As today is Ethereum’s historic “merge” (and we want to show that we are not toxic maximalists), we let our friend Benedikt Lechner give you some of his personal crypto investment tips.
In which cryptocoins shall I invest? I get this question a few times every day and I am a bit reluctant to answer it. I don’t want to be the one who is to blame if someone loses money because of my recommendation.
In any case, it depends a lot on what you buy. But even more important is when to buy it, when not to sell it and when it’s time to cash out. In principle, you can earn good money with every Shitcoin if you master this game. However, this requires a high level of commitment. Not only financially, but above all you have to invest a considerable amount of time to be informed about when is the right moment for which action.
I don’t do that myself anymore. I prefer to bet on the blue chips of the crypto world and to think in a longer time frame. After all, getting rich within 5 years is still pretty quick!
What Are Crypto Blue Chips?
Blue-chip coins are those standard ones that I consider to be safe. They tend to have a high market cap and have proven that they have real utility and can survive the chaos of the crypto markets.
In my opinion, these are technologies and protocols that the world cannot do without and are destined to take a significant place in the industry once they are adopted by the mainstream. I firmly believe that crypto is the new internet and that we are still at a very early stage of development. Therefore, I consider the risk of investing in these tokens to be about the same as that of buying tech stocks. However, crypto offers a much higher upside potential. The risk is highly asymmetric because you can gain a lot with little investment.
Here is a look at my personal portfolio:
The “mother of all cryptocoins” started it all, has the largest market capitalisation, is the most popular cryptocurrency and has the strongest fan base. Technically, it may be inferior to newer cryptocurrencies, but it has proven its value time and time again. When people hear about cryptocurrencies, they first think of Bitcoin. When institutions enter this space, they do so through Bitcoin. Even though its appreciation potential is limited, I consider it the safest cryptocurrency.
I believe Ethereum is by far the best investment in the crypto space right now. Its blockchain is where most decentralised applications run, it has the most developers, there is a lot of experience behind it. Last but not least, it has a brilliant founder in Vitalik Buterin, who is the central figure when it comes to innovation. When institutions get into cryptocurrencies, Ethereum is the most popular choice after Bitcoin. Ethereum has significantly less power compared to other blockchains, but it still attracts the largest amount of developers and start-up companies.
DeFi runs mainly on Ethereum. NFTs are mainly on Ethereum. When innovators decided to build something big, they chose Ethereum, even at a time when it didn’t really make sense. The fees were so high at some point that the network was on the verge of being unusable, but people preferred it nevertheless.
However, that is exactly what is changing this week. Right now, the protocol’s consensus mechanism is being switched from Proof of Work to Proof of Stake. One can only imagine what will happen when Ethereum’s performance catches up with its competitors. The switch creates new opportunities to make money by staking on the Ethereum Blockchain.
Ethereum claims to become a “clean” technology without mining. This is particularly important in view of the increasingly strict ESG rules for institutional investors. Without miners to cover their energy costs, the pressure to sell is estimated to drop by 90%. Moreover, a small amount of ETH is burned with each transaction, so the coin has a deflationary character. Even if the merge doesn’t provide the expected short-term boost I’m hoping for, Ethereum is still the cryptocurrency I feel most comfortable with over the long term.
Binance Coin (BNB)
Buying BNB is like buying Binance shares. You are essentially betting on the company’s success of the company. Binance is the most popular centralised exchange in the world and has remained fairly consistent since its launch. To me it seems to me to be a solid, well-run company. They manage to continue business as usual despite a bear market. While competitors have had to cut costs and lay off people, Binance has actually hired new staff. Every quarter they use some of their profits to buy back coins, which increases demand and makes prices rise. This process is like a dividend payout to shareholders.
Centralised exchanges are currently the only easy way for new users to get into cryptocurrencies, because they are the only way to convert euros and dollars into crypto and back again. They are also less complicated to use than a wallet linked to DeFi protocols.
After a period of resistance, Binance is now also fully cooperating with regulators. Hardliners of the decentralisation idea see this as a mortal sin. As a sober investor, on the other hand, I can only welcome every step the company takes to expand its customer base. In the next bull run, Binance will most likely be overrun again, and they are already preparing for it.
Cardano is a rather controversial project. It was one of the first blockchains to implement Proof of Stake, but there are not nearly as many applications built on it as there are on Ethereum or Solana.
The creators of Cardano have a very different way of doing things. They are methodical and meticulous and put a lot of emphasis on academic research and peer reviews. Sometimes I feel they lag behind the rest of the industry and take too much time to make updates. They tend to delay things and that hurts the price of their coin as crypto markets are fast moving and impatient.
So I am still waiting for the Vasil upgrade, which was originally slated for the end of June. It is expected to fix most of the performance issues and bring Cardano to the same level as Ethereum, Solana and Avalanche.
I still believe in Cardano for three reasons:
1. Its focus on academic research and support from the academic community can lead to innovation that will give it a competitive advantage. It’s like a company investing in research and development – eventually it will pay off.
2. It is much harder to develop on Cardano because it uses the Haskell programming language. But that generally leads to more stable and serious applications. I can imagine companies or even governments that want to use blockchain technology turning to Cardano for a more secure and solid solution.
3. It looks like the Cardano founders are seriously trying to make the world a better place. They focus on giving people in Africa access to finance. Tthey are working with regulators and trying to be as decentralised as possible.
Last but not least, I made a lot of money with the initial euphoria around Cardano. I sold my last coins for a price of $1.06. I can get back in at $0.50 with a clear conscience.
All blockchains need data from the outside world and Chainlink’s Oracle is currently the best solution out there for this. It is a token that is fundamental to the development of Web3, and I can see it gaining even more value a business use of blockchains grows. After all, all data delivered must be paid for in Chainlink tokens.
I firmly believe that Layer 2 projects are the hottest picks for the next bull market. Polygon is by far the most popular scaling solution for Ethereum and I expect this to continue after the merge. It has strong partnerships, a good reputation and is innovative. Therefore, it is very likely that Polygon will continue to grow.
I think it’s a good time to invest now because the macroeconomic situation looks rather cloudy. I always make my purchase decisions with a view to the all-time high reached in each case, i.e. the highest price for which the coin in question has ever been traded. This allows me to make a realistic assessment of the upside potential. In a growth market like crypto, this price is the least I expect for the next bull run. Let’s speculate:
If you get in now, you have an extremely realistic chance of at least quadrupling your invested capital within two to three years. I am a little more optimistic from experience and reckon with a much higher factor. But that is actually irrelevant, because an investment in crypto stocks seems to me to be the most promising at the moment anyway.
The development has begun, crypto has what it takes to become the new internet, because it brings with it a meaningful expansion of the internet. It is not only the internet of money, it is also becoming the internet of a completely new entertainment industry.
Benedikt Lechner is a crypto consultant and editor of the blog Kapitalistenschwe.in, where this article has been published first (in German). Translation and editing by Aaron Koenig.
The opinions expressed herein do not necessarily reflect the opinion of the editors and do not constitute investment advice.