Having The Right Perspective With Your Long-Term Investments

You probably heard it a million times - a diversified portfolio is essential for long-term success and while that is true no one told you how to properly diversify. How to know how much to put in every con in USD terms?

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Utility

Always start with utility. Ask questions and try to understand the long-term value of your investment. If you are thinking about investing in Bitcoin are you doing so only because you think the price will be higher or do you truly understand the importance of a censorship-resistant decentralized money in the future?

For your long-term investment to make sense the currency of your choice should be designed to withstand the test of time but also provide value for future users.

Market Cap

Once you are done with your own research look at the market cap and try to realize if it is too high or too low right now. Almost all currencies on the market have speculative value at the moment meaning that we are pricing them in based on future expectations. For example, you can't do anything with Cardano right now because the native blockchain has no smart contract functionality (yet) but the market cap implies that it is a $90 Billion project. This is because people expect it to be a success rather than valuing it based on current functionality.

Competiton

This is probably the best way to get some serious perspective. This website is an amazing place to start and here is one example.

If you think that Cardano could have the same Market Cap as Ethereum, you can use this tool to see how that would unfold.

Cardano vs ETH.png

Or maybe you have an even more ambitious idea. You think that Safemoon could capture the Market Cap of Bitcoin. This would be the result:

sfm vs btc.png

If a project you are interested in has the potential to disrupt some of the top players this tool can help you understand how big of a move that would be.

Max Supply and Ratio

After all the work is done extra attention should be focused on tokenomics. Capped supply tokens aren't the same as inflationary tokens for a few reasons:

  • There will only be 21 Million Bitcoins in existence. If you owned just one you would be one in 21 Million people (if everyone owned exactly one) but that's not the case here. Many institutions already saw the value of BTC and started accumulating. The same will happen with pension funds and wealthy investors. While they keep taking BTC off the market human stupidity will do the rest. Rough estimates say that 20% of BTC is lost forever but we are only 13 years in. Imagine how much more will be lost in the coming decade...
  • In terms of maximum supply, owning 1 Bitcoin today is the same as owning 1.2 Bitcoins in 2010 and probably the equivalent of owning 1.5 BTC in 2030. People will keep losing their private keys until a more convenient solution comes along. Supply shocks like this can make prices go parabolic if a surge of demand appears in the market.

Think in Percentages

At the end of the day pose yourself with a simple question - would you be happy with owning 0.000005405405405405405% of Apple's total market cap? In dollar terms that is a bit over $100k today. You could have bought it for pennies back in the day and it's still not too late to do that with Bitcoin.

Owning 1 BTC today means owning 0.000005405405405405405% of the total BTC supply, just for perspective.

Take some time and calculate your share of a certain cryptocurrency. Make some basic projections on future market valuations and see if you would be satisfied with those returns. At the end of the day we are all playing a guessing game here so try to get good at it.

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