Which altcoins should you choose?

Good Morning,

Today, I'd like to guide you on how to invest in altcoins.

I strongly encourage you to read this entire newsletter as it holds the potential to transform your perspective and, possibly, your life.

Stay Up-to-Date

Save time on researching the crypto:

💰Bitcoin

• #Bitcoin is a worldwide problem, says 🇮🇸 Iceland Prime Minister Katrín Jakobsdóttir. (link)
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• New Bitcoin Book: Gradually, Then Suddenly (video presentation) (link)
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• You think Bitcoin has topped? ..hasn't even started yet. - (link)
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• Understand Bitcoin Better with 3 min video (link)
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• Retail is coming.. (link)

🚀 Altcoins

• Detained Binance executive Tigran Gambaryan sues Nigerian government (link)

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• Educational: What are crypto points? (link)
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• Ethereum co-founder Vitalik Buterin would like to see 'more good memecoins than bad ones' (link)

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📈 Trading

• $GLM is a beauty (link)

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• $BEAM chart (link)

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• $CPOOL masive move, after acumulation period (link)
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• $CROWN (link)

(Not financial advice)

Educational

How do you determine which altcoins to invest in?

Most people alocate capital heedlessly without grasping the fundamental principles of opportunity cost and risk-reward ratio.

When allocating capital, one can choose between a safer or riskier asset.

The following scenarios can take place:

1. The safer asset may outperform the riskier asset

2. The riskier asset may outperform the safer asset

A very simple exemple would be dollars vs stocks.

Dollars are safer than stocks.

You may want to alocate resources to a stock only because you aim to outperform the value you have in dollar.

If the stock underperformed the dollar, you end up with fewer dollars.

This should be your mindset:

A risky asset must outperform the safer one.

Why does this matter?

If regularly expose yourself to risky assets that underperform the safer ones, you will soon lose everything.

Let’s apply this to crypto market

What is the safest asset in crypto?

Bitcoin.

Why?

→ Because compared with other altcoins, it possesses the largest liquidity, doesn’t have an active founder, doesn’t have any counterparty risk etc..

What are the riskier assets in crypto?

Altcoins.

Why?

→ Altcoins depend on a team and active founders.

→ It has less liquidity.

→ Are not backed by a real business that makes revenue and pay the team.

→ To finance operational activities, they have to sell coins, witch creates a potential exit scam risk etc..

Good.

Let’s say that at the beginning of 2023 (20 feb, 2023) you had $1000 and you wanted to invest in crypto.

As a beginner, you might not know what to do, so you start “investing” in a random altcoin.

Let’s say you choose $MATIC, because you heard about it from a friend.

You bought it at 1,37$.

The year is 2024. The price of MATIC is $0.99.

Your holdings have depreciated by 27%, reducing your initial investment of $1000 to $730, resulting in a loss of $270.

Meanwhile, within the same timefreme, Bitcoin, a safer asset, appreciated by 200%.

Had you chosen Bitcoin, your investment would now be on $2000 profits.

This occurs without inheriting any of the risks associated with MATIC.

In other words, during this timeframe, you didn’t just lose $270, you also missed out on a potential profit of $2000 from Bitcoin, in addition to the 270 lost from MATIC.

Now, you would be 2,270$ richer.

How can you determine whether an altcoin may outperform or underperform Bitcoin?

You examine the Altcoin vs BTC chart.

Consider the MATIC/BTC chart below.

It illustrates how MATIC underperformed BTC by -75%.

In other words, had you invested 1BTC in MATIC last year, your current holding would be 0.25 BTC.

Poor Investment: Less money from a riskier asset.

Meanwhile, during this timeframe, there is an investor somewhere in the world who held Bitcoin, avoiding any additional risk, and made significantly more money than the person who invested in MATIC.

Don’t compare altcoins only with FIAT currencies

There are some coins that, in dollar terms, made a profit but still underperformed Bitcoin. 

Actually, most altcoins underperform Bitcoin.

Let's turn our attention to ETH.

As we can see in the chart below, ETH appreciated by 120% in dollar terms.

Had you allocated that $1,000 to ETH, you would have earned an additional profit of $1,200.

But..

The illusion is that you achieved a good return on investment in dollar terms.

In reality, ETH underperformed the safer asset, BTC.

Had that money been invested in BTC, you would have more dollars right now. 

ETH underperformed Bitcoin by -27%.

In other words, had you invested 1 BTC in ETH at the same time, you would now have only 0.73 BTC.

So, even though ETH increased by 120% in dollar terms, it failed to outperform BTC.

Poor Investment: Less money from a riskier asset.

You earned less money with increased risk. 

You could have made more money with less risk.

What's the next step?

If you want to trade altcoins, you need to adapt your mindset and select altcoins that are most likely to outperform Bitcoin.

To do this, check the Altcoin vs. BTC chart to see if the altcoin is on an upward trend against Bitcoin.

If not, you will most likely make more money in a safer way by choosing BTC. 

Now, go and make your own research,

Mr GoBrr

Meme Of the Day

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.