Mega Disclaimer: This is simply telling you what I’ve decided to do with Cryptocurrencies, as an experiment more than anything else, and why and how I did it. Do not take anything in here as advice. I will try not to express any views but any that are expressed are merely my (largely uninformed) opinions, so please do your own research before deciding if you are going to dabble with the devil that is: cryptocurrencies!
They are the talk of the town, and for better or worse I’ve decided to stick some money into them. My thinking behind it was pretty simple:
- Fact: In (say) 1 years time, Cryptos could either have stayed the same, crash horrendously, or be another 10 bagger
- Question: Which of these scenarios would piss me off more:
- A) I stuck in (say) £3000 into Cryptos and they crashed to zero
- B) I stuck in £3000 and it roughly stayed the same
- B) I didn’t stick in £3000 and they increase by a factor of ten
The conclusion was that I’d be more pissed off in scenario C so it makes rational sense to put some money into it and see what happens. Yes, this is FOMO 1 in action people. I also figure that a few grand is essentially play money in terms of our current net worth so losing it won’t hurt the overall FI effort.
It’s also worth pointing out these important facts before we go on:
- I fully realise this is speculating, not investing. Anyone who says they’re investing in cryptos right now is deluding themselves.
- I am almost certain that a great crypto crash will inevitably come, and I have no idea how bad that will be or what cryptos will survive and which will die out completely. The gamble here is to get in and out before it does.
- Or maybe I’m wrong even on that account and there will never be a big crash!? But from my perspective it certainly looks like a bubble waiting to pop, it’s just will this be tomorrow (hopefully not!), in 3 months, or in 3 years. I think there are plenty of greater fools out there to keep it going for quite some time, but again what do I know?
Additionally, one extra reason I wanted to get involved, which may sound stupid, but I wanted to test my resolve as an “investor” in a market crash, which tends to happen quite often with the price of cryptos. Would I wussy out and sell out of my position or would I go back in at “bargain” prices? I may have to wait a while to test this out in the stock market because they have generally been going up since I got involved with investing, with only minor crashes happening in the last few years. 50% crashes in a day happen fairly regularly with cryptos! So I doubt I’d have to wait too long to see how I would react (spoiler alert, it wasn’t!!!)
I realise the corollary to a stock market crash is extremely weak if not non-existent, because the underlying companies of the stock market are (generally) still worth something whereas cryptos are only worth what people will pay for them with (in my opinion) very little actual underlying value. But still… it has to be said that if you look back at the charts, every time they’ve crashed, the surge has been even stronger, so buying after a crash does still seem to be a sound strategy.
Of course, I could be extremely unlucky and I could call the top of the bubble, and buying more after a crash could see them all continue crashing back down to zero, but personally I think that is unlikely for most of the big ones, at least for a while. So I will be treating any crashes like a stock market crash and buying more in the expectation that it will keep going up soon enough.
By the way, if you are wondering about the post title, I started writing it just before Christmas and I couldn’t think of a better title now so have just left it 🙂
muchos cryptos
As a quick aside it’s worth noting that there is 1300+ of the little buggers listed on coinmarketcap.com alone. The funniest named of which has got to be TrumpCoin… yep, no joke:
🙂
how to trade cryptos
There are many sites you can buy and sell Cryptos, the biggest and most well known of which seems to be coinbase but I decided to go with more of a trading style website called eToro(<– Referral link, we will both receive $20 on your first deposit if you use this link) as it offers more of them to get involved with, 7 of the largest known ones in all which are namely:
- Bitcoin (BTC)
- Ethereum (ETHEREUM)
- Ripple (XRP)
- Dash (DASH)
- Ethereum Classic (ETC)
- Bitcoin Cash (BCH)
- Litecoin (LTC)
The 7 tradable Cryptocurrencies on eToro
It is probably worth stating that eToro is more of a trading site and it doesn’t seem like you can store any of the coins on a personal wallet or anything like that, although they do actually buy the coins on your behalf, according to this article which it’s very much worth reading before you open an eToro account:
The risks of trading bitcoin on eToro
TL:DR are these points:
- Buying/Selling is too easy encouraging short term trades
- Spreads are very high
- High withdrawal fees
However seeing as I am just aiming to get in and out at one point rather than trade alot these factors didn’t really make much difference to my use case so it turned out OK .
So now that just leaves one thing and that was for me to get all aboard…
…the crypto rollercoaster!!!
The louder you scream the faster she goes!
Well, what a ride it has been so far.
My “portfolio” has been up $1,000 to -$1,000 within the space of a day:
Didn’t quite catch the -$1,000 as it ticked back up so quickly!!!
The above screen shot was taken in the midst of the crash just before Christmas where my I was almost immediately tested on my (half baked) trading strategy I mentioned above. I did what I planned and bought some more and was back in “profit” soon enough when most of the currencies bounded back somewhat. So… so far not much damage done there. Since then is hasn’t bounded back and forth but mainly been in the green, but it is crazy how much things change even from hour to hour.
This ride is certainly not for the faint hearted!
This is how things stand as of 7:41 am 12th January 2018 (I thought it might help to put the exact time as things change so quickly… haha):
new strats
After reading a few more articles on the whole “bubble” subject, not least from your boi MMM, I have to admit I did change my tune somewhat and decided to get out if the whole portfolio hit $3,000, a nice round, totally arbitrary number.
Technical shit going down here, I think you’ll agree?
It came excruciatingly close after a ridiculous run up of Ripple to about $3.70 (which I bought at around 0.9 on average) but that’s now crashed again so I have decided to sell positions in tranches that have made over 100% (not including Ripple, I’m not really sure what to do about that yet) so I’ve only sold one position on Ethereum so far. I’m hoping by doing this I will make more use of the individual ups and downs of the different coins and hit the 3K profit mark fairly soon.
Then… I am going to use that as even more play money to invest small amounts in some “altCoins” – which pretty much just means any cryptocoin that isn’t one of the top 10 – i.e. the other 1300 odd listed on coinmarketcap.com – and hope to hit a 10 or 100 bagger. Sounds crazy but I think it’s worth a shot, especially seeing if (and that’s still quite a big IF at this point in time!) I can be playing with profit from the initial strategy.
Anyway, if/when that happens I’ll be sure of doing a post on that as well.
morals schmorals
Finally to address the well made and valid points MMM makes in his article on Bitcoins/Cryptos:
- Cryptos are speculating not investing – I pretty much totally agree with this, Bitcoin in particular does seem to have nothing special about it that anything else could do, and for “free” 2 as it’s open source. Although some of the newer coins do seem to have specific use cases which might make them more resilient to the bubble popping, which is why I want to look into the altCoin space.
- Huge amounts of energy are currently being wasted mining coins and calculating the blockchain transactions – Again totally agreed and this is something that needs to be sorted out. We can’t have a whole countries worth of electricity going to just sorting out these crypto transactions. There are other coins again that are far more efficient in this regard.
- It’s a waste of investing time and energy – Indeed but it’s not like I’m sticking our whole Net Worth into it, and will try not to waste too much time on it either.
- if you’re going to be an evangelist for anything, it needs to be purely based on the underlying merits, not what you hope it will do for your personal fortune. – Just to be clear I’m not evangelising any of this, I’m simply telling everyone what I decided to do and how I did it.
- I am always going to tell you that price speculation is a bad way to spend your life. This part of it is ideological to me: You Must Earn Your Money By Creating Value for Everyone. – I’m actually calling bullshit on this. I can see the patently obvious difference between investing in a company and speculating on bitcoins, but don’t delude yourself that all of your S&P Vanguard fund investment returns are “earned”, pal!
So yea… basically as I’ve mentioned above quite a few times now, I kinda totally agree that this is a greater fool thing but I just think there are plenty more fools in the sea.
There is the morality argument to this I suppose, that if I fundamentally agree that the whole thing is a bit stupid then I shouldn’t get involved, but at the end of the day we’re all in this FIRE business to make some money and to live the good life as quickly as possible. People are all (supposed to be) responsible adults who can fully decide whether or not they want to get into this sort of thing or not, so I think that’s up to them if they want to go for it.
Yes it is most likely a zero sum game so there will be winners and losers, but hey, I could easily lose the shirt off of my back as well. If you don’t want to get your fingers burnt then don’t play with FIRE Fire 😉
Finally, I’ll leave you with one of my favourite stories about Bitcoin, which is the infamous Bitcoin Pizza, a.k.a…
Isn’t hindsight is a bitch?
I remember reading about Bitcoin way back around 2013 (could have been even earlier actually) and in particular the infamous Bitcoin Pizza which I recall at the time being “worth” around $1 million, which blew my mind. It was worth (or more correctly would have been worth, if the person who bought it had kept the bitcoins instead) $100 million as of November 28th at values of $10,000/bitcoin which means it’s worth just over that at time of writing (and we’ll get onto the volatility discussion momentarily!), but even just a few days ago with a high of around $20,000 it would obviously have been double that at around $200 million! An expensive pizza, right!?
Anyway I guess the point I’m making here is that I read the story, looked at the graph, thought well I’ve totally missed the boat on that one and didn’t give it much thought. And now here we are in 2017 and it’s a 100+ bagger since those halcyon days of the $1 million pizza story.
As they say the best time to plant a tree is 20 years ago and the next best time is now… I think we need to update that for the cryptocurrencies age a bit:
The best time to buy a cryptocurrency is 5 years ago, the second best time was last week!
What are your thoughts on Cryptos? Anyone else dabbled with them yet? Anyone get in at the start of the year (or earlier?!) and are sitting on 1000%+ gains? Have you sold yet? Tell us your stories in the comments section below!
Also, I’m fully expecting to get some flack for this btw so don’t hold back and let your keyboard loose! I’m a big boy, I can take it! 🙂
Discussion (37) ¬
Can you let us know when your invest goes up and how easy it would be to cash this out? I think that’s the part I’m more fearful of (I still have a £5 chip for a casino in my purse).
Thanks,
Sophia
Hi Sophia
I’ll keep people informed of any movements I decide to do as much as I can yea! With eToro it’s ridiculously easy to cash out. It’s literally one click of a button. But as stated in the post you will pay a bit of money on the spreads and then again if you actually want to withdraw the money. So best not to do too much trading/depositing/withdrawing if you use that trading platform. With the other more traditional exchanges, I believe it’s a little harder to cash out but I’ve not tried them yet so I can’t really comment too much.
Cheers!
My thinking was much like yours; I’d be more annoyed if things went up 10x and I hadn’t have been on then if it all crashes and I lose the whole investment. As such I ‘invested’ 1 month’s worth of matched betting income (about 2k) spread out over the last few months. Current value is just over 4K so I’ve doubled my money already.
Im planning on long term holding, at least a year. If it shoots up I’ll cash out a %, if it crashes I’ll not worry as will have no doubt made many more X that amount from the following months worth of MBing.
Moral of the story: Only ‘invest’ into this money you can honestly and unashamedly afford to lose without losing a minutes sleep over. Otherwise you may as well just go and chuck the whole lot on a roulette wheel and get it over and done with much quicker.
Sounds like we’re on the same page. Just wish I’d have thought of this even a few weeks earlier and would already have been sitting on a tidy gain just like yourself.
Yea I very much viewed it as profits from MB funds (in fact that’s exactly where I sourced the money) and also very much as a gamble but one with hopefully limited downside (in the short term at least) but with a potential massive upside. Not sure I have enough hair on my chest to hold out for a year but again that was the original plan, but will have to see how it goes I think. I know you should probably have a plan and stick to it but if I get a double your money in short time, I am pretty sure I will just cash that out and plough it into altCoins instead, which I think could turn out to be a smarter play anyway.
Cheers!
Hey TFS
I’ve been wondering if you were going to dip your toe in! Well done on making a profit, despite the rollercoaster ride and hope you continue to do so, or manage to bail out before the big correction!
Myself, I’ve decided not to take any risk – like you, I heard about bitcoin years ago but as I didn’t understand how it worked and worried about it not being regulated, I didn’t take a punt, not even to experiment.
I am a little concerned about the energy being used to mine the currency although perhaps until this is addressed, investing in electricity companies (particularly ones in China?) might be the way to go to take advantage of all that energy being used? Morally doesn’t sound great but like you say, we’re in it to make money!
The MMM article was interesting, the comments even more so, hah!
Thanks for the positive as usual comment weenie but let’s not get too carried away with the “making a profit” stuff just yet haha. Still go to actually sell the damn stuff before any of that. And even then it’s totally unearned so no real congrats are warranted.
I remember thinking years ago, well this is clearly in a bubble and won’t go up any more. 🙁
So I guess that is one reason why I finally capitulated, if you kept thinking like that then you will never get involved. Rubbish logic really but it seemed to make sense to me.
Hah… like your out of the box thinking there!
We could argue about morals all day long but someone else would just step in and invest/trade or whatever to take our place anyway so it’s a bit pointless I think. Bit of a tragedy of the commons style way of thinking but for better or worse that is just true of the world we live in.
Yea I agree he really did a lot of research into tbf, which is why some people saying he didn’t understand it are clearly talking out of their behinds!
I need to go back and read some new comments as wasn’t too many wackos on there when I first read it… haha!
I am risk averse most of the time, so, while I could make some huge profits, I did not. I buyed Bitcoin at 300 and sell at 900, I buyed Ethereum at 36 and sell at 200. Total profit was for 2017 at £12.500 and I am pleased with that. Even if I sold in June July and if I would keep it to December January would be 60-70.000. Now I have few mining contracts for Bitcoin, Ethereum, Monero, Dash and Zcash. I have around 3000 in value , same like you. And I do not know what will be my profit until November. But I did a bit of research. I also have 500 in altcoins (Iota, Cardano, Verge). We keep in touch in one year to see our results. Heh!
Thanks pretty decent return, can’t sniff at that!
I’ll pop over and check out some more of your posts, I noticed you were mining a few months back, I thought about trying to get involved then but just never really round to it (d’oh!).
Good luck for 2018!
well the problem is if your only committing pin money you can afford to lose then even best case result isn’t that exciting, 2k to 20k… meh!
this is the problem with committing small amounts to outside bets. When you merge the returns back into the big picture (whole portfolio) they become insignificant, therefore a waste of your time/effort.
If it is just for fun, effectively entertainment, something to watch to fill your day then I can see the attraction. But if it is just FOMO then I think you’d be better of resisting the urge?
spend it on a holiday or something or give it to someone you really like?
you’re *probably* going to lose money truth be told, and waste time and effort doing it?
Hi Rhino,
I was looking forward to your comment actually 🙂
I think it’s fair to say we have wildly differing opinions on what it would be like to “make” 20K out of messing around with a few crypto websites for a few hours a month.
I think any gain is gain and if it’s a bit of fun and/or kills the FOMO thing on top, while not putting enough in that it would lose you sleep if you lost it, then it’s a green light to go for it.
Having said that, I totally see your point of view!
Effort wise it’s next to nothing. Emotional wise – maybe the toll isn’t worth it seeing it going up and down (for some people) but this sort of thing has never really bothered me too much.
Remember I seem to have gambling in my blood so I think this is just an extension of that I guess.
Cheers 🙂
what are the spreads and transaction costs?
It depends on what exchange you use and what coin you are exchanging. But a good answer is probably “Quite a lot” from what I’ve seen so far. I think buying the coins of the exchanges might be the best strategy as they are the ones that are definitely making money (well, crypto money) out of this for definite!
Good move – I invested 5% of my TNW (non property) in crypto in August – now that 5% is 20%! You should check out Steem and steemit. My best investments – and I cannrecomend Kraken and Bittrex as exchanges – I also just opened a Binance account which is what you need for the crazy penny cryptos. Invest in steemit is my reco. It’s an odd place but Its got earning potential.
Cheers Karl, will check out Steemit!
Need to open an altCoin account so will try all of those you mentioned although last time I checked Binance and Bittrex had frozen any new accounts due to a surge in demand.
Thanks again and nice one with the 5%->20% gain! That’s massive!
Yeah, totally a case of FOMO here. I remember trying to buy Bitcoins years ago when it was $11, but the methods were so strange and opaque it scared me off. Fast forward to this November, and I bought $100 each of Litecoin, Bitcoin and Ethereum. I intend on checking them once a month like the rest of my investments. Maybe one of them with be worth $10,000 one day. If not, who gives a shit.
Wow… you actually got to the point of trying to buy… that’s a much closer miss than myself who just read about it and didn’t really give it too much more thought.
Yea I’ve been checking my eToro daily which is actually quite fun but I’m sure the novelty will wear off and I’m hoping to just check once a month in future.
That’s what I used to do when I opened my first investing account (ISA) and now I barely check those monthly, although I must say those are much longer investment horizons than I envisage for my cryptos, as stated in the post!
Cheers, Good luck, and who gives a shit indeed 🙂
You say:
Fact: In (say) 1 years time, Cryptos could either have stayed the same, crash horrendously, or be another 10 bagger
Except this is not a fact at all!
Care to inform us what the price of Bitcoin will be in one years time then and we can all trade accordingly?
Thanks! 🙂
I certainly can’t. Neither can anyone else. Hence me saying it’s not a fact that those are the three options.
If you’re basing the decision on the FOMO on a 10x return, because it’s one of three possible events, then you’re making a decision on a wrong premise.
haha – seems pretty factual to me? difficult to disagree with?
I see where you are coming from but I didn’t say that those were the only three options at any point, I just said “It COULD do X, Y or Z”. Sorry if the meaning of that part wasn’t clear enough.
Cheers! 🙂
Hi there.
I’ve played with eToro a bit before. As I understood it they just let you gamble on the price of the asset, but there’s no real buying or selling of it going on. Are you sure they’re now actually buying the asset for you?
Andrew
I’m not 100% sure of course but according to the article I linked to they seem to think they do actually buy it for you:
“eToro is a cross-over between these two. it allows you to buy Bitcoin directly (not via CFD), but it also has a great user interface for things like opening/closing orders & stop losses and has unique features such as the ability to copy other traders. It does however have many hidden risks which you should be aware of, this guide will explain some of these.”
https://www.anythingcrypto.com/guides/risks-of-trading-bitcoin-on-etoro
Dipped into bitcoin in July – mostly because I actually do like the idea of decentralised currency/asset and felt it needed supporting. Added a bit more in December. The amount will not be life changing in traditional currencies unless it fulfil’s McAffee’s wilder predictions. I’m simply holding.
Cool! Good luck Chris! (Also I thought it was HODLing?!) 🙂
I had very similar feelings over the Christmas period so put £2k into cryptos, I spent 2017 calling it a bubble but thought why not this year, worst way I lose the money, and as you said, it could go up further.
It does worry me that pretty much everyone else seems to have got in recently. Haha. Oh well, as you say see what happens and if not then not too much has been lost.
Cheers!
I figure if you’re playing around with something like $3k, it’s a very interesting thought experiment that has more upside than downside.
We, personally, are not going to participate. I don’t even keep my company’s stock for more than 2 days a year (i.e. – I sell each 6 month batch on the first day available, and put the profits into index funds). So something like crypo is way, way off the plan for us.
Still, as with all things, I admire those who go their own way. Best of luck getting a 10 or 100 bagger. Who knows, maybe you can flip your $3k into $300k?
Yea you are so close to retirement now it’s really not worth playing this game. I guess I have a fair few years left to go so why not risk a small(ish) amount to see if it can boost our FI plan ahead by a couple of years, and if it loses it will take…what? 2-3 months off ? So no big deal.
Cheers!
It’s certainly a rollercoaster! I’m trying not to look at the prices as it makes me anxious!
Hope you haven’t look over the last couple of days then Sam 🙂
I think you’ve done the right thing by explaining that what you are doing is purely speculative and outlining your reasons for why you have given it a go.
My logical argument for whether to buy or not was the same as yours, but I eventually landed on Option A. I’m not a gambler (I know you’ve been known to dabble in sports ahem) and that’s all I see this as. No one knows where it’s going to go. If I loose £3k, I’d be pretty upset. If in a years time someone told me that I missed out on turning that into £6k, I doesn’t bother me because I never had the extra £3k to loose. I still have my £3k, and it may have grown in my passive portfolio.
I’m not pissed off I didn’t make money in the dot-com bubble and not upset I missed the housing increase in the early 2000’s. I simply missed them. It’s not part of my plan.
Part of me does still say “If only…” but I get over it. I’m not annoyed I didn’t buy Botcoin when it was at $1, so I won’t be bothered if it happens again. But I do reserve the right to say “If only…” and then get on with my day.
I’m watching with interest how it pans out as I’ve been doing a lot of research. Check out a documentary called ‘Banking on Bitcoin’ which is pretty decent.
Hi Rich,
Wise words indeed there my friend! And can totally see the other side of the argument (obviously, because I weighed up the exact same things myself). Yea you are right about the dot com thing and the housing thing, but that is easier for me to think I missed them because it wasn’t even on my radar back then.
The fact is this is totally on my radar (and everyone else’s it seems) and so there would definitely be a lot of kicking myself. Having said that, I imagine I will be kicking myself if I lose on it as well because as I’ve mentioned I totally agree it’s a bubble, and cannot be valued etc… So why didn’t I just stick with the rational logic there?
I’ve backed myself into a corner where I am basically damned if I do and same if I don’t… but the potential upside outweighs the downside so I decided to get involved.
Sitting on the sidelines and watching with interest definitely sounds like it could be better for the stress levels… that’s one thing!!! Hah!
Will check out that doco… cheers for the recommendation!
The ‘currency’ is decentralized, which means many individuals who mine the coins actually compare the coin data, and validate its accuracy among one another. Each miner is responsible for running the server that validates the transaction, and acts as a regulator for the currency. Each blockchain that is verified by these miners pay them a fraction of the transaction cost. They are the one who ensure the ledgers are correct.
Thanks for clearing that up… :s
I invested in crypto in late 2017 and made great gains with altcoins that would jump 50 percent in a week. I got into Vechain when it was just below 2 dollars and rode the wave all the way to its all time high of 10 bucks before crashing back to 1.50. Luckily I sold half of my coins before the crash.