The Magical World of Cryptocurrency! | Let's Talk Wealth Ep 18📈🚀

Hey there, it's Todd Polke here, and today we are entering the magical world of cryptocurrency. Now, uh, as we know, in the cryptocurrency world there are a number of different ways that you can play within the world itself. You can act as an investor by buying good quality coins where you believe that the growth and the value of the coins, or you might be able to receive an income stream off it into the future. You could be a trader where you're actively buying and selling coins for intermediary profit. You could be staking and pooling where you could actually go and earn cash flow streams from your cryptocurrency or NFTs or, you know, through via the mechanism of staking. Or you have the ability to be able to hold some things for some short-term profits. Then be able to sell later on, which is a more medium-term type of trading type of strategy. Now, one of the big mistakes that I see a lot of investors make in the world of cryptocurrency is that they wind up buying on hope and buying on a prayer. They hear about the latest coin that they may want to get involved in, that their brothers, uncles, friends' dog told them that it's absolutely going to the moon and Lambos for everybody and all that type of stuff, and they rush in and they buy it purely based on on an odd tip from someone, or they get caught up in either the hype or the despair of the market. Anyone that's been involved in the world of cryptocurrency for a little while, you will know that it's been a rollercoaster ride. Personally, I've been involved since about 2016, when I got involved in the cryptocurrency world early but kind of late compared to some other people. And I've definitely been through a number of different cycles and have experienced kind of the emotional pull of, of, uh, the hype in the marketplace, but also the despair of the marketplace as comes back down the other side. Now, in and amongst all of this, what we have to understand is what is the long-term trend around cryptocurrency in the world of blockchain actually looking like? Now, I don't know about you, personally I'm very, very bullish on it. And so when I'm thinking about interacting in the world of cryptocurrency, especially when it comes to investing, what I'm mainly interested in and focused on doing is about the long-term accumulation of quality assets and Over the long term, which is fundamentally what an investor will tend to do. Now, where I see for a lot of investors that they don't really know how to assess the world of cryptocurrency, or assess well which coin am I actually going to buy? Quite simply because there's no framework to kind of figure it out, or they don't have access to that framework to figure it out. I created something for my a lot of my private investors around how to choose the right coins in the framework and what is to. Designed to do is give you a step-by-step so-called checklist of the key elements that you need to check, the level of due diligence that you need to do to make a true decision if this is a coin that you want to hold, that you can see some future viable potential out of it for the longer term. So whenever I'm looking at the cryptocurrency world, I'm at a minimum looking at a 5-year time frame. And so when I'm purchasing now, I'm sitting there asking myself the question Am I going to be happy to own this coin in 5 years' time? And then I make the best decision based on that. So what I want to run you through right now is the framework that I've created for my investors called How to Choose the Right Coins for Your Portfolio. It's a very simple title, but it's very apt for what it's all about. And I wanted to take some time to run through that guide with you right now to give you some of the key elements that I focus on when I'm choosing cryptocurrency coins for my long-term portfolio. So let's get into that now. Now, before any— anyone that's been following me for a while or any of my clients, you will know that I do not do a thing until there is a strategy in place. If you don't have a strategy, straight up to me, you are just gambling. And if you just want to gamble in the marketplace, if you want to chase the get-rich-quick, the shiny objects, and just speculate in the market, please go somewhere else. There's lots of different things out there on— in the world of YouTube and anywhere else that will tell you what to buy and what not to buy based on hype and speculation, because opinions are cheap. What I want to do instead is that I want to give you a way of thinking, because when you've got a way of thinking, then you are empowered and you get to make the decisions yourself rather than relying upon the good or maybe not so good opinions of others, depending on how educated they actually are. So to me, everything begins with strategy. Now, as I mentioned, there's a few different strategies that you can actually deploy when it comes to the world of cryptocurrency. There's your long-term buy and hold options. There is your short-term trading. There's your speculation. But another one is also your cash flow streams through things like pools and staking and such. Today we are focusing on the long-term buy and hold and how do you choose those coins for that. Now what we're looking for is the coins that outperform. Okay, so we want to find some coins that have a unique value proposition and a solid team behind it. Right, that we are happy to own in our portfolio and that we are riding for a future growth position. Now, of course, there's never any guarantees in investing. Anyone that says there is is a liar, and they probably lie about other things as well. Um, but we want to put our best foot forward in choosing those right coins for us because, you know what, straight out, there's a lot of dog shit in the world of cryptocurrency. You know, you can go down CoinMarketCap and scroll down thousands upon thousands upon thousands of coins and get to the bottom and see these absolute nonsense coins that someone decided to either start as a joke or decided to start as a scam or to cash in on the hype in the marketplace. And we want to avoid those. We want to stick with the coins that actually have a future behind it. So one of the first questions I'm always asking is all about relevancy. Is the coin actually relevant? Now here's something you have to understand when it comes to investing, whether it be in shares, whether it be in cryptocurrency, or any other, um, type of product like that is that when you're investing in the world of cryptocurrency and you're choosing to invest in a specific coin, like buy a coin for your portfolio, what you are actually doing is that you are buying a part of a business. And so you're not assessing the coin, you're actually assessing the viability of the business behind the coin itself. The coin is just itself, or the token is just representation of that business itself. And it's no different in the world of, um, shares where you're buying a share on the share market or, or, you know, private shares behind a privately listed company, for example, you are actually buying a part of a business and you actually have to get away from thinking about the coin and think about how am I going to be assessing the business behind this coin and does it have a future. So the very first thing you want to think about is relevancy. So is there a real-world use case behind the coin and for the technology behind it? So you're going to see coins of all different types out there. And if I see another coin which goes, oh, we are a decentralized cryptocurrency, a peer-to-peer currency which, um, you know, operates on the blockchain— and if I see another coin use those, just those type of wording, like, I just smash my head against the wall because there are so many knockoffs of the underlying original use case of Bitcoin, which is the OG. So, but there are a lot of coins which actually have a real-world utility, right, where they are there to solve a problem in the marketplace using the advanced technology of blockchain, right? So does the coin solve a real problem worth solving? So you might have a coin out there which may support, you know, nanas in there who are 85 years old who love to knit socks for their grandkids. Now, I don't know, I'm making a judgment there. Maybe that's a great problem worth solving, but using the world of blockchain and with that type of demographic, Highly unlikely. So does this coin actually solve a real problem worth solving? How readily usable is it? And what makes it unique compared to other coins? And do you feel the coin will remain relevant into the future? A good thing that I've got a lot of my investors thinking about right now is that you don't want to be buying assets based on just the now. You want to be thinking ahead where technology is going and buy with the future in mind. A really core thing that we're all facing right now is the emergence of of AI, artificial intelligence. And so with that emergence of AI, it is going to automate, systemize, and eliminate a heck of a lot of rote type of jobs that a lot of people are doing right now and tasks that a lot of people are doing. And if some people are not careful, they're going to find themselves jobless into the future. So you want to be asking yourself the question, hang on, are other technologies out there going to be— that are existing right now, that are developing right now— going to make this obsolete. And so that's the core thing you want to be asking yourself. You want to put yourself into the future and, um, with the future in mind. So the first thing you want to understand is relevancy. Now, as I go through this, there is this order that I'm taking through this, because if I get to this relevancy question and all of a sudden I go, hey, this coin is actually not relevant, or it can easily be overtaken by something else which is already out there, I'm done. I'm not wasting any more of my time on doing the due diligence on this particular coin. Now, if you wanna do it just for a practice and to get used to using the framework, go ahead, knock yourself out. It's an incredibly valuable activity for you to do if you're serious about building a strong portfolio in the cryptocurrency world. But if you really are looking right now, I'm done, I'm out, right? I'm not wasting another moment, time, energy, anything on this particular coin, and next. So we're gonna start to eliminate the coins that don't have a future or that are not gonna hit the core things that we need it to. So I now move on to part number 2, which is all about the underlying technology. So what is the real-world use case for the technology, and does it solve a problem worth solving? As I said, just because it solves a problem, is it actually a problem worth solving? And is there an economic advantage to solving that problem itself, right? There may not be with nanas who are 85 who are, you know, using blockchain to track where their mittens for their grandchildren are passing from generation to generation or something like that. I don't think that's really something that's worth solving. But, you know, you might be thinking about other areas like logistics and transport and, and currency and finances and a whole lot of stuff where there really is a, uh, it's a problem worth solving and the technology can actually do it. Now, what makes technology stand out from the crowd? Now, when we talk about disrupting an existing industry or product, it doesn't mean it has to be revolutionary. You know, it's not about finding the unicorn businesses, although that's great, and when you find them, happy days. But it's not about finding another Apple or finding another Amazon. You don't have to be in the number one business to make some profit out of it, right? So you— it's fine to be in 2 or 3 or 5 or even 10 if the market is big enough. So is it disrupting an existing industry? Doesn't mean it needs to be the only one that's doing it, but does it have a marketable edge associated to it, and does it have a um, a, uh, a moat around it where it's going to make it a viable thing for the future? And how would the technology perform against its competitors? I was looking at a bit of technology in the blockchain world which, uh, which was automating some elements associated with pools and associated with staking, and it was solving a real-world problem. It was making things more efficient, it was making things easier, it was removing time, it was doing a whole lot of different type of things of managing pools and staking. And so was it solving a problem worth solving? The answer was absolutely yes. Now, were there other technologies which were far in advance of this at this point in time or emerging? The answer was yes. And so to me, that bit of technology was no longer like— I might go hedge my bets against this other business over there which has a technology which is, uh, more advanced and will make this a little bit more obsolete into the future if I chose that first one. The next one we want to look at is all about the market strength. So does the coin have any oomph behind it, right? Very technical term called oomph. Now, um, when you're looking at market strength, the distinction you've got to make here is what stage of life is the coin in, and are you investing in established coins or are you investing in ICOs, initial coin offerings? Okay, because this is going to change how you answer this. If you are investing in ICOs, initial coin offerings, those of you don't know what an ICO is, It's when a new coin or a new token is effectively just launched into marketplace. What that means is that there's no history behind the business. There's potentially no market cap yet. There's no circulation. The supply isn't there. Liquidity isn't there. It's just launching in the marketplace. And how you're going to assess that versus how you're going to assess like a coin which has been in the market for a long period of time is going to be very, very different. If you are looking at a coin that's been in the market for a period of time, but it still has The market cap is very low and the ranking is very low. The coin's price stability, um, compare— is it comparable at least to the marketplace, or does it tend to have massive drops? And is it subject to kind of pump and dumps along the way? What does the history tell you about the coin? What's the supply in circulation? Is there sufficient liquidity? Um, how widely is it accepted? What exchanges is it available on? If it's available only on, you know, one or two obscure exchanges in the marketplace, then you go, well, how are people going to hear about this coin? How are they going to be trading this coin? Is there enough liquidity behind this coin? Where's the growth and demand pressure behind the coin which is going to keep it growing into the future? Credibility. Does the coin and team have a solid reputation? I'm going to talk more about team later. That's a big one for me. And have any major investors or notable figures or companies invested in the coin itself? Now, so you want to make sure that is there demand behind this coin? Is there going to be future demand behind this coin? Is the, the coin making progress through different exchanges and things like that? Is there enough supply and liquidity? And is it growing in market cap and ranking, or is it actually declining? And it's going to tell you a whole bunch around the coin's performance itself and the demand behind it. Now you might get to this question, you might go, market strength isn't so strong right now, but it may not be an instant strikeout. You might go and dig a little bit deeper and start to understand, okay, but they've got some other marketing initiatives going through, there's some partnerships coming, or Or it's only just started recently and there's more emergence still to happen. But it's something, it's a bit of a red flag and you want to take notice of that. If it's an ICO, what you want to understand is what is their plans in their white paper that's going to develop into a coin which is moving up the market ranking and is getting into better quality exchanges and expanding in the reach and liquidity behind it. Okay, so different way to think about it. Community is a big thing when it comes to tokens and when it comes to cryptocurrency. Coins. And so one of the things you want to be asking is, is there an active and dedicated community behind the coin itself, or what is the strategy for creating this? So this way you want to go through some subreddits, some YouTube channels, some Discord, Telegram, and some of the feedback from their communities and assess the following questions. So as you're looking at a coin, these are set up as questions for you to be able to go and ask yourself as points of research. You know, what are they saying about your potential investment that you're looking to head into? What are all the communities that's currently saying about it? If the existing community is constantly saying things like, oh, I haven't heard from the developers in forever, or they keep missing their roadmap, or any other negative thing, you keep hearing that same bit of, uh, commentary regularly, then you might be questioning, hmm, maybe the team behind this coin isn't actively involved, or maybe they're hit and miss. And, uh, that's a bit of a red flag for me, and I'm not interested in a team that's not living up to their word. I'm a big believer in doing business on a handshake. Um, not that you won't protect yourself, of course, but I like people who are true to their word, right? And that's how I like to do things, how I like to invest in people. How active is the community? Are they active in all the, all the forums and the Reddits? And, and how dedicated are they to defending and holding the coin itself, right? Do they have, um, forgotten the word right now, uh, not iron hands, it's something else, can't remember what the right word is. Or do they have weak hands in the marketplace and they, um, know, the, the coin is just being dropped. It's not being held by a huge community of the marketplace. Now, this is what I mentioned before. The business behind the coin is a massive one to me. And, uh, this is, this is where the, the way to think is you're assessing the business behind the coin itself. So is there a legitimate business behind the coin with the clear roadmap, or is it just hype? There are more than enough meme coins out there hoping to cash into the hype of the marketplace. Do you know what? You can make some money out of those. I wouldn't be holding for the long term, that's for damn sure. Um, I made a bunch of money out of, uh, Dogecoin. It was one of the first coins ever bought, made a bunch of money out of it. It was fantastic. Didn't know what I was bloody doing at that point in time. So now looking back, I go, hey, that's gambling. But I put a little bit of money in it and just to learn the marketplace. Because what I know is that when you're actively involved in the market, you start to pay more attention. And, uh, you've got money in the market, you start to pay more attention. As you pay more attention, you learn more about it. And And so I decided to get involved at a very early level. So the question is, how do you assess the business behind the coin? And this is where the white paper and the roadmap comes into play. Now, most credible cryptocurrencies have a white paper which lays out in detail the purpose, the vision, and the roadmap of the coin itself. So what you are asking is, does the business have a plan and a solid future? So you're going to get the white paper, you're going to download it, you're going to find it all major cryptocurrencies website. If they don't have a white paper, pretty red flag. I'd stay clear, clear, clear away from it unless they've got some new fandangle way of presenting this. What does it— but it's not normal, the done thing in the crypto world. What does the project do and what problem does it solve? How will the technology work and how will the problem solve the problem identified? Are the key team members detailed? Right. And that's important. I'll talk about this soon. Are the tokenomics laid out? I'll talk more about this soon. Is there a roadmap which summarizes the project's development for both the short-term and long-term plans and timeline for achievement? Are there obvious mistakes in the document? Like the number of white papers I've seen with grammar mistakes and punctuation. I always think about how you do one thing is how you do everything. So if someone's not even— if a team is not even willing to put together a quality roadmap, what other shortcuts are they taking along the way in the development of the coin? And again, I'm out. Does the white paper detail compliance with relevant laws if necessary? This is more and more important. The SEC is having a field day with cryptocurrencies. At this point in time, uh, trying to make their mark and make their little point in the market. Have any major investors, notable figures, or companies invested in the coin? Now, the Ethereum whitepaper is well regarded as one of the best in the industry, and so that's a great one. Here's the link to it right here. That's a great one to actually use a bit of a litmus test that you can go put another one beside it and go, uh, hey, does it match up right? Now, there may be better examples out there in the marketplace, but the Ethereum one is considered to be a great one. So when you're looking at the white paper and the roadmap, the team is a huge one to me. I'm a massive believer investing in teams when it comes to business, whether in blockchain businesses or in, you know, physical businesses. I invest in lots of different types of businesses, and, uh, team is a big one for me. I'm a massive believer in investing in founders and absolutely love it, right? I love hitching my bandwagon to, uh, incredible founders who are dedicated, who are competent, who are Committed beyond words. And, um, no ego is another big one in, in the mix as well. And I love hitching my bandwagon to great founders and backing them to the hilt. So here are a few things to analyze. Who are the founders, employees, and advisors? What skills and experience do they bring to the table? Now, someone's looking to launch a coin in handling a financial aspect of the marketplace, yet they have no background in finance, and yet they were just a school teacher teaching English. I'd be sitting there going, yeah, maybe you don't have the skills and experience to bring to the table unless they're an incredible CEO and employ incredible talent. Is their expertise credible and relevant, and can you trust it? Do they have a vision that they're committed to? Can you verify who the team actually is? Are they real? It seems silly to even ask that question, but the number of ones that you can look at where you, you do a bit of research on the team and you find that all they have is some stupid meme picture as their, um, their thing They don't have any links to any social media. They don't have any online presence any way, shape, or form. You know, you can pretty well almost think that it's going to be a scam, right? That's what I consider when it is to be. But you know, some have kind of learned a few tricks and they've gone, you know what, we're going to set up LinkedIn profiles between for all of our people. And you go look at LinkedIn profiles and you sit there and go, oh my goodness, there's there's there's no way this is real. Like you can tell really easily, and maybe my bullshit radar is up really. High. Been in the world for a while now in terms of the crypto world, and I've seen a lot of dog shit out there, as I said. So I'm very skeptical when I look at this team. They got to be real, they've got to be active, they've got to be online, they've got to be committed, they got to be reachable. If not, I'm out. Do they have a proven track record of success? Uh, has the advisory panel and business owners, uh, been involved in other coins prior? Okay, some cool things to be able to ask. The next one is all about tokenomics. Now tokenomics is how the cryptocurrencies will work in the overall ecosystem. How the tokens will be distributed and used, as well as the quality of tokens, the factors that may affect their value. This is where we look at things like the token utility. The more clearly defined a token utility is, the more valuable it may become. Coins need adopters, and those who stay for the long term are there because of the use case it brings. So utility is all about the use case, right? What is the use case it brings to the marketplace? Next is all about token supply. Is there a limited or endless supply of tokens? Tokens with a finite supply are scarce, which eventually leads to price growth. Meanwhile, tokens with unlimited supply may lose value. Obviously, that is not the only indicator for growth. You would have gone through a thousand other questions in the meantime, which I've laid out here for you. But if you get to a point of going where the developers can just keep printing more and more coins, well, hey, that reminds me of something. Let me think about what it is. Oh, that's right. It's a fiat currency system, right? Where the government and the reserve banks and such can just keep printing money to their heart's content and And the debt ceilings just go up, no problems, we'll just print some more money. And the people who get impacted are you and me, the users of the currency supply itself. This is why they talk about Bitcoin, only 21 million Bitcoins are ever going to be printed, right? Now that some people suggest, well, that may or may not lend itself to the actual peer-to-peer currency, which will be the place, more than it might be a store of value. Although you can split up a Bitcoin into something called Satoshis, which are the microdecimal points of a Bitcoin. So you can kind of send small amounts and things like that, but there's a cost to all of that. So, uh, you know, will Bitcoin be the actual currency? I don't personally think it will be. I think it will be the store of value. That's— and that's where it tends to lend itself and is at this point in time now. But if there is a coin which can just keep printing money, uh, look, I'm just— I'm not massively interested in that unless there's a fundamental reason for it. What is the percentage of tokens allocated to the founders? Are they just raping and pillaging, um, versus using business itself? Understanding this will give you an insight to how committed the founders are to long-term vision, seeing the project. How are they, uh, allocating the tokens for the growth of the business and the reward of the community, right? Important thing to be able to ask. And finally in this is the token listings. Which exchanges are listing the token? What are their trading volumes? The larger and thus more liquid the trading platforms are, easier to buy and sell tokens without huge price differences. When a coin first launches if they don't have a strategy to go from— often they start in, you know, third-tier or fourth-tier type of exchanges, and they, they list on a few, and then they— once they list on a few, then they access the second tier and might access the first tier, right? There's a strategy behind doing that, and good founders know how to play the game when it comes to that strategy. And so if you're looking at ICOs, you want to know what's their plan for getting on the mainstream exchanges where the volume and the audience is. And that's important. Or if it's an established coin, you want to go, where is it being listed at this point in time? And is there enough trading volume behind that to make it actually viable, but also competitive in the marketplace? Because there's so many out there. Finally, we look at risks and then when to buy, right? Anyone who doesn't talk about risk when it comes to choosing an investment, stay right clear. There's always risk in every investment. You go into no matter what. Okay, and so whenever we are investing, we are taking educated risks in the marketplace. So what are the obvious and potential not, uh, not so obvious, potentially not so obvious risks behind the coin and business? What are the risks associated with a particular coin itself? What other coins or other services are its competitors? Is this coin subject to pump and dumps? And a pump and dump, if you don't know, that like, you know, communities will get behind the coin, they'll drive up the price, drive up the price, get a lot of hype behind it. And so the amateurs will jump in and drive up the price even further, and then they just start dumping it hard and then make big profits along the way. Uh, it's not a healthy type of coin to be involved in. Is there a compliance risk for the type of coin now or in the future, and have they demonstrated to discuss compliance, especially in the finance world? If there's any coin even touching on finance, if they're not talking compliance in a big way, again, I'm not interested. They're not thinking ahead. They're not protecting themselves. They're not protecting the business. They're not protecting Um, uh, us as the owners of the tokens itself. Can you verify the information promises made, e.g., the team, uh, the smart contracts? Do they have the, um, the audits done, like the Certik audits and things like that, done by, um, you know, the, the companies that actually do the, the smart contract auditing, right? And then finally, when is a good time to buy? So when would be a good time to buy or not buy this coin? Now, when we are thinking about— so the question to ask is that what price might be considered a reasonable entry price? When is there— where is there strong support and strong resistance? If you know anything about trading and charting, is there any emotion being played out in this coin right now? Are there any legal regulatory hurdles they may face? Is the security coin a utility coin, for example? Now, the, um, the relevance of this question is going to change depending on if you're investing or if you're trading. If you're trading, when to buy the coin is everything because your whole game is just getting in and out and creating a— let me get the camera in the right place— and creating a profit difference between when you're getting in and getting out. And so when to buy the coin is absolutely everything. Now you might be trading on the short term where you might be trading an hourly or daily, for example. You might be trading over 1 or 2 to 3 months, for example, a short term. But if you are holding the coin for the long term, I don't get as caught up in this. The question I always ask myself is, in 5 years' time, would I be happy buying this coin knowing what I now know, buying this coin at today's price? And if that's the case, cool, I'm in. I don't have the time or desire or brain space to be monitoring the market every single day. I've got other things to do in my life. Um, I used to trade. I'm not an active trader anymore in the marketplace. I'm a very avid investor in the marketplace. And so I find a good coin, I might take a strong position right now and leave it, or I might take a moderate position and dollar-cost my average way in. Or if it's something where I'm not so bullish on— but I'm sorry, let me rephrase that. If it's something that I'm not going to have a big holding in potentially, but I want to accumulate a bit of position over time and I'm happy to kind of ride the ups and downs, I'll just start a dollar cost average process into that along the way. So, um, when to buy is going to have a big, big relevance associated to what is the purpose behind holding the coin in the first place. So that's it. That's the framework, uh, that you can use, um, that is now yours, that you can use to go and take a coin, run it through a systematic framework for you to be able to make an effective decision. Is this a good buy of coin to hold in your portfolio? Or is it not? And you can use it as a filtering process on basically any coin out there in the marketplace. It's designed to be very, very universal. And so now when you're investing in the marketplace, uh, you're acting as an investor. You're not buying based on emotions. The cryptocurrency world is very driven very strongly by a lot of emotional marketplace, especially being so early in its life stage. And when I say early in its life stage, it's been around for a little while now since, um, you know, since around the GFC. Uh, when Satoshi Nakamoto created it, uh, for very, very specific purposes— what was going on during the GFC and the banking system and the fiat currency system and all that type of stuff. But, you know, we're still only talking about 10 to 15 years in the marketplace, which is not a long time when it comes to assets. The market is maturing in a big way now, and it's going to continue to mature, but we've only just started that in the big game, in the big scheme of things. And so you have to understand that there's a lot of emotion in the marketplace. place. And investors don't buy based on emotion, okay? You can trade based on emotion. We do not buy based on emotion. We— because that's gambling to me. We make decisions based on facts, figures, and due diligence. Hope that's been really, really useful. Love to hear in the comments what you took out of that and your key takeaways from that— how to choose the right coins for your cryptocurrency portfolio framework. All right, thanks very much.