Trading Crypto Like Warren Buffett
The most successful investors in modern history have a few things in common - and it's not just money.
Literally everyone on the internet has seen “billionaire mindset” memes and quotes. Some are hilarious, while others border on cliche. But like J. Cole said, “All good jokes contain true shit.” Pardon my French.
It’s not difficult to imagine that a rich person looks at situations differently than a broke guy. Heck, Robert Kiyosaki famously wrote a book about this entire premise.
As the saying goes, “One man’s trash is another man’s treasure.” In the world of investment, some see opportunity where others see nothing but risk. Very often, a sharp intuition turns out to be a million-dollar skill. But that’s not all.
Studying the greats will help you discover certain patterns of behavior. This can provide insight into their decisions, which can be invaluable to a trader.
You’re probably thinking, “OK, Bandit, but stocks and real estate aren’t the same as crypto and NFTs.” Well, yes and no. While they fall under separate asset classes, they are all assets. Hence, they can be flipped for profits.
Alright, enough chitchat. Let’s get to the juicy stuff!
What goes up on an escalator comes down on an elevator.
PATIENCE
The best cooks know when to let it simmer. After all, simply flipping eggs all day never won anybody a Michelin star. Let’s bring that analogy home.
Look at the Opensea analytics chart for Genesis by Claire Silver. This collection was the artist’s first drop in collaboration with Braindrops Art. It minted for 0.1 ETH and sits at a 24 ETH floor price today.
99 percent of readers have never heard either of these names before. So what caused that huge spike? Well, Claire is a prompt engineer who uses AI to create art pieces.
Over the last year, Claire has collaborated with Sotheby’s and signed with a global talent agency. Basically, she pulled off a goated run.
Think about the open edition meta where degens somehow managed to post losses on art NFTs. That species of degen would’ve flipped Claire’s work for pennies. But the diamond hands got rewarded for it with generational wealth.
Another example is the degen who “max mints” everything, hoping to strike gold. Statistically, the odds are stacked against this fella. However, they do get lucky sometimes, fueling the delusion. This often turns into a gambling addiction.
Here’s an unreal (totally real) Warren Buffett quote: “You can’t produce a baby in one month by getting nine women pregnant.”
Let that sink in.
BUY FEAR; SELL EUPHORIA
Amid the confusion brought about by the 2008 economic meltdown, Warren Buffett made headlines. Why? He was buying U.S. stocks.
What sort of madman pumps billions of dollars into a struggling economy? Well, it was an educated bet. He saw a rare opportunity to buy the dip when everyone else was scared.
Warren was also playing his cards right. Several large corporations needed liquidity to get them through the financial storm. By becoming their sugar daddy, Mr. Buffett gained himself lots of leverage to negotiate deals that earned him billions of dollars.
This principle is applicable to the crypto market. Given the high volatility, what was a once-in-a-lifetime opportunity in the stock market may occur several times in a decade.
You’ve probably heard the popular crypto mantra, “Buy the dip.” Sounds easy, right? It’s shocking how many people do the exact opposite because they have the wrong mindset and no strategy.
Here’s another quote from master chef Buffett: “Be fearful when others are greedy, and be greedy when others are fearful.”
BUY WHEN IT’S QUIET
A surefire way to buy the top is to jump in when everyone is talking about it. That’s how I bought Bitcoin at $45K, held it all the way up to $60K, and all the way down to $20K. Max pain.
What could I have done differently?
By waiting for a reversal in the market trend, I could’ve found a better entry. Sure, Bitcoin hasn’t moved a lot since last year’s lows, but remember this is a long-term strategy. I could have bought in at $18K and still made a decent profit.
Strategies like dollar-cost averaging come in very handy. Don’t just “buy the dip.” Do it with a clear plan of action. The research methods shared in the last couple of newsletters will serve you well 😉
Another banger quote from Warren Buffett: “Beware the investment activity that produces applause; the great moves are usually greeted by yawns.”
TRADE ADJACENT ASSETS
There’s a popular saying: “In a gold rush, sell pickaxes.” This captures the wisdom of not rushing into an oversaturated market. A wise investor follows the narrative, pinpoints a catalyst, and finds a winning trade.
You might be surprised to know that a certain breed of investors buy crypto-adjacent stocks instead of investing directly. An example is Ark Invest’s purchase of $53.7 million worth of Square stocks back in 2021.
What was the catalyst? Square had announced its plans to build bitcoin-integrated services, including a crypto wallet. Now, let’s apply this to NFT trading.
Have you ever noticed how collections in the same ecosystem pump whenever there’s big news? BAYC, MAYC, and BAKC were all pumping hard right after Yuga Labs announced the Sewer Pass event. Yep. That’s the alpha.
Warren Buffett captured the idea perfectly when he said, “If a business does well, the stock eventually follows.”
There’s a lot to unpack in today’s newsletter. But that’s my goal: to leave you with enough to really think about during the week. With the current market meltdown, I’m sure everyone else is talking gloom and doom.
But I’m in the business of sharing knowledge and opportunities. Leverage this information, and feel free to share your thoughts in the comments section.
See ya next week!
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
Really valid points, BB 🫡 like my mind seems opened. I’m gonna run with these words and get them to sink 🤝