Welcome to my free cryptocurrency educational series. Each part builds on the previous ones, so I suggest starting at the beginning and moving through part by part:
Cryptocurrency 101 series (core principles, social justice, blockchain tech, Bitcoin):
- Part 0 Overview of my series, who this is for, why you might consider listening to me, and how easy it is to think you understand crypto when you actually don’t.
- Part 1 Why should I care? What’s in it for me? Why is crypto important (it’s about a lot more than just making money!)?
- Part 2 How crypto actually works, why Bitcoin is valuable (even if it’s just “made up!”), and what you should know about blockchains (the tech behind them and how they could influence the future of our world)
- Part 3 How the blockchain keeps running, where new Bitcoins come from (i.e., how mining works), and concerns about Bitcoin’s environmental impact
- Part 4 How crypto offers autonomy, why it can’t be stopped, and the value of decentralization
- Part 5 How to store and use cryptocurrency, some basic cryptography, how wallets work, identity management, and the future of democracy
- Part 6 Overview of the different types of wallets, which one is best for you, what to be careful of, and why a hardware wallet might be worth the investment
Cryptocurrency 201 series (intermediate principles, Ethereum, NFT’s, DAO’s):
- Part 7 Ethereum (the #2 most popular cryptocurrency, and the one I’m most excited about), smart contracts, dapps, gas (and the high gas fee problem), Proof of Stake (PoS), and Ethereum 2.0
- Part 8 Coins vs. tokens, and some real Ethereum use cases—oracles and DEX’s
- Part 9 Intro to NFT’s (collectibles, research funding & historical significance, and music)
- Part 10 More categories of NFT’s (art, video games, virtual reality)
- Part 11 Wrapping up NFT’s (what you can actually do with them, upsides, downsides, risks)
- Part 12 DAO’s (organizations managed by algorithms, governance tokens, collective ownership, and the “network state”)
Cryptocurrency 301 series (advanced principles, DeFi, reinventing the finance world):
- Part 13 DeFi & CeFi, reinventing banking with peer-to-peer finance, stablecoins, and borrowing & lending
- Part 14 More DeFi (how Uniswap works, plus insurance, payments, derivatives, blockchains, exchanges, liquidity staking, and impermanent loss)
- Part 15 Wrapping up DeFi (why liquidity is important, LP tokens, yield farming, calculating return, yield aggregators, and major risks)
Cryptocurrency 401 series (investing, making money in crypto):
- Part 16 Intro to investing (what could go wrong, where you might fit in, and what kind of investing could be right for you)
- Part 17 Preparing to invest (how much money to put in, how to split it up to mitigate risk, setting up your wallets, buying the coins & tokens you want, and dealing with different blockchains)
- Part 18 More preparing to invest (security, understanding what price targets are realistic, and using “expected return” to choose between opportunities)
- Part 19 Specific investing options (buying and holding, index tokens, leveraged tokens, my list of coins and tokens, mining & staking, and lending)
- Part 20 Higher-risk, higher-reward opportunities (liquidity staking & yield farming, NFT’s, OlympusDAO, and Tomb Finance)
- Part 21 The single investment that’s made me the most money: StrongBlock
- Part 22 Wrapping up my seven categories of investment (including an update on StrongBlock)
- Part 23 How to invest depending on how much money you have (plus, the market dip, where my money is, and how to fit crypto into a larger investing strategy)
- Part 24 Holding coins & tokens vs. yield farming, where I’m putting my money now, big news on StrongBlock, and the future potential of crypto
- Part 25 Staying safe, preparing your taxes, avoiding scams, upgrading your security, and judging new projects
- Part 26 How to decide who to trust in the crypto world, technical analysis & market cycles, and an update on my longish-term portfolio
- Part 27 (in progress) Wrap-up
This is part 23 in my cryptocurrency educational series.
Part 23 Reading Time: 29 minutes
Want to listen to this post instead?
1/26 Update: A few minor additions and clarifications around risk and portfolio allocation.
1/30 Update: All of this was originally part of Part 22. But, that post was getting too long with my updates, so I split it off into this one.
2/1 Update: Added the “everything is dropping” section at the beginning.
2/14 Update: Added a new section toward the end about how to fit crypto into a larger, balanced investment strategy involving multiple asset classes.
This is my eighth post specifically about investing in crypto, so I highly recommend you start with the previous ones if you haven’t read them yet:
- Part 16 (“Intro to investing)
- Part 17 (“Preparing to invest”)
- Part 18 (“More preparing to invest”)
- Part 19 (“Specific investing options”)
- Part 20 (“Higher-risk, higher-reward opportunities”)
- Part 21 (“StrongBlock”)
- Part 22 (“Wrapping up my investment categories”)
(Disclaimer: I’m not an investment advisor, so please don’t see this series as me telling you to invest a certain way. Instead, this is my attempt to thoroughly explain all the major options available to you in the crypto world so you can make your own choices. Many of these will not be right for every person, and I don’t know your individual situation.)
Given how much the crypto market has dropped lately, I think it’s important to briefly address that before continuing. Then, we’ll dive into where my money is and how you might consider investing depending on your situation.
Everything is dropping! Should I be worried?
Here’s the short answer: No one knows, but I don’t think so.
(This is assuming you’ve been listening to the warnings I’ve included throughout this series—e.g., proper risk management, diversified asset allocation, only putting in what you can afford to lose, etc.)
There are so many possible explanations for the drop, but one is likely that so many new people have been getting into crypto investing and they aren’t used to the volatility, so they panic-sell when the market starts to decline, and then that snowballs.
Also, because so many institutional investors have gotten into crypto now, the crypto market has become more correlated with the stock market and more affected by world news.
As I’ve explained many times, crypto investing is volatile.
If you can’t psychologically handle a dip, this isn’t for you. But, if you still believe in the fundamentals—that blockchain and crypto technology is amazing in a variety of ways and will offer a lot of utility to society—then nothing has changed. We’re still moving toward that same future, and there will always be ups and downs along the way.
Remember how you might have felt when crypto prices were at all-time highs a little while ago? You probably thought that you’d like to put even more money into crypto but you should wait for a dip, right? Maybe you were beating yourself up for being late to the party and wished you had gotten in years ago when everything was cheaper? Great, now’s your opportunity.
It’s easy to call people who have been successful in crypto “lucky” since they were able to buy in at lower prices a while ago. But if you think things feel uncertain now, they probably didn’t feel a whole lot more certain to those early adopters who got in before crypto was popular. So, if they held on through that early uncertainty, it’s not that they were lucky (barring the few who happened to get rich buying something like DOGE); rather, it’s that they had the conviction to make a bet and stick with it. They endured many dips along the way and held on.
The bottom line is that it’s impossible to consistently time the market. No matter when you get in, you’ll always be thinking at some point, “I wish I’d bought in sooner before that rise” or “I wish I’d waited a few more weeks till after that drop.”
Trust me: I’ve advised a lot of friends over the past year about crypto, and they all end up saying one of those two things no matter when they bought in.
I know it’s scary at times like this, but these kinds of drops have happened many times before.
Here’s a great Reddit post from January 22 by user greenappletree. That person found that this level of drop has occurred 14 times since 2016! The median time to recover was just under 5 months. The shortest time was around 3 months and the longest around 34 months. The recovery times seem to be decreasing too over time.
So, if we’re going by that data, things should be back to where they were before too long.
I hope that helps you feel a bit better.
Here’s a relevant quote as well from the book The Psychology of Money, by Morgan House (found via Trung Phan): “Market returns are never free and never will be. They demand you pay a price, like any other product. The volatility/uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds. The trick is convincing yourself that the market’s fee is worth it. That’s the only way to properly deal with volatility and uncertainty—not just putting up with it, but realizing that it’s an admission fee worth paying.”
So, if you’re already invested, I suggest hanging on. If you sell now, that simply locks in a loss, whereas if you wait, it will most likely go back up as it has over a dozen times already in the last several years. Remember the classic investment maxim: buy low, sell high.
Don’t sell low.
And, if you’re not invested in crypto yet, now is an amazing time since everything is “on sale.” Crypto is never a risk-free investment, so only invest what you can afford to lose. But, if you believe in the vision of crypto, now might be the perfect time to get in.
Ok, on to today’s main content.
Full transparency—here’s where my money is and how much I made:
I believe that transparency is critical when talking about investing. People on social media exaggerate their gains and hide their losses all the time, and it’s easy to make assumptions about how someone did.
If you’ve read this far, you might be curious where I’ve personally put my money. I hesitate to do this simply because my situation is likely quite different from yours (in terms of my net worth, my risk tolerance, my income sources, my responsibilities in life, my fall-back options if I lose it all, etc.). But, I also understand what it was like to be where you probably are now—seeing me mention all these different opportunities but being unsure where to begin or where to focus your energy.
Again though, please don’t buy any of these just because I own them. This is simply what I happen to hold right now and it doesn’t mean that all of these are doing well or that I intend to keep holding all of them.
So, here’s where my money is right now, ordered from largest position and excluding my smallest, more experimental investments:
(Keep in mind that this is how things look today, but the crypto world changes quickly.)
- Stocks and bonds, mostly through the robo-advisor Betterment
- If I were starting again now, I would choose Wealthfront over Betterment.
- Either one is fine, but I highly recommend you use a robo-advisor in any case for investing in the stock market. You simply send them your money, pick a risk level, and they do the rest—using advanced algorithms to manage your money in a way that’s more efficient and lower-cost than a human money manager.
- It was definitely not my intention for this to become my second-largest investment—it’s simply that the value of my initial investment kept going up over time. My original investment was only a small percentage of my net worth, but I’ve been compounding nodes for eight months (and I’ve still been regularly buying nodes, though I put a pause on that a few weeks ago to just concentrate on taking profits for a while while I wait to see if the team comes up with a better sustainability plan, as they’ve promised).
- If you’re just getting into StrongBlock now, I can’t emphasize enough that this should not be your second-largest investment. StrongBlock is high risk.
- Holding, staking, and lending altcoins (i.e., crypto coins and tokens other than ETH/BTC)
- See my list in Part 19, but my largest positions are currently LUNA, SOL, DPI, MVI, RPL, ETH2xFLI, and LRC.
- Holding, staking, and lending ETH/BTC
- If I were starting over now, I would swap this with the previous one (i.e., I’d be holding a lot more ETH/BTC than altcoins). It’s easy to get caught up in all those other coins and tokens, but it still seems to me like ETH’s value is likely to double in the next couple of years. (Who knows, though!)
- Staking UST in Anchor Protocol (on Terra)
- Cash in traditional checking/savings
- Farming FTM-TOMB on Reaper (on Fantom)
- Staking in OlympusDAO (on Ethereum)
- Providing liquidity for ETH/BNT on Bancor (on Ethereum)
- Staking in Hector DAO (Fantom)
- Farming USDC-FTM on SpookySwap (on Fantom)
- Staking in Wonderland (on Avalanche)
- Earning yield in the DPI pool on Vesper Finance (on Ethereum)
- Staking in Jade Protocol (on Binance Smart Chain)
- Staking in Umami (on Arbitrum)
- Fractional ownership of NFT’s
- Providing liquidity for ETH/DPI on QuickSwap (on Polygon)
- Staking in KlimaDAO (on Polygon)
- Staking in Euphoria (on Harmony)
Here are a few more that I was in for several months but recently pulled out:
- Farming in the Auto CAKE pool on PancakeSwap (on Binance Smart Chain)
- Farming RAY/USDC on Raydium (on Solana)
- Farming PLENTY/BUSD on Plenty (on Tezos)
- Farming TSHARE on Grim (on Fantom)
Finally, here’s my todo list for the next investments I’ll likely be making:
- Farming wNEAR-TRI TLP on Vaporwave (NEAR Protocol [wNEAR] is a new blockchain with growing momentum, Trisolaris [TRI] is a large DEX on there, and Vaporwave is a yield aggregator on the Aurora blockchain, which is an EVM [Ethereum Virtual Machine] for NEAR Protocol, meaning that it allows you to use MetaMask and easily bridge over your ETH)
- To pay my taxes soon, I’ve been converting a lot of my profits from StrongBlock into the algorithmic stablecoin UST on the Terra blockchain and earning pretty safe 19.5% APR on Anchor Protocol (note that this APR might only last for a few more months, but at that point it should only drop a few percentage points)
- Fundrise, which is a way of investing in real estate and unrelated to crypto (since it feels important to keep my overall investment portfolio diversified)
- Buying and holding GMI (the new “Bankless DeFi Innovation Index” from Index Coop)
- More yield farming of FTM-TOMB on Reaper (as I described in Part 20, this pair should have low impermanent loss)
- Buying and holding CRO (the token of Crypto.com, which I’m seeing as one of the leading centralized exchanges)
- Yield farming USDC-FTM on the Fantom version of Beefy (for auto-compounding)
- Liquidity mining ATOM/OSMO on Osmosis (I’m still learning about Osmosis, but it looks like the ATOM/OSMO pool—on the Cosmos network—has been offering a consistent APR of over 100% for quite a while)
Again, I believe that transparency is important, especially when I’m in an educational role.
So, here are my total returns over the past year:
This includes my entire investment portfolio, meaning crypto, stocks/bonds/ETF’s, and cash. Naturally, I could have gotten higher returns by putting more of my money into riskier investments (e.g., a higher percentage into crypto), but this is what I considered to be a balanced portfolio with a reasonable ratio of risk to reward.
For each month, I’ll also note how much of my net worth at the time was invested in crypto:
- January (0.5% of net worth in crypto): 2% total return
- February (0.5% of net worth in crypto): 0% total return
- March (1% of net worth in crypto): 3% total return
- April (4% of net worth in crypto): 3% total return
- May (9% of net worth in crypto): -2% total return
- June (11% of net worth in crypto): -7% total return
- July (22% of net worth in crypto): 8% total return
- August (29% of net worth in crypto): 12% total return
- September (34% of net worth in crypto): 3% total return
- October (39% of net worth in crypto): 12% total return
- November (56% of net worth in crypto): 6% total return
- December (52% of net worth in crypto): -5% total return
My total return from January to December was 39%.
For reference, the S&P 500 returned an average of 2.3% each month and nearly 27% total for the year. A balanced portfolio at Wealthfront with a risk score of 7 out of 10 (i.e., a mix of stock and bond ETF’s) would have returned 14.4%.
So, I’m quite happy with my 39%.
By the way, in that same period of time, ETH returned over 400%. I would never have recommended that anyone put their entire portfolio into one thing, even Ethereum, but that number just shows you that there’s no need to get too carried away with complex DeFi strategies when you could just be buying and holding ETH and a few other major coins.
(More on this in the next post.)
For now, let’s move on to:
How to invest based on how much money you have:
I want to be very clear about one thing in this section: I’m going to lay out some specific asset allocations and specific orders in which you might invest in different things; but, please don’t see that as set in stone. Compared to the amount of time and effort I’ve put into the rest of the posts in this series, I’ve spent comparatively less time finessing the specifics of this section—simply because it feels quite subjective to me.
So, there’s no fancy math, probability theory, or anything else behind what I’m about to explain. I’m sure certified financial planners are more thoroughly trained in this kind of thing, but this is all just my subjective gut writing what feels right in this moment.
Of course, my intuitions and gut feelings that went into writing this are based on hundreds of hours of research as well as a variety of my wins and failures along the way. On the other hand, I’m knowledgeable about my own financial situation and not yours, so filter everything I’m about to say through what feels true for you.
First: What percent of your net worth should you put in crypto?
I still struggle with that question myself. But, here are several questions to ask yourself:
- How much can you afford to lose? Seriously, if it all went to zero, would you be ok? (And “ok” could mean having to downsize your life but still being able to afford food, shelter, and other necessities.)
- How much do you believe in all this? Is this just another investment to you, or are you bought into the notion that blockchain technology is going to fundamentally change the world?
- How good are you at making money in other ways in case you lose a lot in crypto and need to recover?
- How young are you? If you make a big mistake, do you have many years of earning potential left to make it back?
- Are you financially responsible for other people like a partner, kids, or aging parents?
I also highly suggest you go back to Part 17 and do the exercise I laid out for calculating your net worth and deciding what percent to put into crypto.
Honestly, everyone’s financial situation is different, and it’s hard for me to truly imagine what it would feel like to be in a different income bracket and with a different amount of savings.
But, here’s a very rough attempt at laying out several approaches:
How you might think about investing in crypto at five different levels:
- If you have $5,000 USD or less to work with:
- I would stay away from anything too risky. Consider just buying and holding a few of my top coins and tokens from Part 19. I’d either keep them on the centralized exchange where you bought them (probably Crypto.com, Coinbase, or Kraken), or lend them out on a platform like Nexo, BlockFi, or Celsius. It should be pretty easy to just ACH transfer in money from your bank account and earn an easy APR much better than anything your bank would offer you.
- If you want to experiment a bit with DeFi as well, I suggest sticking to the Fantom network.
- If you have $5,000 – $15,000 USD to work with:
- Consider diversifying your portfolio by buying more of the coins and tokens from further down my list. Make sure you’re staking them as well.
- You might begin to split your portfolio into low-risk, medium-risk, and high-risk buckets. In the high-risk bucket, you could put a little into something like OlympusDAO or Tomb Finance.
- In general though, I’d still suggest staying away from DeFi on Ethereum at this level. If you’re putting, say, $2,500 into some DeFi opportunity, a gas fee of $100 on each side would cost 8% of your investment.
- If you have $15,000 – $25,000 USD to work with:
- Keep going further down my list of coins and tokens.
- You should definitely be using a hardware wallet at this point.
- At this level, you might consider buying a StrongBlock node.
- You might also feel ok buying individual NFT’s that cost hundreds of dollars.
- As you move closer to the $50,000 or $100,000 range:
- Make sure your asset allocation is solid—at this level, you can be nicely diversified across several major blockchains like Solana, Terra, Polygon, Fantom, Avalanche, etc.
- You could be comfortably participating in a range of DeFi opportunities including many different risk levels. You might even set aside a small bucket of money for extremely-high-risk opportunities, as long as you’re taking the right safety precautions (including likely using a separate wallet).
- You might buy 5-10 StrongBlock nodes.
- You might have a portfolio of NFT’s.
- You might even be a member of one or more DAO’s that have some minimum entry requirement.
- At this level, I would highly recommend getting tax help from a CPA who has specific expertise in crypto. You might even create an LLC or S Corp to be operating within.
- One last piece of advice for this level: Don’t neglect simple ETH and BTC. Sure there are lots of other blockchains, coins, tokens, and advanced strategies to be playing with; but, BTC and ETH are the most foundational cryptocurrencies that are most likely to stick around. A lot of people still think ETH is going to double in the next year or two. So keep that in mind: If you’re putting your money into something other than just raw ETH, you better hope that other thing has the potential to return 100% APR in a year or two.
- Finally, once you have millions in crypto:
- Recognize that your investing in something is very likely to have a noticeable effect on it. You might ruin the APY for others or greatly affect the price of the coin or token with your actions. Please act responsibly.
- If you’ve been lucky enough to make this much money, please also set aside as much time and energy toward giving back as you do toward continuing to make more money yourself. “Giving back” could be in the form of sponsoring up-and-coming NFT artists, educating others, lobbying for crypto, giving to charitable causes, etc.
Don’t get carried away with fancy investments.
For all of these levels, I want to emphasize that, in my opinion, major blockchain coins should form the majority of your crypto portfolio—in other words, things like ETH, BTC, SOL, LUNA, MATIC, RUNE, FTM, DOT, and AVAX.
You can certainly stake them as well (and maybe even liquidity stake them); but, I want to urge you to refrain from putting too much of your money into riskier DeFi platforms and investment opportunities, especially if the rewards are in the form of a token tied to that platform (i.e., not one of those major coins).
I know it’s tempting to chase high returns, but the unfortunate truth is that the crypto world moves extremely quickly and many platforms and tokens won’t even be around a year or two from now. I believe that you’ll be much safer in the long run with at least 50% of your crypto money in major coins. Beyond that, you can certainly set up buckets for medium- and high-risk DeFi opportunities too.
Also, I encourage you to integrate crypto into a larger, balanced investment strategy involving multiple asset classes.
For example, a common recommendation for classic, non-crypto investing is the “70/30 portfolio,” meaning 70% of your money in stocks and 30% in bonds.
Taking a step back, what that really means is 70% in higher-risk assets and 30% in lower-risk ones. So, here’s one way you could integrate crypto into a portfolio like that:
Your 70% higher-risk might bucket could break down into 40% stock ETF’s, 20% low-medium-risk crypto (e.g., staking “blue chip” coins), and 10% higher-risk crypto (e.g., yield farming or StrongBlock).
Your 30% lower-risk bucket might break down into 15% bond ETF’s and 15% stablecoins earning APR in Nexo and Crypto.com.
That way, you’d have around 55% of your net worth in “classic” investments and 45% in crypto investments.
All of that will of course depend on your age, your risk tolerance, etc.; but, it’s a starting point as you consider how all this might fit together as part of your larger financial planning strategy. And again, I’m not an investment advisor, and I encourage you to work with one if you don’t feel like you have a solid understanding of all this.
Finally, if you want to keep things super simple for yourself or help your parents or other less tech-savvy friends and family get crypto exposure:
Here are several things you might consider:
- In a traditional (non-crypto) investment brokerage, you can buy two stocks that represent crypto: ETHE (Grayscale Ethereum Trust) and GBTC (Grayscale Bitcoin Trust). There are also many more funds focusing on crypto or blockchain in general emerging. But you can buy both those Grayscale funds via most traditional stock investment brokerages.
- You can buy ETH and BTC in Venmo, but it’s a closed ecosystem—it just sits in there and you can’t pull it out to another wallet, invest it in DeFi, etc.
- You can open a regular Crypto.com or Coinbase account and buy and hold a simple basket of cryptocurrencies without needing to deal with MetaMask. For example:
- 50% ETH, 50% BTC
- 40% ETH, 40% BTC, 20% SOL
- 32% ETH, 32% BTC, 12% SOL, 6% LUNA/WLUNA, 6% LINK, 6% MATIC, 3% DOT, 3% ALGO
- You can skip the crypto exchanges and just transfer money directly from your bank into Nexo or Crypto.com to lend and earn in “blue chip” crypto like ETH and BTC or in safer stablecoins.
- At the time of writing, both of those platforms will get you 10% APR on the stablecoin USDC. Again, it’s easy to get carried away with fancy crypto strategies, but 10% APR at a very low level of risk and a very high level of ease and consistency is amazing. That’s over 150x what the average US savings account offers. And, to lower your risk even further, you could split up your money—half in Nexo and half in Crypto.com.
- If you just buy ETH on Crypto.com or Coinbase and transfer it to MetaMask, you can put it all into BED, an index token from Index Coop that contains ETH, BTC, and DPI (the DeFi Pulse Index that represents a bucket of the best tokens in the DeFi world).
- You can create multiple accounts on your MetaMask/Ledger—say, one for each family member—and handle everything yourself. Each of those accounts are totally separate wallets, but you don’t have to worry about multiple seed phrases, etc. since they’re all using the same MetaMask extension and/or Ledger hardware wallet.
- Note that I’m not 100% sure about the legality of this in terms of taxes (i.e., are all accounts considered to be owned by you even though it’s other people’s money?), but I can’t think of any way the IRS could find out that those wallets are all in the same MetaMask or Ledger.
- By the way, it’s also worth knowing that, for tax purposes in the US, you can gift crypto to people and only you have to pay tax on it as the sender. But, I encourage you to investigate the tax and legal issues in more detail if you want to handle all the crypto investing yourself and just send friends and family their share of the profits.
Again, all that is quite subjective, and I realize it’s only scratching the surface as far as all the different options and investing styles out there. But, it’s a starting point at least.
Next time, I’ll begin to finish up the topic of investing by exploring how high ETH might go, whether you should stick with Ethereum or explore other blockchains, and more.
P.S. Crypto is one of my newest passions, but my overarching focus in life is personal growth and intentional living. Do you want help with challenges like confidence, decision-making, or idea overwhelm? I’m a transformation coach who helps analytical thinkers get unstuck, find consistent motivation to take action, and design their life purpose. Read more about me here or my coaching practice here.