Can you turn an initial investment of $5,000 into $5 Million in just five years?
Impossible, you might say. And I might have thought the same.
But I’m going to explain why it’s not necessarily impossible.
Let’s look at this idea in detail.
How To Make $5 Million Dollars In 5 Years
First of all, I myself have already achieved more spectacular rates of investment return than that in the past.
The first time was back in 2013. That was when I started trading Bitcoin for the first time. The BTC price went up from around $40 to a peak of over $200. For a short period it even reached $260. I was trading only for a short time – about three months or so during which that growth occurred.
That’s a price increase of 400% in 3 months. Effective annual rate would be 1600% if that were continued over a whole 12 month period.
At that time I was not trading in altcoins, apart from Litecoin. I did not invest in other coins using Bitcoin. I was just trading USD/BTC pairs.
In the event, the 1600% growth wasn’t realized. What happened was that the Bitcoin price then collapsed from the peak. I got out just in time with only small losses. I was not trading with a large principal, so losses for me were minor. But 400% growth in just three months is not bad. Extremely good in fact.
It was an interesting and exciting rollercoaster experience in parabolic asset appreciation – and subsequent crash.
I then forgot about Bitcoin. I got on with my main business – IT and e-commerce, and more or less ignored the cryptocurrency sector.
Second Time Around – The Big Crypto Boom
After a break of 3 years, in 2016 I got involved in crypto again.
I opened accounts with several cryptocurrency exchanges. I researched cryptocurrencies in depth. I studied practical trading techniques, in particular the excellent Babypips.com course. I learned and practiced margin trading and also shorting for the first time.
This time round I traded not only in Bitcoin but in altcoins as well.
This second period coincided with the sudden enormous take-off of interest in Bitcoin and the cryptocurrency and blockchain sector in general and prices were on the up right across the board with enormous optimism and price growth being registered. It was crypto-fever time.
And I was in at the ground floor – or just above it, and values were soaring. I remember increasing my capital fund by over 250% in just one month alone. Another month it increased by around 350%.
I haven’t calculated the figures exactly for this article, but the growth was enormous over the period of 2016 to early 2018. The Bitcoin price grew from around $700 to in excess of $20,000 during that time.
That’s a price appreciation of around 3000% or x30 in less than two years. I was this time also heavily invested in altcoins, mostly purchased as BTC/altcoin pairs. So my Bitcoin and with that USD portfolio value was enjoying a ratchet gearing effect, which I estimate might have been as much as x40 or 4000% USD growth over that time period.
Then Came The 2018 Bitcoin Crash
And then crypto crashed. As of early 2019, Bitcoin is languishing at around $3500.
I and many other investors in the sector made a number of mistakes. I’ll talk about them in detail in another post. For now I’ll just say that the two biggest mistakes that I made were, firstly, not to get out at the peak. Or to at least to reduce my exposure in crypto by for example around 70-80% or so.
As a result, a lot of my capital growth then slowly evaporated over the coming months in 2018 as the inevitable fallback and then the bear market in crypto took hold.
Since I was invested in both BTC and altcoins, the fallback brought with it a negative ratchet reverse-gearing effect which amplifies the losses. Not pleasant. In such a market reversal you need to quickly cut your BTC/altcoin exposure. I made some adjustments, but not enough. Another error I made.
Of course, I was not the only one to make these mistakes. Plenty of others made the same errors of judgement.
The second mistake was to draw an income from this amazing capital growth. If you do this then you do not reap the full benefits of the strong capital value appreciation.
At least I was able to margin short. This time round I had no fear of shorting on margin. Which helped a little.
Past Performance Proves It Can Be Done
Point is, this market trading experience proves capital value appreciation around the range of 300% per annum is achievable in the cryptocurrency sector through smart trading.
The cryptocurrency industry is a new and growing sector with enormous growth potential. We’ve already seen the first initial phase of spectacular growth. 2018 has seen a pause and a fallback. The next period of rapid growth is about to begin.
It may not be growth of 3000% or 4000% over a few years. But investors can be happy with a fraction of that. Say one tenth.
How You Can Do It
Assume you start with an initial modest investment sum of $5000.
Here’s how this starting capital can grow over a 5 year period:
Projected $5000 Capital Fund Growth at 300% Per Annum Average
year capital balance interest end balance
2019 $5,000 $5,000 $15,000 $20,000
2020 $5,000 $20,000 $60,000 $80,000
2021 $5,000 $80,000 $240,000 $320,000
2022 $5,000 $320,000 $960,000 $1,280,000
2023 $5,000 $1,280,000 $3,840,000 $5,120,000
In practice these figures may not turn out exactly as in the schedule. The end sum here is actually $5.12 Million. It could be more, it could be less. A lot can happen in 5 years – both good and bad. So it’s more than likely we will end the five year period either over or under this sum.
It depends in part what happens to the cryptocurrency markets, and what you achieve with your trading performance.
But at 300% average capital appreciation per annum compounded consistently over that 5-year time period, will be able to turn $5000 into $5 Million five years later.
Bear in mind I am not saying or implying that the price of Bitcoin has to increase by 300% every year in order to reach this target. That is not the case.
The BTC price can increase by less than that and you may still reach 300% or more on your fund value appreciation. You may invest in other cryptocurrencies as well as Bitcoin. For example also investing in altcoins using Bitcoin as a trading pair. this would give you the benefit of gearing on both Bitcoin and USD capital value.
And the 3000% rise may have been a one-off. It was certainly a product of the crypto-fever and startup mania. But we are not talking here about another 3000%, just a tenth of that.
So that is how you can make $5 Million Dollars in five years. Simples.
Of course, in practice it is not as “simples” as all that. For one thing, events can intervene. There’s a lot more that can be said about this projection and I will discuss some of these aspects in another post.
But past performance and my own trading experience shows that it is at least doable.
In theory at least.
ps. What are you going to do with your $5 Million Dollars?