High risk investment for the Middle Class and how to handle them.

I’m hesitant to write this article because conveying my thought process into a public domain especially as a licensed financial advisor can be dangerous. Not because they are wrong but because they can be misconstrued as financial advice.

Therefore, I’m going to share the following statement: This is not financial advice.

Cryptocurrency, a new asset in this century

I would like to discuss cryptocurrency, but it's important to clarify that I'm not licensed to market cryptocurrencies or provide advisory services for crypto. I hope my experience sharing serves as a testament to how an ordinary, non-expert crypto investor navigated the volatile and high-risk landscape of cryptocurrency through principled and disciplined investments strategy.

My journey in crypto hasn't been without struggles, despite currently sitting at a modest profit, somewhere in 2022, my overall crypto portfolio plummeted by a staggering 80%. Those are losses amounting to mid five-digit figure.

My exposure to cryptocurrency took two main forms. Firstly, I invested in a variety of coins, predominantly meme coins and second layer Ethereum projects, along with other blockchains outside the Ethereum ecosystem. This included ventures into NFTs and DAOs (Decentralized Autonomous Organizations), which, I won’t go into details but it can be described as "Crypto Ponzi Schemes."

Secondly, I had significant exposure to cryptocurrency-related stocks, primarily with Coinbase (COIN). This counter, I felt was a diversification away from direct cryptocurrency investment and yet provided me a direct exposure to the cryptocurrency system.

Painful process, a bitter medicine but the patient needs it

Navigating the downturn of an investment cycle demands patience, belief, and discipline. Amidst market volatility, I halted my crypto investments, particularly in NFTs and DAOs.

The cumbersome expenses and complexities of wallet transfers, coupled with regulatory hurdles and security concerns also deterred me from getting myself back into such projects. Nonetheless, my conviction in the relevance of cryptocurrency and it’s blockchain technology remained firm.

After months of hiatus, I consolidated my various crypto holdings into the top three coins by market cap and a promising layer 2 coin. Concurrently, I maintained gradual investments in Coinbase despite its substantial depreciation from $353 to $32.65 in 2022.

The Recovery, which didn’t take too long

The stock market initiated its rebound in the second quarter of 2023, with technology stocks reclaiming their status the top sector following a significant downturn in 2022. At this point, we should be all too familiar with the phenomenon dubbed the "Magnificent Seven."

While attention was largely focused on advancements in artificial intelligence in 2023, the latter half of 2023 witnessed the resurgence of cryptocurrencies and their associated stocks. Bitcoin began to solidify its position as the preeminent digital gold, with other major cryptocurrencies following suit.

During this resurgence, Coinbase, the leading cryptocurrency exchange, experienced a notable recovery. This resurgence was partly attributed to issues surfacing within competitors like FTX and Binance, further establishing Coinbase as the most reputable cryptocurrency exchange globally, bolstered by its status as a US-Public listed company, Coinbase went from $32.65 to a high of $283 on March 2024.

Lesson learnt; quality is key.

As of writing, my investments in Coinbase have yielded over a 100% profit, while my existing crypto investments show a 60% increase. These gains include the initial investments I made during the volatile boom-and-bust cycles of the past four years.

Through these experiences, I've gleaned invaluable lessons about investing in high-risk ventures. One key principle stands out: prioritize quality companies and assets. This steadfast approach has proven reliable time and again. Take cryptocurrencies, for instance. Despite periodic turbulence, they have demonstrated resilience and longevity. Bitcoin, often likened to digital gold, has weathered numerous fluctuations. Notably, the recent introduction of ETFs has provided investors with accessible avenues for participating in bitcoin's price movements via traditional stock exchanges.

Coinbase, as the custodian for a significant portion of bitcoin ETFs, maintains its position as the leading exchange in the USA. Despite facing legal and regulatory challenges, along with competition entangled in legal and criminal proceedings, Coinbase perseveres as a major player and probably the only reliable crypto exchange in the world.

Dollar Cost Averaging

Despite my confidence in the resilience of crypto and Coinbase, I refrained from making large investments during downturns. Uncertain about how deep or prolonged these downturns might be, I relied on a strategy I've honed through stock market experiences: dollar-cost averaging.

For over a year after the initial hiatus, I consistently invested varying amounts, ranging from a few hundred to over a thousand dollars monthly, into top cryptocurrencies and Coinbase. This disciplined approach ensures that regardless of market fluctuations, I'm steadily accumulating assets at different price points. As of April 2024, such convictions proved correct, this strategy has positioned me to quickly realize profits as both Coinbase shares and cryptocurrency prices recover

Ignore the noise, stick to your friend

Like any tale of triumph, success hinges on discipline and consistency. When Coinbase and cryptocurrencies plummeted to their lowest point at the close of 2022, maintaining my resoluteness proved crucial. While inundated with discouraging news about the crypto market, I persevered, buoyed by unwavering conviction. Amidst the tumult, I gleaned insights unnoticed by many so-called "cryptoexperts."

During this period, I was inspired by the teachings of luminaries like Peter Lynch, Warren Buffett, Terry Smith, and Paul Tudor Jones. Their investment journeys and storeis were beacon guiding me through turbulent times.

Terry Smith “stick to your friends”

Warren Buffet “be greedy when others are fearful, and be fearful when others are greedy”

Paul Tudor Jones “Don't be a hero. Don't have an ego. Always question yourself and your ability. Don't ever feel that you are very good. The second you do, you are dead.”

Peter Lynch “People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.”

These are words I live by when it comes to investings and I hope the same for you too

Disclaimer

This article serves to inspire the humble middle class who sort wealth growth through investing into high-risk assets. Patience is a virtue, know that the market will correct and the market will recover. Invest in what you know, diversify and always be prepared to go long term and maybe lose all your monies. Non of the above serves as a recommendation as you may die or lose all your money if you follow what I did. Feel free to have a discussion if you are suffering investing setbacks.