What’s The Best Crypto to Buy Now? (Hint: There’s Not One)
If you decide to go on a Google search hunt for the best cryptocurrency to buy this year, you may find yourself down a rabbit hole in an unfamiliar and uncomfortable part of the internet. (Don’t worry, we’ve all been there at some point.) And if you don’t end up there, you may find yourself on one of the many generic investing websites, all offering you similar “top cryptocurrencies to buy in 2022” lists. You’ll find the usual suspects here, mostly based on market capitalization or even personal preference of the writer. It’s common for these lists to include Bitcoin, Ether, Solana, Cardano, Binance Coin, Polkadot, and Avalanche. All fair examples but no need to do a Google search at this point.
Instead of attempting to discover the next best cryptocurrency or token, we favor a different mental model. Ask yourself this question: What’s the best area of crypto to invest in, not now, but over the next three years? (Or whatever time horizon you are investing within.) You’ll see that trying to find the needle in the haystack—and it’s an incredibly large haystack—is probably not the best route to take. Rather, we recommend a more long-term, wide-reaching approach to selecting your investments.
Three Reasons Not to Find the "Best" Crypto
To sum it up, here are three reasons why you shouldn't try to find the “best” cryptocurrency to buy now. (And what you can do instead.)
1) You’re probably not a professional crypto investor. (And that’s perfectly OK.)
If you are like nearly everyone, you’re not a professional crypto investor. Absolutely fine. Similar to any other asset class, non-professional crypto investors are at a disadvantage when it comes to technical resources, market data, and general industry knowledge. For example, at Makara, we have people whose job it is to research individual crypto assets and analyze the pros and cons of including them on our platform. So instead of pretending to be a crypto day trader in search of a new token that’ll take you to the moon, we recommend staying on planet earth. One way to do this is to learn about broad sectors in crypto and decide for yourself which areas you think may have the most growth potential. Among other things, we’re talking about the metaverse, decentralized finance, and Web 3.0. You could take it a step further and read up on NFTs but you may just be tempted to right-click-save on a picture of an ape that for some strange reason you can’t stop staring at—avoid the temptation, for now. Read up on crypto sectors, and if you’re feeling up to it, try explaining them to your friends or family to see if you grasp the important notes. This approach will give you a wider understanding of the crypto industry and pairs well with our next two recommendations.
2) You don’t have enough time. (Join the club!)
Making wise investment decisions takes time. One of the best investors to ever live, Warren Buffet, reads 80% of his day. We’re going to guess you can’t spend 80% of your day reading about crypto. So how do you make up for this? As we said, educate yourself about crypto industry sectors instead of searching for individual assets. But don’t stop once you can explain what the metaverse is and why it could change the future. Yes, you are short on time, but if you have done the work to understand sectors in crypto and are interested in investing, you have two very important questions to ask yourself: How much do I want to allocate into crypto? And what is my time horizon? These are very personal questions. And with the little time you do have, ones worth thinking about. Knowing the amount you are comfortable investing and when you need to withdraw the funds will help you better understand the risks and make a decision that lets you sleep at night. We like sleep.
3) You’re most likely increasing your risk. (Not a good thing.)
Investing in one cryptocurrency is not quite comparable to putting all of your eggs in one basket. It’s more like having one egg. One cryptocurrency, like one egg, can be fragile, or in financial language, volatile. It lacks any diversification within the crypto asset class. Diversification is a complex subject, but generally speaking, the goal of diversification is to invest in uncorrelated assets to reduce the risk of a portfolio while enhancing its expected return. Moral of the story: we recommend diversification. Consider how your crypto investments fit into your larger diversified portfolio of uncorrelated assets. Within crypto, you can consider spreading your investments across multiple assets and even multiple sectors within crypto. One way of thinking about it is since predicting the future is near impossible, diversification sets you up for various outcomes. We built crypto baskets at Makara to give you the choice to invest across the crypto asset class in the metaverse, Web 3.0, or decentralized finance. We even have a basket encompassing all assets on the platform called the Universe Basket.
Your To-Do List for Finding the Best Crypto Assets
Step 1: Read up on broad crypto sectors.
Step 2: Know how much you want to invest and for how long.
Step 3: Select diversified investments.
Rinse and repeat.
Makara Digital Corporation (“Makara”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration as an investment adviser does not imply a particular level of skill or training. Makara exclusively provides investment advisory services related to investing in cryptocurrencies and other digital assets.
Makara is not a broker-dealer, exchange, custodian, or wallet provider, and is not intended for frequent trading activity. Investing in digital assets is highly speculative and volatile and Makara is only suitable for investors who are willing to bear the risk of loss and experience sharp drawdowns.
Past performance is not a guarantee of future results. Investing in a basket of cryptocurrencies is not necessarily the most appropriate investment strategy for every investor. There is no assurance that baskets will achieve a particular degree of diversification or that baskets will actually reduce the risk associated with making an allocation to cryptocurrency.