Beware of the digital gold rush

Digital Gold Rush

You see a forrest ahead of you that is surrounded by mist. It might not be a forrest after all because you only see parts of trees sticking out of the fog here and there. But you assume it is a forrest. You can stay where you are and keep guessing or you step closer to explore the place yourself.

The cryptoworld feels similar to the described scenario. Many people assume what cryptos are based on a few facts from the news. Some are getting rich, others predict a scam and most people turn a blind eye to what might be essential in the near future. Not many people seem to deep dive into the topic to get a clear view and dismiss the topic right away.

The situation feels similar to the introduction of the internet in de mid 1990s. But things are moving fast. Therefore you have to be aware of the digital gold rush and pay attention to possible pitfalls along the way. Here are the five commandments to steer you clear of danger without missing an opportunity.

Commandement I: Listen 👂

A short while ago a young electrition came to my house to improve my wifi network. After a while we talked about finance and investing which led to cryptocurrencies. With fire in his eyes he praised several coins that surely will generate him some profit in the future.

While I applaud the enthusiasm he showed, you should treat carefully when recieving advice on how to invest money from an electrician. When investment tips and easy get rich quick ways are discussed frequently in news papers, we might be in a bubble.

Commandement II: Read 📖

Instead you shoud do your own research befor you take action. Get some books about the topic and inform yourself online to get a better picture of the field. There are plenty of educational courses online available to learn something new.

Learn the fundamentals first, form an oppinion and discuss with likeminded people. Do the extra work and take the time to read books. There are plenty of good blogs too, but often their oppinions are one sided and either for or against it.

Commandement III: Experiment 🥼

Next is to get a feel on how this works. Choose an exchange or broker you like and start doing some trades to see how it feels. I bought my first cryptos about three years ago and then let them sit for a whole year before I returned to the topic. My investment was small and the idea was to use the BTC I bought and buy something with it.

How do you cope with the volatility of the markets? Do you constantly check your portfolio or can you ignore the ups and downs? What is the strategy you want to apply? How much money are you willing to invest and for what reason? These are all questions you should have an answer for. What about a crash? Can you afford to loose your investment?

Commandement IV: Reflect 🤔

Finally you got a taste of the crazy world of crypto currencies. What is your impression after you have some hands on experience? How comfortable do you feel and how confident are you about the future?

I am at this stage as of now deciding on how much I am willing to put into cryptos. I started with 5% of my portfolio but I am adjusting that number as we speak. Personally I have fixed rules when I invest in the market. For me it is always the same time and the same amount on a regular basis. No matter where the market it, I invest automatically.

Why you ask? Well the volatility can give you the illusion to do market timing. But this offers to many options for me so I don’t want to think about it. I can save a lot of time and energy that way. But for you it might be different.

Commandement V: Educate 👨‍🏫

The last step you can do is try to educate your surrounding. I think it is very interesting when you talk with people about the crypto world. The majority is sceptical and therefore dismissiv. I think that is a missed opportunity. These talks also help to test your knowledge and to present arguments, why you think there is a future in this thing.

Than there is a minority that is invested, mostly with an all in approach because of the recent news. This group is also interesting to talk to because mostly they don’t know what they are doing and they open admit that. The funny thing is in my circle of friends it is always the people working in finance.

There is a goldrush going on but only among a small group of enthusiasts online. The majority is still turning a blind eye to the topic. Whatever you do, be aware of the digital gold rush and try to walk closer to the forrest to get a better picture. Who knows what the future brings.

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