when it comes to crypto investing

Crypto investing strategy

XXX coin to the moon!!!πŸš€πŸš€πŸš€

This statement is pretty common when it comes to crypto investing. Whatever cryptocurrency it might be, there is often no lack of speculation in online spaces.

This euphoria around cryptocurrencies hit an all-time high in March/April 2021 when Bitcoin hit a peak price of around US$61K. Since then, the crypto market has corrected around 30% to 50%.

However, in recent times, there have been signs of recovery in the crypto market. As of writing this post (end July 2021), Bitcoin currently sits at a price of around US$40K.

Against this backdrop, I thus feel that it is useful to share what I am currently doing when it comes to crypto investing. Hopefully from this post, you can gain a better insight into cryptocurrency investing aside from just mere speculation.

Disclaimer: I am no expert when it comes to crypto investing. At its current stage, I still feel that crypto investing is highly risky in nature. Hence, if you are looking to invest in crypto, there could be wild swings (either up or down) in your crypto investments. In addition, I take no responsibility for future gains or losses should you decide to invest in some of the cryptocurrency projects I would be highlighting. Lastly, always do your own research and risk management when it comes to crypto investing.

Let’s get right in.

Invest in projects not coins

Now it might seem a little ironic that I would say don’t invest in coins when the asset itself is called cryptocurrency.

However, any serious crypto investor has to know that behind every legit cryptocurrency is an ongoing project being developed. Be it whether it is the decentralizing of finance, building of a smart chain network or tagging in-game currency as crypto assets, the cryptocurrencies that you invest in have to be backed with a tangible and viable project.

So how do I separate the duds and promising projects? Well, look at the value that the team behind the cryptocurrency is trying to bring. Does it help society as a whole? Does it improve upon problems in the real world? What are the cryptocurrency’s real-world usages? By asking these questions, we can then narrow down the cryptocurrencies that we want to invest in.

To get the information required for some of these questions, one would have to look at a cryptocurrency’s whitepaper. It is roughly similar to a prospectus of sorts when it comes to an IPO in the stock markets.

A cryptocurrency’s whitepaper would detail not only the technical information about the cryptocurrency, but also the vision of the development team, their goals and the fundamental purposes of the cryptocurrency itself. It is through this that you can make a more informed choice about your crypto investments.

Remember, all legit cryptocurrencies would have a whitepaper on their website.

Personally, I often look at cryptocurrencies that fall into these two categories; coins that form the backbone of smart contract networks and coins which democratize the distribution of wealth. I am of the view that such cryptocurrencies would do best over the long run as they provide tangible real-world benefits.

Banking on the potential of decentralized finance

Decentralized finance or DeFi for short, refers to a financial sector without traditional intermediaries like stock exchanges, brokerages, banks or remittance companies. Instead, decentralized finance utilises blockchain technology to facilitate end-to-end transactions.

The reason why I think this has huge potential moving forth is due to the fact that it disrupts the concentration of financial influence and power that traditional institutions have held for so long.

From the interest rates on mortgage loans and savings accounts; to overseas remittance fees, current financial institutions have a huge influence on whether such interest rates and fees rise or fall.

DeFi hopes to challenge and change that. And I would say it is achieving that aim so far.

In the current low-interest-rate environment, interest rates on DeFi are already far exceeding anything offered by financial institutions. In addition, one’s ability to take up a loan is not based upon their credit score but rather on the amount that can be collateralized.

All of the happenings on DeFi just makes sense.

Is it risky? I would definitely say yes as DeFi itself is still quite niche and there is no failsafe should your invested DeFi project goes under. Hence, always do your research properly before investing.

With that said, these are two activities I am currently doing in the DeFi space.

Liquidity mining

Now do not be put off by the term liquidity mining. It just basically means providing liquidity on a decentralized exchange (DEX). As there is no centralized broker or exchange company, a DEX has to depend on its users to provide liquidity to the platform. This is to facilitate currency swaps and trading on the DEX.

Liquidity mining involves the pairing of two crypto-assets. Usually, this pairing consists of the native currency of the blockchain network itself and another cryptocurrency (such as Bitcoin, Ethereum etc).

When transactions of the two cryptocurrencies take place on the DEX, a portion of the resulting fees is then paid out to liquidity miners. Your portion of fees would be dependent on the amount of crypto assets that you provided to the liquidity pool.

Hence, the more transactions that take place on the DEX, the higher the amount of returns you would get.

Currently, I am getting around 70% returns per annum from liquidity mining.

Staking and lending

Besides liquidity mining, I am also involved with the staking and lending of my cryptocurrencies.

Staking means that you put your cryptocurrency into a blockchain network to keep it functioning and secure. By doing so, you get rewarded every time a new block is created on the blockchain network.

For instance, I am currently staking my DFI on the Defichain network. Hence, every time a new block is created on the Defichain network, I get rewarded a certain amount of DFI.

Lending is just as it sounds. You basically earn a return by lending your cryptocurrency to a 3rd party.

There is some inherent risk when it comes to lending right now as it is currently done through 3rd party intermediaries. As such, if you truly want a ‘decentralized’ experience, I would look at staking and liquidity mining on the blockchain network itself if you have the financial and technical knowledge.

For me, I am doing staking through a third party company at an advertised rate of 102.6% per annum.

NFT Gaming

Exploring NFT gaming

Lastly, I am also currently looking at non-fungible token (NFT) gaming, also known as play to earn gaming. The idea is that you can gain ownership of in-game assets which have an ascribed market value.

In a sense, NFT gaming is roughly similar to trading card games such as Pokemon, Yu-Gi-Oh or Magic: The Gathering. You gather and own in-game assets which you can then trade with other players for cash in the form of cryptocurrency. Of course, there is also the added competitive edge in which you can battle with other players too for more in-game rewards.

The current NFT games are mostly similar to trading card games. The only downside is that you would need a considerable amount of time to possibly get a good investment monetary wise.

Thus, I would say enjoy the game first before thinking about making money from it. With that said, the NFT gaming sites I am currently gaming on are Splinterlands, Gods Unchained and Sorare (requires a significant upfront investment).

My cryptocurrencies

So, having taken a glimpse into what I do for crypto investing, I would now list down the cryptocurrencies I am currently invested in and my reasons for investing in them. There are only three currently which are, Bitcoin, Ethereum and DFI.

Bitcoin – My reasons for investing in Bitcoin is simple, it is secure, it has withstood the test of time and it has recently garnered institutional interest.

While there are concerns with Bitcoin’s sustainability due to its proof-of-work mining, I still feel that it would retain its role as a digital store of value.

Ethereum – To me Ethereum is the ‘Android’ of the blockchain networks. It remains the backbone network of many cryptocurrency projects out there. As such, I still expect Ethereum to continue being a big player in the cryptocurrency space.

While there are concerns with Ethereum with regards to its high transaction (gas) fees, I feel this would clear up once Ethereum 2.0 is pushed out. Furthermore, the recent ‘London’ hard fork update also helps to stabilise network transaction fees.

Defichain/DFI – Defichain is the first DeFi network that I invested in. As compared to other DeFi projects such as Uniswap or Pancakeswap that runs on smart contract networks such as Ethereum or Binance Smart Chain, Defichain instead runs on a network anchored out of the Bitcoin network.

This means that it is more secured than smart contract networks as its code is less complex, which reduces the occurrence of security vulnerabilities or bugs. This is particularly crucial for DeFi as you would want a financial network that is securely as robust as possible.

Conclusion

So there it is, an overview of what I am currently doing for crypto investing. If you are thinking of getting into cryptocurrency investing, always do your own research and be mentally prepared for extreme volatility. As a general guideline, cryptocurrency should only constitute a small portion of your investments.

Also, do not have the mindset of investing in crypto with the hope of 100x your money, it is just not realistic. With that thinking, you are more likely to invest in duds.

Lastly, keep an eye out for my next crypto post as I would share how I make my cryptocurrencies work harder for me. Till then, always invest safely and get profitable returns!

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3 Comments

    1. Hi BK always good to see you around!

      To invest in Defichain/DFI, you can do it via Cake Defi or the Defi wallet app. I will share more on this in the upcoming post:)

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