The freshmen guide for the crypto class of 2025: Chapter 1
Learning to invest in crypto goes in 4-year cycles, akin to four years of a college education. The key event which separates the cycles is bitcoin halving. So far, there have been three halvings on the following dates:
- November 28th, 2012
- July 9th, 2016
- May 11th, 2020
The class I did not graduate from
I started in the crypto world with the class of 2017 (2013–2017). I bought some bitcoins for $600. Bitcoin dropped to $250; I gave up on it and exited the market.
I joined the 2021 (2017–2021) program with complete preparation. Bitcoin tested my resilience, especially when it dropped from almost $20,000 to ~$3500. I was unperturbed and made it through highs and lows.
Yesterday, the class of 2025, i.e., newbies who have entered the crypto market in 2021 (or last fall onwards), faced their first significant test. Those who have remained unfazed will experience new heights and the thrill of it. This blog shares some of my learnings that potentially can benefit you.
Lesson 1: Never sell
I have a simple investment principle. Invest when you have some spare cash and sell when you need some money. No matter at what price you sell, you will feel stupid after some time. I have learned it the hard way.
What should you do when the market crashes. The usual advice is not to pay attention and focus somewhere else. My advice is the opposite.
Watch the falling market and watch your emotions. Watch the sinking feeling and detach yourself from it. How many times in the past have you panicked, sold, and then regretted it.
Now is the time to break that cycle. HODL.
Make lemonade from lemons. Get greedy while others are fearful. Start buying in small chunks in a staggered manner.
Lesson 2: How to balance portfolio
One question people ask me frequently is what one should buy and when one should buy it. There is a haphazard way to do it and a systematic way to do it. Let me explain the system I use.
The Basket
The first order of business for you is to decide which cryptocurrencies or tokens should be part of your basket or portfolio. It is supposed to be a slow and deliberate process, and you should take your time here. I take at least six months before I add a new cryptocurrency to my portfolio.
The PPM Method
Most of you are familiar with the concept of parts per million due to the chemistry classes in high school. This concept is not unique to sciences and also is prevalent in finance. Since it’s a tiny number for most common calculations like interest rate, mostly you hear about percentages and basis points (bps).
Now you need to decide your target ppm. Target ppm is the fraction of the supply of each coin you need in each bucket in your portfolio. Each bucket needs to have the same fraction of the supply irrespective of the cryptocurrency it holds.
Let’s say you decided that the target ppm is one ppm for simplicity. It means your basket needs to have a millionth of the circulating supply of each coin. For some leading cryptocurrencies/tokens, this number is the following:
- 19 BTC
- 116 ETH
- 50,000 XRP
- 300 SOL
A note about BTC: since BTC is the most expensive and as per estimates, as many as 20% of bitcoins are lost forever. You can use a number between 15–19 for ppm calculation.
The rest of the process is simple. As your financial situation allows, you slowly fill your basket. Do not change the target ppm (size of basket) until every section in your current basket is full.
Continue to Chapter 2 here.
