The Game of Investing, Vol. 28
We’re looking at how a fundamental understanding of crypto can enhance your overall investing strategy.
Our guide today is Roger Hirst, a Real Vision favorite and markets educator who breaks down the core principles of crypto as an asset class in the Real Investing Course.
In this issue, we’ll cover 3 things:
- Navigating the digital asset space.
- Understanding the crypto trends.
- Valuing digital assets.
Let’s get started.
Welcome to the Game
Welcome to The Game of Investing, a bi-weekly newsletter bringing you “aha” moments and actionable lessons from Real Vision experts. No matter your level of expertise, markets are tough — which is why we all have to put in the work. Ultimately, the game of investing is a competition with yourself. Our mission is to help you navigate the path to success. Prepare to level up.
LEVEL 1 — The Digital Asset Basics
In the fast-paced world of digital assets, terms like bitcoin, ethereum, stablecoins, and DeFi, sound like a foreign language to beginners.
- “Rather than getting lost in specific projects or coins, it’s crucial for beginners to focus on the core principles that transcend asset classes,” says Roger.
Understanding the basics will help you build a foundation for further digital asset exploration. And when it comes to crypto investing, there are 3 asset classes you need to know:
- Large-cap coins — Bitcoin (BTC) and Ethereum (ETH) are the only mega-cap coins, and these 2 have outperformed every other coin over the long term.
- Altcoins and memecoins — Smaller coins that can be divided into subsets based on market cap. A few (like SOL and ADA) have a market cap over $10 billion, while most are below $10 billion. “Microcaps” are any altcoin with less than a $100 million market cap.
- Non-fungible tokens — NFTs aren’t cryptocurrencies, but they are trading instruments. These tokens are used to certify ownership and authenticity of a digital asset like art, a club membership, or a music catalog.
Level 2 — Understanding the Trends
The key to success in any market is the ability to identify patterns and trends — and crypto is no different.
Similar to tech stocks, digital assets experience cyclical (short- to intermediate-term) trends driven by factors like sentiment, leverage, news, and regulation.
And despite the speculative nature of crypto, there are clear secular (long-term) drivers supporting the exponential adoption of digital assets.
- “Understanding macro dynamics — like where we are in the business cycle — can help you identify the trends and correlations that impact all asset classes,” says Roger.
🔑 Real Vision co-founder and CEO Raoul Pal uses his proprietary business cycle indicators to project future market performance — and he believes that crypto offers the best long-term risk-adjusted upside of any asset class.
Intermission — Introducing Crypto Tax Calculator
Whether you are a crypto newbie, an established investor, or operating a business in Web3, tax season can be an absolute headache — but it doesn’t have to be a nightmare.
That’s where Crypto Tax Calculator comes in — the software platform founded in 2018 by brothers Shane and Tim Brunette, crypto fanatics who were fed up with the complexity of doing their taxes.
As Coinbase’s official global tax partner, CTC focuses on simplifying complex transactions, supporting over 300,000 currencies across Ethereum, Arbitrum, Optimism, as well as 1,000 other integrations.
Sign up right here to get an exclusive 30% discount with the code RV30 at checkout.
LEVEL 3 — Valuing Digital Assets
Valuing individual digital assets is a tall task, but understanding the common drivers behind asset price performance is a crucial first step.
By studying the relative performance of different coins during the same cyclical cycles, you can uncover valuable insights into the factors that drive price.
- In this session [paywalled] from the Crypto Academy, we learn about the specific tokenomics that experienced crypto traders use to value digital assets.
- That video is available to Real Vision Plus members or higher — or anyone who joins the Crypto Academy right here.
On a broader level, it’s important to prepare for volatility in crypto markets. Forty percent selloffs occur regularly, but that volatility is also a positive when price moves higher — so don’t panic.
- A good rule of thumb is never be fully invested. Always have some reserve capital to buy the dip.
Risk management and discipline are pivotal in crypto investing. Given the volatility, you should never invest more than you’re willing to lose, and you should constantly evaluate your position size and portfolio makeup.
According to most experts, beginners should concentrate most of their crypto portfolio on BTC and ETH, allocating a small percentage of funds for altcoins, memecoins, and NFTs.
Oh, and most importantly…
Don’t forget to take profits.
Thanks for reading. In our next issue, we’ll dive deeper into why understanding macro markets is so important for crypto investors.
See you then.
Have feedback on The Game of Investing? We’d love to hear it. Just email us at firstname.lastname@example.org to share your thoughts.
The Game of Investing Newsletter…
…a bi-weekly newsletter where you learn from investing pros about how this game actually works.
Because learning about finance shouldn’t be boring.