How importance of choice in crypto investment?

Assume that everyone was a beginner and didn’t start investing until 2020. From January 1, 2020 to December 31, 2020, the price of Bitcoin quadrupled from $7225.72 to $28815.55; that of Ethereum surged from $131.70 to $736.43, a six-to-seven-fold increase; and Litecoin price also tripled from $42.12 to $124.93. But in the same period, the price of EOS fell from $2.62 to $2.59. That is, everyone enjoyed a bull market except for EOS investors.

This is why people say choice outweighs efforts.

So, how to pick out one with great potential in the vast ocean of cryptocurrencies? Before talking about specific skills, we must pay attention to the following points first.

1) Don't expect to find treasure in the garbage

Benjamin Graham, a master in stock investment, has a famous investment philosophy: picking up cigar butts. This philosophy works in this way: when you are looking for cigar butts on the street, finally you find a nasty butt that seems to have one good puff left in it; you pick it up, take a puff and throw it away, and you continue to find the next one. Though not elegant, it is free. The idea is to find surplus value in the garbage. The philosophy is somewhat useful in the stock market but not applicable in the cryptocurrency industry. The blockchain projects behind many cryptocurrencies are far from being launched to have any value at all. If the underlying technology of the cryptocurrency fails to meet the expectations, it will be worthless.

Now let’s compare the top ten cryptocurrencies by market value in 2017 and 2021:

The top ten cryptocurrencies in 2017, only three still exist in 2021. With such a high elimination rate, how can we “pick up cigar butts” in this industry?

2) The timing of investment matters a lot. Never expect to always earn profit from promising cryptocurrencies.

When it comes to the question of how beginners choose cryptocurrencies, the preponderant answer is to invest in the mainstream ones, including Bitcoin, Ethereum, Ripple, Bitcoin Cash, Litecoin (LTC), Cardano (ADA), and Dash (DASH). But let's take a look at how these cryptocurrencies going through the bull and bear markets.

Among the 7 mainstream cryptocurrencies, only 4 have a higher peak value than that of the last bull run, while only 3 have a higher current value than the peak value of the previous bull market. So even if you choose a promising cryptocurrency based on your judgment, don't expect that you can always gain a profit. And if you buy it at the peak price, you can be trapped as even mainstream cryptocurrencies are very likely to go through a bull-bear cycle. In addition, as the elimination rate of cryptocurrencies is ultra-high, it can be very risky to hold them for a long term. So the timing of buying is of great importance.

3) Don't expect a method that "applies everywhere" to work in choosing cryptocurrencies. In this volatile cryptocurrency industry that is frequently updating, it is very easy to fail by mechanically applying models or others’ methods.