RV Blog Investing The Game of Investing, Vol. 32

The Game of Investing, Vol. 32

A Bitcoin exchange-traded fund (ETF) is an investment vehicle that tracks the price of BTC or assets associated with bitcoin’s price, like futures. It’s traded on traditional stock market exchanges rather than on crypto exchanges. A Bitcoin ETF gives investors exposure to BTC without the need to actually own and hold the crypto asset.

This Week…

We’re building on our last lesson with an introduction to successfully trading altcoins. 

Once again, our expert today is Michael “Mando” Anderson, a former high-yield credit trader at Barclays in London turned professional crypto trader and co-host of our 5-part educational series in the Crypto Academy.

  • “There’s no exact science to do this correctly,” says Mando. “But if you get the narratives and market trends right, and you know the tokenomics, these trades can go parabolic.”

In this issue, we’ll cover 2 things:

  • What altcoins are, and how to use them in your portfolio.
  • The importance of understanding trending narratives and tokenomics.

Let’s get to it.

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  — Altcoins by Definition 

In simplest terms, an altcoin is a cryptocurrency other than BTC and ETH. Altcoins are divided into subcategories by the size of their market cap.

  • The largest altcoins (like SOL, XRP, and ADA) have market caps over $10 billion.
  • Most altcoins fall below a $10 billion market cap, and “microcaps” are any altcoin with less than a $100 million market cap.

Just like with BTC and ETH, altcoin trading requires a keen sense of market sentiment, macro drivers, and the fundamental factors that impact crypto prices.

Altcoins have a higher risk profile than even BTC and ETH — so we must proceed with caution. That volatility can have benefits, though. Some traders use relatively small altcoin allocations to supplement their larger portfolio.

  • “You can get absolutely destroyed trying to trade these things,” says Mando. “So it’s important to only invest what you’re willing to lose, be disciplined about position-sizing, and wait for dips to buy.”

Mando recommends allocating a maximum of 30% of your crypto portfolio for altcoins, and only consider buying a token once it has dropped at least 50-60%.

“And absolutely never buy altcoins based on FOMO,” he says.


LEVEL 2 — Trading the Narratives and Tokenomics

Every token founder, influencer, and altcoin degen wants you to invest in their favorite coin, so it’s important to have an incredibly high bar about what narrative you’re buying into.

Be wary of memecoins (altcoins that are popular purely based on an internet trend) and low-cap coins.

  • “You have to be careful because you’ll often catch the move just as the early investors are exiting the trade,” says Mando. “These are the pump and dump coins.”

Instead of chasing viral narratives, new investors should develop an understanding of the characteristics that make a viable, sustainable altcoin, and what really drives the price.

Start with blockchain technology and use cases.

  • Different coins operate within different networks and have different functions.
  • There are Layer-1 coins, Layer-2 coins, DeFi coins, DAO coins, and even NFT coins.

Recognizing a coin’s use case and network compatibility — combined with an understanding of how macro forces impact broader crypto sentiment and price action — will help you navigate the ecosystem and identify attractive, substantial market narratives for trading.

From there, consider the tokenomics.

Tokenomics help us understand the supply and demand dynamics of a specific token. You’ll want to research things like distribution schedules, total supply versus supply in circulation, vesting periods, mining and staking allocations, token burning, utility function, and more.

🔑 “No matter why you enter a trade, always have a target for when you’re going to get out,” says Mando. “With altcoins, you’ve got to know when to walk away.”

📖 To continue your education on all things crypto, consider joining the Real Vision Crypto Academy.

Next Time

Thanks for reading. In our next issue, we’ll examine why liquidity matters more than anything else in investing.

See you then.

Have feedback on The Game of Investing? We’d love to hear it. Just email us at essential@realvision.com 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.