How I Increase My Probability of Making Money in Crypto
May the odds be in your favour.
Investing is a game of probabilities. No matter what you invest in, you’re only going to be profitable if the probabilities are in your favour.
This can be applied to any investment vehicle, but let’s explore how we can apply this to crypto.
Investing in crypto (and anything for that matter) is a game of probabilities, but most people treat it as gambling. A simplified exercise to illustrate how you can get +EV (positive expected value) on your bets.
Let’s create 4 scenarios for the granddaddy of crypto, Bitcoin (BTC). We’ll also come up with a probability of each scenario.
BTC will reach a new all time high (ATH) this year - 20%
BTC will continue sideways in 2022, but make ATH in 2023 - 40%
BTC is finished, it will go down and stay down - 20%
BTC will go lower this year, but make an ATH in 2023 - 20%
What would be the actions to take for each?
Buy
Buy
Sell
Buy
In 3 out of 4 scenarios (75% of the time), buying would’ve been the right thing to do.
20% Probability of a 70%+ upside
40% Probability of 70%+ upside
20% Probability that BTC will crash and burn
20% Probability that BTC investors will lose money in the short-term, but come out on top long-term
For scenario 3, you could make a “cut loss” case. For example, you may decide you want to sell if BTC goes below $28k.
You have an 80% probability of 70% upside, and a 20% probability of a 30% loss (at current price). This gives a positive expected value of 50.
Of course, all these are subjective and people will assign different probabilities to different outcomes. This is a just simplified explanation on what you can do.
Conclusion
The market can stay irrational longer than you can remain solvent. Anything can happen in crypto (and the stock market). Thinking in probabilities is a helpful way to stay sane. By consistently taking high probability bets, the profits will follow.
What I’m Using For My Investments:
Crypto
FTX
This is by far the BEST crypto brokerage (in my opinion). Verification and deposit was fast (less than 30 minutes) and easy. The platform interface is user-friendly and easy on the eye.
Transferring crypto in and out of the platform was also a breeze.
Receive 5% discount on all your crypto trades when you sign up here.
Hodlnaut
I use Hodlnaut to stake my BTC and ETH (for 6.71% APY and 5.65% APY respectively). They offer some of the best rates for staking your crypto.
Get free 30 USDC (US$30) when you sign up and deposit US$1,000 worth of assets here.
Stocks
Interactive brokers (IBKR)
I opened this about 1 year ago. The platform is not too user-friendly, but I like the charts they use to show historical returns.
Earn up to US$1,000 worth of IBKR stock when you sign up here.
Saxo
My first brokerage I opened to invest in the US markets. I love that they give a P&L breakdown, both on a monthly and yearly basis.
Earn up to S$500 per person (depending on your deposit amount). PM me on FB if you’d like to open an account and we can split the rewards.
Moomoo
My most recent brokerage which I opened, just to get some freebies if I’m being honest.
Get 1 FREE share (worth up to $1,000) when you sign up here.
TD Ameritrade
The charting software for TD is second to none. The platform even allows you to do backtesting and simulations. My only gripe is that they lack a P&L chart like Saxo or IBKR, making it hard to track your returns.
Note that TD only allows trading for US markets.