How to invest your money in cryptocurrencies.
F.Years ago I didn’t know anything about cryptocurrencies, but I managed to convert a hundred dollars into six-digit numbers. I’m not a genius, I’ve followed core principles that many investors apply today. You can do that too.
Let me explain that this is not the same as what day traders do. Personally, I’m not a fan of buying and selling within a day or two.
You don’t need a college degree or training like a financial advisor. These are simple rules that you can easily follow.
This doesn’t guarantee you’ll see six digits as your results may vary.
Personally, I have invested over the past two decades, so I was used to turbulence in my investment. You have never seen the turmoil or the ups and downs in cryptocurrencies unless you have traded penny stocks. That is how volatile this market is.
Cryptocurrencies can suddenly lose thousands of dollars before you even wake up. Bitcoin whales are doing their thing trying to trick you into selling your investment at a loss. Don’t fall for it and be patient.
The market will return before you know it.
“It’s Money 2.0, a huge huge deal.” Chamath Palihapitiya
It took me a while in 2017 to understand bitcoin and the cryptocurrency market. Bitcoin hit its previous all-time high of around $ 20,000.
I didn’t understand the market at the time, but luckily I hadn’t invested much. I invested $ 100 in bitcoin.
Then I started adding more Bitcoin and Altcoins – cryptocurrencies that are not called Bitcoin.
I’ve looked at a couple of platforms that didn’t work out and lost some money. Use caution when investing in cryptocurrencies under the guise of a multi-level marketing (MLM) or network marketing company. These usually don’t work in the long run.
Then the Bitcoin market fell and kept falling. I was hoping the market would recover, but it only did a year ago.
“Compound interest is the eighth wonder of the world. Whoever understands it deserves it. If you don’t do that, you pay for it. ” – Albert Einstein
You probably don’t have five numbers just sitting in your bank account. But I am sure that from time to time you will have three numbers. Even double-digit numbers can get you started.
When I read stories by Robert Kiyosaki, the author of Rich Dad Poor Dad, he said to pay himself first.
Basically, when you get paid from your job, you are investing in yourself. Subtract some of your income and invest the money. If you do, you pay yourself first.
Make sure you have enough to pay your rent or mortgage and enough to put food on the table. If you don’t, you will likely need to find a second or third job.
You have to invest with what you already have. Do not try to take out a personal loan or your mortgage money and invest it. This could easily backfire and you could lose your home.
If you invest about $ 100 each month, the money will pile up and grow. It may look small at first, but you have to be patient.
When buying, don’t worry too much about the price of Bitcoin. Basically, you are using the dollar cost average when buying every month or on a schedule that is convenient for you.
Example of a dollar cost average with Bitcoin
For example, you bought Bitcoin and the price for a month was $ 100. This is an example as the price of Bitcoin is higher today.
The next month you bought Bitcoin, and this time the price was $ 150.
The third month you bought Bitcoin, and this time the price was $ 90.
In three months you paid $ 340. Since you bought Bitcoin over three months, the average price you paid for Bitcoin was $ 113.33 (340 divided by 3).
As you invest your money month after month, you will find that the money slowly gets bigger. They go from three to four digits and then from four to five digits. Then one day you will cross the six-digit mark.
“Since I have no way of reliably predicting market movements, I recommend buying Berkshire stocks just if you expect them to keep them for at least five years. Those looking for short-term profits should look elsewhere. “Warren Buffett
Often times, you will see someone on social media talking about making three or four figures out of a deal they made. Often times people talk about their gains but don’t show you their losses.
Cryptocurrency trading is possible, but the more often you buy and sell your cryptocurrencies, the more you can be hit by a tax bill that you weren’t ready for.
As a general rule, if you sell your cryptocurrencies in less than a year, as a short-term trader you will be paying taxes. This is usually higher than if you held your cryptocurrencies for more than a year.
If you hold your cryptocurrencies for a year or more, you will pay less tax. You are classified as a long-term owner.
Make sure to take out your cryptocurrency gains and losses with your accountant. They will help you find out if you owe money to the IRS.
You don’t want to be surprised if the IRS says you owe money on cryptocurrency trades that you made. The IRS gets smarter and gets access to exchanges for your trades.
Don’t try to outsmart them. The IRS usually wins.