Monday, 13 July 2020

The 3 Month Rule, Investing In Cryptocurrencies

The “3 month rule” is an investment strategy developed for the more conservative cryptocurrency investor, like myself, to both preserve capital assets and maximize value while investing in cryptocurrency projects. This strategy is not designed to “get rich quick” although it is possible to create wealth the strategy is designed to create consistent stream of income.

Why I developed the “3 month rule”:

I have invested in numerous cryptocurrency projects and noticed a distinct pattern for all new projects entering the market. Some are great projects and some not so great and some were outright scams. The 3 month rule helps the individual investor sort out which is which and develops a personal investment protocol for investing in projects. 3 months is the litmus test for this sorting. This does not mean I do not invest at all in a new project; however, I do not take a serious stake in a project until it has proven itself over time.

The tendency for people is to invest in new projects is based on FOMO (Fear of Missing Out) rather than on the merits or value of the project itself. FOMO drives the perceived value upon exchange market(s) opening a lot higher than the project or coin should be valued at that point in its development. Overpaying for an investment means that it will take much longer for you to realize your ROI than if you waited to enter the market. Does that mean you will not create income by entering early? No, not necessarily, but as a general rule it will take longer to recoup your initial investment as long as the project survives and prospers.

Why 3 months?

1. Scam projects pop up all the time. Scam developers normally hype the project for 1–2 months, where they sell ICO’s and master nodes and then list on an exchange dump their pre-mine holdings on the exchange and walk away from the project with the Bitcoin from the sales leaving the investors with coins that are virtually worthless. The problem is very legit and worthwhile projects use part of this same formula of ICO’s and sales of pre-mine for master nodes and listing on exchanges. The only difference is the developers do not dump the premine or their holdings when an exchange listing opens. Time sorts that out.

2. The FOMO (fear of missing out) time has passed. After 3 months the coin project has stabilized and so has its price on the market. That does not mean there no risks in the investment. In any investment there are risks and there are rewards but many of the initial landmines in development of a project will have come to light and addressed or the project has begun to dissolve.

3. After 3 months you will be able to establish an accurate pattern and project growth potential for a cryptocurrency. The high reward portion of the coin is usually winding down (projects usually pay out very heavy whether being mined or minted or both during the first 2–2 ½ months) to meet the initial supply and demand of the new cryptocurrency. Proof of Stake and master node rewards will be at price sustainable levels as well as mining rewards.

4. Three months will give you time to research a potentially promising project further. It will give you time to read the White Paper on the project. It will give you time to engage with the community and determine the sediment of the community on the project. You will be able to learn if the development team is struggling in an area and what they have done or are doing about this challenge. It will give you access to the information beyond project hype to make a solid decision to invest or to pass.

The high and the low If it would be a great investment today it will be a great investment tomorrow too. Don’t just rush in, cash in hand, and plank it down on a project. That is not much more than gambling or hoping and dreaming. Go in informed and ready knowing the aspects of the project.

I have posted a couple images of coin prices and activity charts. I have obscured the coin symbols on the two newer projects. I do not want to harm the projects because both projects have a lot of promise but the charts illustrate the point well. The third, Dash is so deep and matured that this article would not apply. Its value is well established and the project is successful. Dash displays the same trend characteristics and movement that was spoken about in the article.

While I have covered the bottom line, the hard line value reasons for waiting three months before placing a heavy stake in a project. There are other considerations such as White paper contents, project direction, if the project is the trailblazer in what the project addresses, what is the stake or mining reward yields, are the developers and community active on discord, telegram, or social media.

The three month rule assists at a very basic level to weed out the heroes from the zeros but should never be your only consideration when investing in any project. In future releases I will write about topics such as evaluating white papers and other topics that complement the 3 month rule.

Until next time hope all your investments are prosperous.

The preceding article is for informational purposes only. All investment contains a certain amount of risk. It was not prepared by a financial advisor and the preceding may contain forward looking statements. Please exercise your own due diligence before investing in this or any investment instrument.

Legal disclaimer: The insight, recommendations and analysis presented here are based on corporate filings, current events, interviews, corporate press releases, and what we've learned as financial journalists. They are presented for the purposes of general information only, and all the information belongs to the original publishers. These may contain errors and we make no promises as to the accuracy or usefulness of the information we present. You should not make any investment decision based solely on what you read here.

Creamcoin Marketcap