Forex or Crypto? Or Both?
Inspired by a trail of thoughts that turned into an Instagram rant, the growing topic of individuals actively participating in both Cryptocurrencies and Forex came to mind.
With activity picking up within the Crypto markets once again, it's almost hard not to reflect on the last 18 months. For many investors, the bear market had not just taken its toll on their portfolio, but their psychological well being. With many introduced to this market a few months before/during the last bull run, being accustomed to exponential gains within a short timespan became a benchmark. In swift succession, how ironic that the same individuals have had to experience not just a drought, but the longest bear market that the crypto has experienced thus far. Shock is not enough to describe the sentiment experienced by many.
One word comes to mind, greed. Haunting thoughts of not taking profits off the table around all-time highs plagued the minds of those who allowed the mirage of a never-ending bull-run to rob them of a chance to realise tangible profits. Blockfolio accounts that once brought an exhilarating thrill became a reminder of the harsh reality of what we refer to as the 'Wild West". However, in saying all this, for those that yielded to the process and never threw in the towel, a well-needed life lesson was taught. With the dust settling, this bear market gave rookie investors the opportunity to actually learn the intricate details about this space beyond the price action i.e. the underlying technology. A well-needed reality check was also given to naive maximalists who quickly realised that it would take more than "Buy more XRP" and "HODLing" to become a profitable investor. More individuals have started to learn what it means to have a well-rounded portfolio, risk exposure, profit-taking, and trading price action. These valuable skills have opened the eyes of individuals to see that it is possible to be profitable within a bear market. And subsequently, if one is able to outperform the market within its bearish phase that leaves unlimited possibilities within a bull market.
With what started as significant bullish momentum in April transitioning into a bull market, it is very easy to forget all the lessons learnt in the last 15 months and get caught up in the thrill once again. However, being on the brink of what could arguably be the beginning of a life-changing era for some, it is imperative to exude a high level of focus. Think about it, a lapse in concentration could mean the gains that can be realised in this bull run will be on the other side of another bear market.
Two words, focus and execute.
Have you mapped out how you will utilise your earnings and maximise the opportunity it presents? Or are you obsessed with the facade of the temporary lifestyle it could provide you with? Everyone has their own reason for investing in this market, however, it's safe to assume a significant number of individuals see this as an opportunity to bring them one step closer to a better financial future. Preparing to be on the receiving end of a wealth transfer is not as easy as it looks. Ask the several lottery winners who within a few years of amassing life-changing finances end up blowing it within a short period of time. There is an art to managing and growing wealth. The unfortunate reality is that the masses will never be privy to this.
One of the distinguishing factors in all of this is skill-set. It may be worth asking yourself, do you have a skillset/s that will allow you to manage and grow your wealth?
A perfect example of this, if executed well, is a dynamic partnership between Cryptocurrencies and Forex. Pro-active, forward-thinking individuals would see the next bull-run as an opportunity to obtain capital. Not profits to lavish solely on material items but capital to re-invest into building revenue streams that provide more consistent returns. This is important because with many individuals executing the "HODLing" approach they would have definitely realised by now returns in this market are far from consistent.
Once the forex skill-set has been refined, it's almost a common consensus that limited capital tends to be a major barrier for many looking to make good returns trading the forex markets. With this in mind, knowing that with the right investment allocation there is room to grow small sum of capital exponentially, returns gained from the crypto markets could be a very feasible way to fund a decent-sized forex account.
Let's craft a simplistic example:
The average salary in the UK (according to the Office of National Statistics) is £35,432. At a tax rate of 20%, this amount would be £28,345, which would amount to a monthly wage around £2,362.
An investment of £6000 given the right allocation and timeframe can experience growth of 500% in the prime of a bullrun. So, in essence, your £6000 could grow into £30,000. Let's say you decided to withdraw £26,000, keeping £2000 for personal purposes in the short term and £24,000 to fund a forex account. Monthly performance of a modest 10% on that account would give you returns of £2,400 which would put you on par with the average salary.
The term "financial freedom" once carried significant weight, but in recent times has become a buzz word with distorted connotations to a lavish lifestyle where minimal effort is implemented and rewarded with mass riches. This is a major deception and hinders many from seeing that at it's simplest level this means for some, the example above would provide them with the possibility of replacing their current employment (if they wanted), whilst comfortably catering for their current lifestyle. Needless to say the cycle of reinvesting would continue, allocating a preferred percentage of profits back into cryptocurrencies to build long-term holdings as well as other investment types. With time and the compounding effect, this is the magical Warren Buffet type recipe to progressively amassing wealth.
Although this example is very simplistic and there are many other factors to take into consideration, it helps to show how reasonable expectation coupled with practicality can produce tangible results. It would be left for you to create a more suited case scenario that accurately reflects your current circumstances.
Many have been introduced into the digital asset space with the promises of 1000% gains within a matter of months. Whilst in rare cases some individuals have experienced absurd returns, this does not account for the majority and if this market will teach you anything, it's that you should have conservative expectations to protect you from disappointment and greed. Greed and disillusionment will cause you to overlook how phenomenal the gains are in this market compared to others.
For example, because of case studies where people have experienced 1000% portfolio gains in a stretch of 1-2 years, many will overlook and not be satisfied with 100-200% gains to their portfolio. Mind you, what we see as "modest gains" within Cryptocurrencies are what would be seen as jaw-dropping if they were experienced within the most established asset classes such as Real Estate, Stocks, Bonds, and Commodities. Therefore, we must be grateful for what the market decides to present us with because these types of returns are very rare, to say the least.
However, back to the main plot of this write-up. With the mid-long term investment approach, many have adopted for digital assets, forward-thinking/proactive individuals have used the recent bear market and current transition into a bull-market to learn and refine skills that will help them preserve, manage and grow the new-found wealth the next Crypto bull run will bring. Skills such as Forex turn a static lump sum into a vehicle that can produce weekly or monthly returns. Cash flow. This is the fine line that differentiates those with a lottery mindset that deplete what they could invest (unsustainable wealth) to an investor mindset that utilises what they have to produce more (sustainable wealth).
With many being thrown into the deep end by being introduced into this market whilst it was at its wildest, the bear market has provided an excellent opportunity for many novices to get educated, bringing them up to speed with knowledge they should have had to make decisions they made naively in the heat of December 2017's parabolic run. If there ever was a time, now is the time strategise in order to maximise opportunities that will subsequently present themselves in the months and years to come.