Understnading Crypto Investing

If you are entering the world of Cryptocurrency with the intention of investing, I recommend that you first invest in yourself before investing in other coins. Gambling without learning and studying will only lead to your own losses. You need to have a basic understanding of Blockchain technology.

Understanding Crypto Investing

Value Investing Vs Growth Investing

Let's start with crypto investments. When it comes to investing, no matter what type of investor you are, crypto investor / asset investor / stock investor, you need to understand value investing and growth investing.

As a value investor, you buy a stock when it is priced below its original price. This reduces risk and investors are always on the lookout for undervalued stocks. The nature of an asset is that when its true value is reached, value investors can reap huge rewards.

Growth investors are those who buy into high-growth businesses that have the potential to grow even more, no matter how high the price. Growth investing includes crypto investments and small-medium enterprises, which can be riskier than other investments.

Investor Types

Today, if we're talking about investment, we need to know the types of investors. So, I'd like to tell you about the types of investors so that you can assess what type of investor you are.

The first is savers. Most savers are risk averse. They want to recoup their capital over time and are not likely to make early investments.

Another type is investors who understand risk and reward. One of the mottos to follow when making an investment is Let Them Grow. When starting an investment, you should be patient and at least think about the medium and long-term. The younger you are when making an investment, the better, and you can change your investment decision and investment strategy depending on your age. Investing is not about the amount, it is a process that should be done regularly. In addition, if you learn the knowledge and skills to control risks and make it, you can become financial freedom from that investment.

Debt vs Investment

Should you pay off your debt first? Should you invest first? One thing is for sure, when you pay off your debt, you get a 100% guaranteed return. For example, you have a credit card debt of $20,000. The APR rate is 12% and you have been in debt for 3 years (36 months). So the total interest is 3914.44 kyats. So the total interest is 23914.44 kyats. The interest rate will increase year after year. So you will have to pay about $600 per month regularly.

If you have an extra $600 in income, should you pay off your debt? Should you invest it? If you pay off your debt, you could save $2,000 in interest if you pay off your debt by paying $1,200 a month.

If you can pay off $10,000 in 18 months, you can be sure to get $2,000/10,000 = 20% return. This means that if you pay off your debt and get a 20% return, you should only invest in investments that will earn you more than that amount.

You should make good investment decisions after careful consideration.

Risk-Reward Ratio

I would like to explain the Risk-reward ratio that those who want to invest in Crypto / asset investment should consider. When investing / trading, the difference between the potential loss / potential gain and the potential profit can be called the Risk-Reward Ratio. This ratio can be calculated by dividing the Potential Reward (Profit) by the Potential Risk (Loss).

Risk & Volatility

What is risk? The first thing you need to know is that risk and volatility are not the same thing. There are risks that can arise from volatility, but there are differences.

Risk can be found everywhere, but the risk in crypto is based on permanent loss, so if you lose, you can lose everything. However, it is not possible to invest in assets without risk. So, you don't need to be afraid of risk, you just need to understand the risk. Another thing is volatility, which means that the value of the asset fluctuates.

Such volatility is so strong that you can make money from trading.

For example, the price of gold fluctuates, but it is impossible to go up too high. Therefore, there is also volatility risk. If there is no price fluctuation, it is impossible to make a profit, so volatility is essential. Therefore, there is no need to be afraid of risk and volatility, but only to understand its concept.

To measure such risk and volatility, you also need to know the standard deviation. Standard deviation will be studied extensively in the next lessons. In this lesson, we want you to understand the difference between risk and volatility.

Standard Deviation

Standard Deviation is the standard deviation of the price movement of a cryptocurrency. How does it change like that? The standard deviation of a cryptocurrency can be measured. For example, if gold goes up and down, it can be measured by how much it deviates from its normal value.

Determine Risk Preferences

Today's understanding of investment involves measuring, calculating, and avoiding risk. Understanding such risks is called risk preferences. What are risk preferences? Understanding the risks associated with an asset and the amount of risk you are willing to take is called Risk Preferences. Choosing the amount of risk you are willing to take based on the amount you want to invest is called risk preferences.

Assets can be of many types such as bonds, equity, stocks, ETFs, Crypto. The amount of risk that can be taken by each type of asset also varies. You can choose the amount of risk that you want to invest in according to your portfolio plan and invest in the asset you want to invest in.

When making investments, you should also consider the time horizon. Short-term investments are investments that last less than 3 years. Medium-term investments are investments that last 3 to 7 years, and long-term investments are investments that last more than 7 years. When it comes to investments, you should at least consider the medium and long-term.

Another thing to consider is affordability. This means understanding what assets to invest in and how much risk those assets can carry. To calculate the affordability of a crypto coin, you first need to look at its market cap size, what its users, investors, and use cases are, what the ownership of the owners is, and how the payment network is structured. Only then can you calculate affordability.