I enjoyed this post on Reddit yesterday:There’s plenty to worry about when investing in cryptocurrency. Is it even an investment? Or is it simply hyped-up gambling?

About a month ago I opened accounts with Coinbase and Kraken. Kia and I each put in $1000. In that time our money has doubled, and Dogecoin went up tenfold (I sold half at the pre-SNL peak).

It’s an absolutely insane market. A major crash is all but guaranteed. There’s a significant chance one of the four coins we’re invested in (Bitcoin, Ethereum, Doge, and Cardano) will fall out of favor and plummet in value to zero or close to it.

On the other hand, I wouldn’t be surprised if holding those coins for five years (and possibly buying the dips) yields an average gain of 50% or more annually. That sure beats a 3% bond yield or a .05% “high-interest” savings account.

Here’s my current approach and thinking:

  • Choosing mainstream coins that have recognition, rarity, and/or utility. I added Cardano recently because of its low energy usage. Cardano uses proof-of-stake instead of proof-of-work to validate transactions, which basically means that computers have to work less hard to process Cardano transactions (thus using less electricity). Of the four cryptocurrencies we’ve purchased, it’s the least popular and least recognized. But it’s also the only one I could see realistically being used as actual money in an actual economy.
  • In terms of asset allocation, max out at 5%. Currently I’m grouping cryptocurrency with metals. Bitcoin is similar to gold as an asset in that it doesn’t really add much economic value to anything, but it’s rare and should hold it’s value over the long-term (albeit with major value fluctuations).
  • Use the maximum recommended security measures for all crypto accounts.
  • Buy the dips, but resist the urge to sell the peaks (both to avoid short-term capital gains tax, but also because we may be in the very beginning of a global transition from fiat to crypto, which could mean a decades-long bull market).

Obviously I’m very new to this, and I’m not advising anyone to do anything. But for people like me who have been watching cryptocurrency from the sidelines for years and finally want to get a toe wet, I thought sharing my experience might be useful.