An instructive cryptocurrency story … how to position yourself to hit it out of the park safely … Matt McCall sees major crypto gains starting now
“How much will you be sending today, Mr. Conway?” asked the Wells Fargo teller.
The man on the other side of the counter felt his voice speed up as he answered.
“One hundred thousand dollars.”
Call it what you will — a stupid, reckless bet … or a bold-yet-calculated speculation — either way, one thing was true …
Dan Conway’s life was going to change.
It was 2016 when the 45-year-old sunk $100k — his entire life-savings — into a cryptocurrency.
You should know that Dan had a wife and three kids. So, this bet didn’t just impact him. It would directly influence whether money would be there in the future for, say, family emergencies, or college tuitions, or retirement …
It was all-or-nothing.
***Dan was a middle-manager, hating his job at a major, multi-media company in San Francisco
Like so many people caught in the corporate grind, he felt stuck.
He made a respectable $150k per year, but he loathed his job. He wanted a way out.
Browsing the internet one morning, he stumbled onto an article about cryptocurrencies. Though he had once viewed this world as ludicrous, the further he slipped down the rabbit hole that day, the more engrossed he became.
In Dan’s own words, he developed an obsession.
He immersed himself in the crypto world, listening to podcasts, reading papers, following Twitter thought-leaders in the space …
Less than a year later, Dan stood at the Wells Fargo counter, transferring his future to a crypto exchange.
***Within seven months of his bet, Dan’s $100k family nest egg was worth less than $40k
Yet, despite being $60k in the hole, his conviction was stronger than ever.
So, he decided to do something that most terrifies most personal finance advisors …
Believing his investment to be selling at a bargain-basement price, Dan turned to the only source of funds he had left, a home equity line.
He returned to Wells Fargo three times in December of 2016, borrowing an additional $200k on his home … and sinking it into his gamble.
Two months later, the rocket took off.
Dan’s cost-basis was $11.21 per coin.
By March, the crypto’s price was up to $50 … by May, $230. In the span of four months, his $300k investment had climbed to $6 million.
The price kept soaring, eventually topping $1,000 per coin.
When all was said and done, in early 2018, Dan cashed in.
His gamble with the altcoin, Ethereum, turned into about $13 million.
***Two seemingly contrary things about this story can be true at once
One, Dan’s Ethereum investment — despite being well-researched and financially-lifechanging — was foolish. It is not a safe model for how to invest in the altcoin world.
Two, it’s an illustration of the wealth-generating ability of elite altcoins. And this potential still exists today.
Let’s look deeper at each of these truths.
As you’re likely aware, the big dog in the crypto world is bitcoin, which is up more than 215% since late March. But surrounding bitcoin are thousands of “altcoins” — alternative cryptocurrencies.
Earlier this year, Bitcoin.com reported that there are more than 5,000 different altcoins. Unfortunately, many of these are next to worthless.
In fact, there’s a website called Deadcoins.com that tracks altcoins that have closed up shop due to a classification of “scam,” “deceased,” “hack,” or “parody.” Here’s a screenshot …
As I’m writing, the website features 1,984 dead coins.
Now, with this many worthless altcoins, how is it Dan got so lucky, picking out a massive winner in Ethereum?
Well, despite doing many things wrong, which we’ll discuss in a moment, he did one thing right — he invested many, many hours into researching before he made his investment.
Dan reported that he sunk every spare minute of his day into studying Ethereum. This gave him an intellectual appreciation for Ethereum’s inherent value. He didn’t just view the altcoin as a “cross fingers and hope” gamble. So, when Ethereum’s price fell, he wasn’t scared out.
He also saw that many of the smartest developers he knew were flocking to Ethereum. This told him that Ethereum’s value was being recognized in a real, practical way — not just on a theoretical level.
***This focus on fundamental value is critical when you’re wading into the altcoin world
Our crypto specialist, Matt McCall, editor of Ultimate Crypto, has made this point many times.
… you shouldn’t just go out and buy any altcoin and expect it to make you rich.
As with stocks, there are good cryptos and bad cryptos.
As with stocks, you need to be able to tell the difference between the two.
We’ll circle back to how a crypto investor can distinguish between valuable and value-less altcoins shortly — but let’s return to Dan.
Despite following sound investment protocol by researching Ethereum extensively, Dan did one thing wrong … incredibly wrong (even though his story had a happy ending) …
He took on an absurd level of risk.
First, he did this by over-concentration — meaning putting all of his investment capital onto just one investment …
Second, he did this by doubling-down — when Ethereum was down 60%, instead of preserving some money for his family, he took on even more risk by tapping a home equity line.
Having no stop-loss is fine — but only if you’re investing an amount that you’re comfortable losing — which points us toward his final mistake …
Dan invested more than his family could afford to lose. Had his timing with Ethereum been different, I suspect this would have turned into a much darker story.
***But Dan’s experience is also an instructive tale for what can happen when you invest in elite altcoins
What Dan knew, and what many investors today don’t fully understand, is that Ethereum was (and is) actually valuable.
It wasn’t a “greater fool” bubble investment, like tulip bulbs in the 1600s, when people were trading their homes for a single bulb … or Beanie Babies in the 1990s, when perceived scarcity led one $5 doll to explode in value (the Beanie Baby set known as “Large Wallace and his Squad” sold for $600k).
Today, the altcoins that have real wealth-generating potential are rooted in one thing — inherent value.
That’s because elite altcoins are less like, say, gold, which does nothing, and more like software, which actually addresses a real-world problem.
Here’s Matt with more:
Some of the most lucrative software companies on the market right now are working to cut out the middleman. Many of these are altcoins.
That surprises a lot of folks, but it’s often easier to think of altcoins as just really, really, really valuable software … some of the most valuable software programs ever created.
I describe them as the oil of the 21st century, as they’re about to mint another generation of millionaires — in short order.
The tsunami of wealth that’s coming with altcoins and the blockchain technology backing them up is due to their ability to make our time vastly more efficient and productive …
***As an example of real value, look at an altcoin that Matt recommended and still holds — Chainlink
In March, I interviewed Matt and asked for an Ultimate Crypto pick that he’d be willing to share with our Digest readers. He pointed toward Chainlink, saying “I believe you’re going to see big things here.”
So, what’s Chainlink’s real value?
Matt explained that it aims to solve one of the biggest problems holding back global business adoption of smart contracts and blockchain technologies — namely, it provides a reliable connection between external data and the smart contract.
This is inherently valuable.
And so, has Chainlink’s market value delivered on those “big things” that Matt suggested we’d see?
Well, as I write Wednesday morning, his subscribers are up nearly 500% on a portion of their position (they’ve already locked in a 552% gain on another portion).
And Digest readers who invested when we profiled Chainlink on March 23rd are up almost 450%.
***So, if you’re looking to wade into the altcoin world, the first question to ask is “what problem is this altcoin solving?”
In his newsletter, Ultimate Crypto, Matt addresses this challenge by using a proprietary selection process called the MAG System.
It’s a 10-point investment protocol that weights various crypto criteria to arrive at a composite score, indicating whether any particular altcoin is a “buy” or not.
The system analyzes everything from the size of the potential market for particular cryptos … to the strength of the team behind it … to risk … and more.
Earlier, we mentioned how Dan did one thing right — researching. Matt accomplishes this research through his MAG System. Make sure you’re not investing without doing your own homework.
So, point one — identify real value.
***Point two, when investing in altcoins, do not follow Dan Conway’s “all-in” method — instead, take the added safety precaution of adopting the “basket approach”
Back to Matt:
… trying to pick the one investment that can make your financial dreams come true is very difficult — and risky. Remember, for every Google, there’s an Ask Jeeves, now defunct and forgotten.
Instead … buy a basket of investments in the sector.
In other words, you pick four to 10 of the best names … and buy all of them.
By purchasing a basket, you get upside potential plus the hallmark of any well-crafted portfolio: diversification and downside protection.
As I write, Matt’s portfolio in Ultimate Crypto holds 11 altcoins (currently up an average of 113%). He adds to it only when his MAG selection system identifies something attractive.
This is how you invest in altcoins without taking on too much risk — put diversification on your side.
***Before we wrap up, one word about timing
As was the case with Dan Conway, investment timing is just about everything.
Fortunately, today, Matt believes we’re standing on the cusp of another massive leg up in the crypto world.
Here he is to explain:
… looking throughout the decade of the Roaring 2020s, bitcoin $100k is not unrealistic at all.
As the bellwether cryptocurrency sets up for another 5X upside, the smaller altcoins we focus on here in Ultimate Crypto are poised to move even higher. They are the software programs of the future.
If history repeats itself, the strongest altcoins will outperform bitcoin. That’s where we’re focused …
Best of all, altcoins look to be beginning their big surge as well.
So, here’s our formula, which we’ll poach from Matt and his Ultimate Crypto newsletter …
Identify a diversified basket of quality altcoins that solves real-world problems … invest wisely, according to your personal financial situation … and then, simply give it time.
Have a good evening,