As you can see from the first four parts, there is a lot of information to cover and we have only begun to scratch the surface.
Here are some high level opinions of where we are headed in the near future and in the next 10-20 years. We have no doubt that many of these predictions will likely be wrong, but some may prove right.
Likely the most common, though we at Crypto Mouse do not advocate day trading cryptocurrencies for arbitrage and prefer to buy and hold.
We are not sure how much you should specifically invest and none of the words here can be considered investment advice.
As we have stated before, our opinion at Crypto Mouse is that you should risk as much as you are willing to see go to zero.
If you are willing to see your net-worth go down by 5% then your maximum exposure should be 5%.
We have seen many take exposures as high as 50% as they are worth tens of millions of US dollars, but that is a very controversial move. If one is rich, and has stable cash flow from owning many businesses, it makes sense that some would take more risk.
No Need to Rebalance
If you dear reader are only risking the amount you are willing to lose, you should not have a need to rebalance. The only case we see for a rebalance is if there is a large movement of 15-20x or so. If this happens go ahead and rebalance a little bit.
While we have given out many of the top coins we at Crypto Mouse are heavily involved in, we have no doubt that there will be other winners as well.
If you dear reader have conviction in one we did not mention, no problem!
We have no issue agreeing to disagree.
As an example, Crypto Twitter is probably the most emotional place we have ever seen and we do not want to offend anyone who owns a different coin we at Crypto Mouse have never done research on.
We maintain that if you dear reader are smart enough to get on the train already (it’s still extremely early), then we at least agree that cryptocurrencies will impact the future in a significant way.
The winner of the money use case will be worth the most (amongst the different currencies).
What we mean by this is the cryptocurrency used for payments will take the majority of the market share.
At this time it is Bitcoin.
Maybe it is called Bitcoin in the future and perhaps it’s not. For that specific use case of money exchange there will be one major
network that is used as the de-facto cryptocurrency.
We at Crypto Mouse think there will also be a second currency used for illicit activities. Attempting to shut down illegal activity for drugs is just not feasible in our lifetime (our perspective). This will represent a second use case for money (a privacy currency).
Keep in mind that at this point Bitcoin is not really 100% anonymous.
The most controversial section is the currency used for Decentralized Applications or Dapps.
For this use case we likely are a solid five to ten years away from seeing who the real winner is. There is a lot of hype and we do not see a clear winner for the protocol layer at this time.
We believe we can all agree there is no standard protocol for all decentralized applications at this time.
The good news is the currency that becomes the standard for decentralized applications could and likely will be worth even more than the store of value/money cryptocurrency.
The winning protocol will receive more value as applications are built on it, the value will increase as the user base expands on a daily basis.
With the overview listed above, you can see, dear reader, that the big money is in trying to figure out which protocol will be the winner. If you can do this you will be wealthy, no question.
The problem though? It is not easy.
As we have said in other posts, the best way to evaluate a coin is to decide:
- Does it already have a network effect?
- How good is the team developing the code?
- Are the marketers engineers or are they simply “crypto bulls” who got in early and don’t know how to write code?
- Does the blockchain scale?
- Does it need to be on a blockchain at all (if investing in decentralized applications)?
Those five questions sound easy sure, but they will take many hours and hours of research to figure out.
Another opinion, and we think there are only two real ways to value the currency (feel free to disagree):
- Network Effect
- Engineering Team
The network effect is the value of the coin derived by the number of people who use the coin. This is exactly how many internet companies are valued today: Monthly Active Users (MAUs) and Daily Active Users (DAUs). The second piece is the engineering team.
We at Crypto Mouse believe that the majority of people won’t bother doing research here. Check out GitHub and ignore the people who market the coins. Meet the people who are working on the software code. Betting against the best engineering team has not worked in the past 30+ years, why it would work today?
Lastly, just as a fun downside case, look at the amount of costs incurred to obtain one coin via mining. This can be calculated by the amount of computing power needed to contribute to the network to get one coin.
At the time of this writing if we include the cost of electricity, the mining equipment, the personnel to make sure everything is running properly, you get to around $2,000 per bitcoin. You can run the same analysis for the alternative currencies that are being used as payments.
It’s possible millions of jobs and or careers and or business opportunities will be created due to this new and growing market. See: exchanges, engineering positions, cryptocurrency hedge funds, smartphone engineers (for wallets), consulting (YouTube channels, anyone?) and much more.
You dear reader can probably take your current skills and apply them to this space in a million different ways. Name a career. There will be an opening.
Many of our dear readers may work in sales which is going to be transportable to this space. You can go into sales for exchanges, sales for accessories (cryptocurrency wallets, T-shirts, etc.).
You don’t even need to hold the crypto currencies to make money off the space.
You could make new cryptocurrency ATMs
Or you could get paid to educate people on crypto currencies.
There is no clear “winner” as we think every single one of these ideas will work.
However, we at Crypto Mouse recognize many of our dear readers may not want to own a single coin ever. Here is a list of pick and shovel strategies where you can get paid and do not have to physically own a single coin.
- New Wallet: There are only two popular hardware wallets at the time of this writing, Trezor and Ledger S. There is certainly room for another competitot here. Since both of these hardware wallets are similar. A simple differentiator would be various types of coins, not just the major ones (e.g. Monero has significant technical issues when it comes to wallets and if someone could figure out a way to put that onto a hardware wallet…). There, free idea. Best if luck, send us a royalty check in the mail!
- ATMs: Bitcoin ATMs are still relatively rare. Have you seen an Ethereum ATM? Neither have we at Crypto Mouse. Maybe they exist but they are not really common. Apply the same logic as the wallet idea here and you could have yet another pick and shovel play on this space.
- An Exchange: Plenty of opportunity here. Coinbase is often the de-facto starting point for newbies to cryptocurrencies, but their offerings are limited to just Bitcoin, Bitcoin Cash, Litecoin and Ethereum at this point in time. If you have technical expertise, creating an exchange and being in the “flow” of money could lead to a material financial payout.
- Merchandise: Selling the merchandise related to cryptocurrencies. Look no further than cryptocurrency related clothing, jewelry and other trinkets. They are becoming popular gifts for small occasions and the cost of creating these items are relatively low.
- Consulting: Become an expert in the space and brand yourself as such in a specific area. This could range from explaining the technology to helping startups related to cryptocurrencies. At this time, the protocol side has the biggest upside since it is the least well known. Bitcoin is extremely well known with many “faces” associated with it (think Roger Ver and Andreas Antonopoulos).
- Money Management: There are more and more cryptocurrency related hedge funds popping up as each day passes. If you have the contacts, then you could earn money by simply investing in the space with limited risk. If for some reason you can raise a large amount of money, you could make a lot if you see material price appreciation and see limited downside with 2% management fees.
- Education: Create a course on how to learn the technology of cryptocurrencies by themselves in just a few months. They will sign up to learn how things work and go off on their own to invest in the space, you do not have to give any recommendations or buy a single coin.
- Payment Systems: Create a company that helps people accept crypto currencies. BitPay is the largest company that we’re aware of as of this writing (they allow you to pay with bitcoin and charge a 1% fee). You would essentially competing with credit card companies which would makes you a quasi middle man. Take care if going this route dear reader: as the technology evolves you’ll want to offer a solution that accepts many different types of cryptocurrencies.
- Cryptocurrency Mining: A complex endeavor but it can be profitable one for those who are technically savvy: mine the coins and instantly sell them without actually purchasing any of the coins! By running the rigs you get a steady flow of coins that you can then sell to the public for fiat. While this takes out the volatility (price movements inn cryptocurrencies do swing often), your competition increases rapidly (competing for specific coins or tokens).
- Sell the Space: Similar to the marijuana movement in many states in the United States, instead of creating the mining infrastructure for cryptocurrencies, you can simply lease the facility. You don’t receive any coins at all and are paid a monthly recurring payment in fiat/cash.
In closing, you dear reader, are watching one of the biggest gambling addictions take place from your computer screen. At the time of this writing, cryptocurrencies are a ~$800 billion dollar industry that can fluctuates by +/+10%+ on a daily basis (not an exact figure, but you get the idea).
Wherever there is sizeable volatility, you can be sure speculators are not far behind. This is exactly why the gambling industry was one of the first adopters of this technology.
Here are few tips from us at Crypto Mouse
No Emotion: If you are following our advice, you are truly invested for the long-term and you do not care about price drops of 80% (not a typo). If the value of the cryptocurrency you hold goes down 80% you should not be losing any sleep. Because you are not investing more than you can stand to lose. When there are near-term corrections of 20-40% it will be a good
Technology Over Hype: There are a lot of amazing salesmen out there right now selling complete garbage, beware. It could be a 100% scam ICO that steals money with no way of retrieving a single cent. It could even be a relatively large coin (capitalization) that is built on nothing but aggressive marketing to push acceptance. The best way to see if it is more hype/marketing versus technology is to look out 5+ years in advance. Ask two clear questions: 1) is this technology actually different? and 2) is it different enough that a current coin cannot simply upgrade its system? These questions are not
easy to answer and should take at least a few weeks of research to figure out.
Track Wallets for Hype: We at Crypto Mouse believe a good way to see if there is too much hype in the market is to see if
you can buy a Trezor or Ledger S. The last few times we saw a correction, the devices were out of stock. As we have mentioned before, we don’t recommend day trading, but buy to hold. If you see a massive
sell out of wallets, you know what is likely coming soon.
Trading: If you are a trader you already realize that trading in this market will reflect human emotion. We will repeat ourselves yet again here: we do not recommend trading cryptocurrencies for anyone. You may win early on, but it will not be sustainable.
Irrationality: With prices going up, many will begin to view bitcoin, for example, as “too expensive”, even though one can buy a fraction of a bitcoin. This is completely irrational, but is how humans work. They may see a lower priced stock and say it is cheaper even though the price does not necessarily say anything about the asset.
Head over to the Blog for current thoughts and observations on this space…