We know that there are better investments than others. If the goal is to grow financially, the ideal is to grow aggressively. Of course, opportunities come with risks. In the financial world, “security” is ???? It is usually synonymous with “stability”. In other words, if you want something safe, you have to be willing to earn little. Highly speculative and illiquid markets offer high returns. However, we also run the risk of losing money. The key concept here is volatility. When something goes up a lot, it also means that it can go down a lot. Risk and volatility are interrelated concepts. Where are the opportunities in the world of cryptocurrencies?
If we want security, the best thing to do is to amass dollars or euros. It’s that simple. You will say that this is not a very good idea because of inflation. Secure. Inflation devalues the currency. Over the past 20 years, the average inflation rate in industrialized countries has been 2-3% per year. In this last phase, it was placed a few points higher due to the incentives to fight the pandemic. Certainly cash is â ???? Scrap as an investment. But it’s pretty safe rubbish. It is not for nothing that the dollar and euro strengthen in times of crisis. Of course, when we say cash we don’t mean cash under the mattress. We are referring to funds invested in certificates of deposit, bank savings accounts, or US Treasuries. These instruments provide income that typically counteracts inflationary losses.
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Suppose we need to pay a vendor or vendor at a later date. In this case, stability is extremely important. The inflation problem takes a back seat because the commitment has already been made. We could talk about our health insurance expiring or a kid going to college. In both cases, the risk must be avoided at all costs. Many companies, pensions and funds accumulate a lot of money in the form of government bonds or capital market instruments because they have to meet many obligations, yes or yes. Equity investments are avoided when there is no room for uncertainty. For this reason, buying Treasuries is interpreted as a sign of nervousness among investors. These bonds are a safe haven. They are signs of fear.
As a solution to the modest return on cash and fixed income instruments, we have stocks. Here the chance is closely related to size and time. A company like Coca-Cola offers a lot of security due to its size and success story. Obviously, its average return is usually better than that of a government bond. But it is also true that the return could be negative in a bad year. You could say that we are talking about medium risk. Which consequently implies an intermediate possibility.
If we are looking for the big opportunities, we have to go to the newer and smaller companies. Here we could even include large and old companies, but as seen in “growth”. This is the case with some tech companies. However, a start-up is usually a more promising investment than any established company. This is the territory of the optimists. Here we could take this opportunity to highlight the huge difference between a venture capitalist like Tim Draper or Peter Thiel and a value investor like Warren Buffett. In many ways, the difference is the risk they are willing to tolerate.
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Now we come to cryptocurrencies. We are talking about a highly speculative market with little liquidity. I mean Wall Street on steroids. Bitcoin, for example, is a very volatile asset. But not as volatile as other cryptocurrencies. Ironically, Bitcoin is the band’s most conservative and established asset. In other words, as incredible as it sounds, it is the safest commodity in the ecosystem. In fact, because of their size, fundamentals, and longevity, Bitcoin and Ethereum are arguably the safest assets. For the other top 10, we would have to carry out a case-by-case analysis. Certainly there are very promising projects out there because of their size or technology. But whether they can build a community remains to be seen.
Today the great opportunities lie in the small, unknown project. What is being degraded today can see a surge of support tomorrow that will skyrocket its price. That said, great opportunities require a lot of faith. Of course, I am not referring to irrational beliefs here. Obviously, the project must have a benefit and an advantage over the other projects. Of course, the tech has to be good, the development team has to be talented, and the promoters have to enjoy a lot of credibility. Of course we have to be in love with the project to invest in it. Here is the detail. It must have potential.
The big gains come from volatility. Volatility is always better in illiquid markets. Therefore, the great opportunities arise from the latest and smallest projects. The problem is that not all new and small projects are successful. In fact, most of them fail. Which brings us to our tragic dilemma: if you want to make a lot of money, you have to be willing to lose a lot of money. In other words, you have to be willing to take the risk.
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This article does not contain a list of such projects. Very sorry. But you have to do your own homework. Do the work. You have to go cryptocurrency for cryptocurrency and read all about it. To go into detail. Study everything. Once you know enough about the subject, choose the best projects. Put in some capital and then wait. How much capital There is little that is recommendable. It wouldn’t make much sense to have a lot of capital for such a risky venture. The formula is: if we lose, we lose little. But if we win, we win a lot. The advantage is that with large profits, little capital is enough to make a good profit.
When we talk about opportunities, the reader expects a tip. Indeed, the possibilities do not lie in this or that project. The opportunity lies in the strategy. The opportunity lies in the way we design our portfolio and weigh up opportunities and risks. It’s flexible and staying open. The possibilities are visible to everyone. But you have to act to use it.