Our Approach to Crypto Investing
When I wrote my crypto investing book in September 2018, I laid out a simple crypto investing strategy:
- Start your investment with any amount (I used $10,000).
- Invest the same amount each month (I used $100).
- Put it into mostly stocks and bonds, with a small amount toward bitcoin.
That’s it. Set it and forget it.
The goal was to make it super-easy for everyday investors to build long-term wealth, while minimizing risk.
I couldn’t get any financial advisers interested in this idea.
I couldn’t get any bankers interested in this idea.
Zero interest. Not even a “Huh.” I felt like the wild-eyed, grey-haired prophet shouting in the city square, while people just went about their business:
Slowly but steadily, this strategy has made money—much more money—for investors who have believed in it. Believers have outperformed the Non-Believers, even while the old-school financial advisers stood by and watched in disbelief.
Today, the new “financial advisers” are content creators on Reddit and YouTube, pumping up meme stocks and overhyped NFTs.
It’s madness on both sides: either crazy conservative, or crazy risky.
At BMJ, we preach a “Middle Way.” Our community has been rewarded with slow and steady growth, enjoying the benefits of bitcoin while saving themselves a lot of money, heartache, and stress.
The numbers speak for themselves. So why aren’t more bankers on board the bitcoin bandwagon?
Your Banker is Baffled by Bitcoin
My wife and I were at our old-school bank recently, and the young banker was trying to pitch us on their Wealth Management services … again.
“When will you begin to accept bitcoin?” I asked casually.
“Yeah, we don’t do that yet,” said the young banker. He lowered his voice. “Some of us do believe that crypto is the future, but it just takes time at a bank like ours.”
“Well, you’ve had some time,” I replied. “Bitcoin was invented in 2008.”
He chuckled nervously. “It’s complicated,” he responded. “So you own some bitcoin, huh?”
“This is the same bank where we sent a wire transfer to Belarus to buy our bitcoin back in 2013,” I said.
“Please don’t get him started,” my wife pled.
“I wrote a book about it,” I went on.
“That’s cool,” replied the banker. “I’d like to read it.”
“I brought over a copy for the bank when the book was published,” I replied.
“The story is in the opening chapter.”
“I bookmarked it.”
“You don’t say.”
“The bookmark had a code to open a Coinbase account and redeem $25 in free cryptocurrency.”
“So you might say I was paying the bank to read the book.”
“Did anyone read the book?” he asked, fidgeting uncomfortably.
“I think you’re answering that question.”
I understand that it’s difficult to accept bitcoin at a large commercial bank. But, come on guys. You should at least have a gameplan by now. “Wait and see” is not a gameplan.
At Bitcoin Market Journal, we have a gameplan.
Reddit Pundits are Idiots
On the other side of the spectrum we have the pundits of Reddit, who continue to pump meme stocks, Dogecoin, and NFTs, among other dubious investments. (This goes for YouTube, “crypto Twitter,” and Discord, too.)
Remember: “Reddit” rhymes with “idiot.”
Pictured above: financial advice from Reddit.
As opposed to the highly-regulated, professionally-licensed world of wealth managers, anyone with a keyboard and opposable thumbs can post to sites like Reddit, YouTube, or SeekingAlpha. Importantly, you don’t even know who they are. No names needed!
This means if you blow all your money on their ridiculous fan theories, there’s no one to blame except yourself. It also means you never really know if they’re working for you, or secretly working for some hedge fund or crypto startup. It’s sketchy McSketchville.
At Bitcoin Market Journal, we have a commitment to transparency. We use our real names. We disclose our investments. And, unlike the other crypto sites, we don’t accept advertising.
Bankers are clueless. The Internet is crazy. That’s why we pursue “The Middle Way.”
Our General Investing Principles
(Click the headings to read more about each principle.)
Invest in things that add value. Whether you’re investing in stocks or crypto, find companies and projects that make human life better, faster, or easier. And look for companies that do it well, with good management and great products. Avoid spitcoins and meme stonks.
Invest in education. Get smarter about investing by reading the timeless books from our Read and Grow Rich list. If you’re out of work, use the time to learn new skills. If you’re less productive, work twice as hard on something that interests you. Every downturn has an upside.
Invest in #1 or #2. Technology tends to consolidate into one or two big winners (duopolies like Mac and Windows, or monopolies like Google). We think of crypto as “sectors” that will eventually produce winner-takes-all or winner-takes-most scenarios. We always try to invest in the future category leader.
Invest in productivity. We’ve highlighted Ethereum (ETH) as making it easier to develop blockchain applications, and Uniswap (UNI) as making it faster to trade tokens. These projects make humans – and our money – more productive. Good investments increase productivity.
Think long-term. Principles are like long-term probabilities: it’s hard to say what will happen next week, but easier to see how things play out over the next several years. When we make smart long-term investments, then have patience to wait, we can be like investors who bought bitcoin at $100.
Our Crypto Investing Principles
(Deciding whether to buy bitcoin, tokens, or cryptocurrencies.)
The hardest part is getting started. The easiest way to get started is to buy a little bit of bitcoin (even just $100) on a reputable site like Coinbase or Binance. You can do this today.
Think of cryptos like companies. This is a core principle: We can think of buying tokens of a good project like buying stock in a good company. (Note: technically cryptos are not companies, but we invest like they are.)
Understand the underlying “business.” For example, we should always know what the hell the blockchain actually does. We should be able to explain it in plain language, and (if possible) use the product ourselves. We should know whether it makes money, how it makes money, and where that money goes.
Look for tokens trading at a discount. We can also look for projects that are likely undervalued, or “on sale.” One day you can buy bitcoin for $60,000; another day it’s $30,000. Guess what? Same bitcoin. (To determine whether a token is cheap relative to its price, see the metrics below.)
Qualitative, Quantitative, Price. There are three tests before we make any blockchain investment: Qualitative (evaluating the underlying business), Quantitative (evaluating the underlying numbers), and Price (deciding whether it’s cheap or expensive, relative to the other two). We call this QQP.
Avoid fees. Fees are the silent killer of crypto wealth. Every time you make a transaction, you’re getting hit with fees (and frequently taxes as well). Crypto fees are much worse than the traditional financial system. Don’t move stuff around, unless you have to.
Earn reasonable (but not unreasonable) interest. Earning interest (or “yield”) on your crypto assets is like earning money on your savings account. Beware of unreasonably high interest rates: if it looks too good to be true, it usually is. Use our Best Rates section for good interest rates from quality providers.
Crypto should be a slice of the pie. Avoid putting your life savings into bitcoin; instead, favor a sensible investment plan that builds long-term wealth. It’s really hard to get rich quick; it’s much easier to get rich slowly. We want to shout it one word from the rooftops: DIVERSIFY!
Crypto Investing Metrics
(Click the headings to see sample charts – or become a Premium subscriber to get them delivered to you.)
Daily Active Addresses. Our thesis: Blockchain is about people. The number of humans using a blockchain is the most important driver of value. For this reason, Daily Active Addresses is the go-to metric, as it shows the “customers” of the crypto “company.” (Sign up for our Premium newsletter to get Daily Active Users sent to your inbox.)
Total Revenue. Our thesis: crypto “revenue” (like transaction fees in Ethereum) is how a crypto “business” makes money. Smart investors look for the projects generating the most cash.
Total Protocol Revenue. This is money paid back to token holders or company treasuries (vs. being paid out to liquidity providers as with Uniswap, or NFT holders as with OpenSea). You might roughly think of this like stock dividends.
Total Value Locked. TVL represents how much is held or “locked” in a company’s smart contracts. Our thesis: TVL is roughly equivalent to the deposits held by a bank, and can signal a crypto company’s strength.
Top Layer 1s. Our thesis: Foundational blockchains, also known as L1s, are like the operating systems for Web3. We predict there will be two or three big winners that will go on to dominate the internet of tomorrow.
Top Crypto Exchanges. Our thesis: Crypto exchanges, both centralized and decentralized, are arguably the most important applications in blockchain. Savvy investors look for which will be the #1 and #2 exchanges over the long term.
Top Lending Protocols. Our thesis: Lending and borrowing is another proven use case of blockchain. Savvy investors look for the companies that will dominate the lending market long-term.
Top DeFi Protocols. Our thesis: DeFi companies are the future giants of fintech, disrupting or replacing all the legacy payment and banking systems of today. Watch for the winners. (See our DeFi Investing Guide, Part 1 and Part 2.)
Top NFT Collections. Our thesis: NFTs make up a specialty area of crypto. It’s only appropriate if you really love collecting. Even then, try not to exceed more than 1% of your portfolio. (See our NFT Investing Guide.)
All the other metrics – including all those crazy metrics that crypto traders use – we pretty much ignore.
The easy rule of thumb: If the number of real people using a blockchain is shooting up, and they’re getting real value from that blockchain, it’s probably a pretty good long-term investment. (Even better if everyone isn’t rushing to buy it – it’s probably cheap.)
The 10 Commandments of Crypto Investing
I’m not a financial adviser, so I can’t tell you what to do. I can only tell you what I do, in the form of these ten guidelines:
- Keep working the day job
- Auto-invest money each month
- Stay focused on simple strategies
- Set it and forget it (avoid fees and taxes)
- Look for opportunities in times of crisis
- Say “no” to most investments, and “yes” to a few big ones
- Talk with smart people to improve your ideas (preferably in person)
- Be confident but humble (have the strength of your convictions, but be open to being wrong)
- Educate yourself to Read and Grow Rich
- Give back, both in money and in what you’ve learned
This is the Middle Way: not too conservative and not too cuckoo. It’s a path that we can all follow.
TLDR (Too Long; Didn’t Read)
At BMJ, we have a simple investing approach:
- Buy and hold bitcoin,
- plus a small number of quality crypto assets,
- for the long term (5+ years).
Our mission is to welcome the next 100 million crypto investors to build a life of financial freedom and independence.
Using crypto, plus some common sense, we are building the next generation of great investors.
We focus on long-term, value-based crypto investing. We rigorously analyze and evaluate crypto assets, approaching them with timeless investing techniques.
And we’re transparent about our returns, which have vastly outperformed the stock market.
There’s plenty of gambling in this space. Many people try to get rich quick; we’d rather help you get rich, and make it stick.
We’re here to help you develop long-term winning strategies: to build a life of health, wealth, and happiness.
Money is not an end in itself: it’s a means to an end. The end is a balanced life, rich with experiences, full of meaningful relationships and meaningful work.
Join our community, and let’s get there together.