Following simple principles can help you invest in this market.
The billionaire is not a crypto fanboy but you can still use some of his principles to invest in cryptocurrencies. The same principles Buffett uses in stocks, you can apply to the cryptocurrency market.
Warren Buffett only invests in companies that he understands. That’s why his investment company Berkshire Hathaway owns banks, Coca-Cola, Kraft Heinz, Kroger, Proctor and Gamble, General Mills, Oracle, and Apple. These are well-known companies that make up a majority of his portfolio.
Warren Buffett does his research. He doesn’t chase the next high-flying stock. Buffett looks for quality stocks that he can hold forever.
Warren Buffett has shared countless wisdom over the years. I picked out 10 that you can use and apply to investing in cryptocurrencies.
With the market dropping like it has this past week, you may panic and wonder what to do.
During times like this, this is when Buffett buys. That is why he has a massive portfolio in cash since he waits for the right time to deploy his cash. According to Bloomberg, Buffett is sitting on $149 billion in cash.
After the pandemic, two years ago, you would have thought Buffett would have bought more investments. His wisdom kept him from buying more and there has been recent news about a potential stock market crash. Buffett may know what he’s talking about.
You can see why some people call Buffett one of the smartest investors of all time. He has a sense of when to buy as well as when to sell.
Some of Buffett’s principles I pulled out are his own quotes while others are ideas he follows.
These 11 principles of Warren Buffett will help since you have seen Bitcoin reach a new high a few months ago. This week Bitcoin dropped to a recent low of $34,658.
1. Invest with discipline
You need to have discipline on when to buy. As an investor, you can use a simple principle of dollar cost average and buy cryptocurrencies on a consistent basis.
Don’t let bad news distract you from your primary goal which is to add more cryptocurrencies to your portfolio.
2. Buy what you know
Always do your research instead of chasing the latest fad about a cryptocurrency. Some cryptocurrencies will do well. Others could crash as soon as you buy it such as Squid Games Crypto which turned out to be a scam.
3. Don’t buy into the market’s emotionality
When the market is trending higher or lower, sometimes you need to step back and look at where a cryptocurrency has been. You need to zoom out and look at the big picture.
Ask yourself, has Bitcoin reached a new high? Then maybe you should wait for a pullback before adding more Bitcoin to your portfolio.
4. When opportunity knocks, open the door
There are always new cryptocurrencies that are created almost every day. Sometimes you may just want to stick with the popular ones such as Bitcoin, Ethereum, or Solona.
When the prices drop, then this may be a time for you to buy into the investment.
5. Rule №1 is never lose money. Rule №2 is never forget Rule №1.
This is possibly one of Buffet’s most famous quotes. If Buffett doesn’t like to lose money, then I’m sure you don’t like to lose money either. I know I don’t.
Make sound investment decisions. Sometimes you may have to hold longer than you originally expected since the cryptocurrency market is very volatile.
6. “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Cryptocurrency screenshot from Twitter
When the crypto market is hot, everyone will buy cryptocurrencies (Greed). A good gauge you can use is the Crypto Fear and Greed Index.
The market could easily turn and people are more fearful. This is how some people are, but the wealthy investors or Whales are buying when the market turns fearful.
7. “The stock market is a no-called-strike game. You don’t have to swing at everything — you can wait for your pitch.”
Stocks are similar to cryptocurrencies. You can’t win trying to buy every cryptocurrency. Some will do well and others will not. Even the Dogecoin millionaire is no longer a millionaire since he had all his money on this dog meme coin.
Sometimes you have to wait for the right time to buy the cryptocurrency you want when it reaches the right price.
8. Don’t follow the herd
Buffett tends to make investments that don’t look appealing to the average investor. He is looking longer term and determines how the investment will look in the future.
With cryptocurrencies, you have to do the same. This may mean you wait for years until the cryptocurrency reaches the level where there are more mass adoption or the price rises 10 times its current value.
9. Prepare your portfolio for anything
You should diversify your portfolio and not keep all of your eggs in one basket.
Personally, I have investments in stocks, real estate, precious metals, and cryptocurrencies. For me, this is diversification and allows me to play all the markets at once.
Ideally, when one market is down, the other market should be up. This doesn’t happen all the time but it does happen quite frequently.
10. Volatility is part of the game
When the cryptocurrency market goes up and down, this is normal. It is part of the process in this market. Get used to the rise and fall of Bitcoin and cryptocurrencies. Nothing goes up forever.
Learn to buy when the crypto is trending down. Try not to buy when the crypto is tending up after several days as best as you can.
11. Think long-term — even if you have very little to invest
With cryptocurrencies, you need to invest for the long term. After 2018 when the crypto bull run was over, several people I met who invested in cryptocurrencies left the market. I’m not sure if they ever returned, but they didn’t want to meet up to talk about crypto at all.
If you continued to invest from 2017 to today, your would be in profit.
Investing in cryptocurrencies can be done day trading or swing trading. Making profits every time is not always possible. Plus, you will probably pay more in taxes as a short-term investor compared to a long-term investor.
One useful tool you can try is FeederFinance. Decentralized Finance or DeFi has a lot of options available.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.