I’m a professional crypto investor, and I’ve been trading crypto for almost a year now. (If you are interested in how I got started with cryptocurrency, check out my blog post: “How I went from non-believer to believer.”)
In this blog post, I want to talk about one of the most misunderstood aspects of cryptocurrency investing — the idea that investing in altcoins is like investing in penny stocks.
This is not true. Altcoins are not penny stocks, and they don’t behave like them. Trading them is not gambling; it’s a financial tool that can be very profitable if used properly.
Crypto investing is really a lot like other investment strategies. There are two main things you need to know about trading: timing and discipline.
Timing is about predicting which assets will rise or fall in value over time. That’s a hard skill, but it’s not mysterious or mystical; it just requires experience and knowledge of what works over time. It’s a skill every trader needs to learn.
Discipline is about putting your money where your mouth is — holding on to the assets you have bought until they have gone up enough that you have made more money than if you had just invested in something else instead of them. In other
When I started investing in altcoins, I was frustrated by the lack of good sources of information about them. So I wrote a blog post to address this, and it led to a few more posts. And it’s now become a thing!
The post that got me started was an extract from my book on investing in altcoins called “Crypto: A Beginner’s Guide”. The book is available in print, ebook, and audiobook formats.**
To learn more about investing in altcoins, check out my blog at: http://cryptocurrencyinvestingblog.com/
When I first started buying cryptocurrencies, I did it based on the price. So I bought Bitcoin in the winter of 2013 and watched its price go up. When the price went up, I sold. When the price went down, I bought back more.
It was a lousy strategy. I probably made about $3 million buying into a bubble that had already burst . And it’s not clear how good a strategy it was even when bitcoin was stable: how much money would you have made if bitcoin had gone up 10x in 2013, and then dropped 10x in 2014?
I now buy cryptocurrency based on fundamentals, based on my gut. Usually, this involves getting involved in the original project behind the coin. It can be anything from an idea for a new blockchain protocol to an existing product or service backed by a strong team with big plans.
When I first heard about Bitcoin, the price was pennies. It was a fool’s gamble and no one believed in it – except me. I bought $10,000 of bitcoins at $20 and promptly lost half my investment. My second and third investments were also placed at $1,000 per coin with the same result. I thought to myself “how could this be possible? Only these fools are buying them!”
Two years later, after keeping an eye on the price trends and doing research on what makes an altcoin valuable, I saw there was a significant supply of bitcoins that were not being used for payment and realized there is enormous room for growth in this space.
It took nearly a year of researching before I decided to buy Litecoin (LTC), but after holding the currency for a few months, I sold the entire LTC position at 3x my original purchase price. What happened to my investment during that time? Instead of being worth just under $1,000, it was worth more than $3,000!
I’m a crypto investor, and I’ve been writing about cryptocurrencies for about three years. In that time I’ve made a lot of money, but I’ve also lost much more.
I’m not a professional trader, I’m not a financial advisor, and I don’t have any special insight into the future of cryptocurrencies. I just have an obsessive interest in the subject, and I write about it because I want to help people understand it better.
Professional investors are always eager to talk about the things they know best. They do this because they want to create the impression that their advice is grounded in experience and they want their clients to see them as credible professionals. Sometimes the things they say are valuable, but most of the time they are neither.
Here’s an example: Many professional investors tell people to buy cryptocurrencies, because they’re all like Bitcoin, only cheaper. If you look at the prices of cryptocurrencies, though, you’ll see that it makes no sense to buy one of these digital currencies unless you’re prepared to wait a long time for its value to go up.
Why? Because the volatility in exchange rates means that it’s going to take a long time for a coin like Ethereum or Ripple or Litecoin or Bitcoin Cash to double in value. Even if you have 100% confidence in your investment decision today (which most of us don’t), there’s no guarantee that the value will go up tomorrow.
As far as I’m concerned, “professional” investors should be required by law to keep some percentage of their assets in physical cash so their customers can see how much money they’d actually lose if something goes wrong.
The list price of a coin is what it was in the past. It is not a prediction of what it will be in the future.
Consider Bitcoin, which started at $0.01. You might think that if it had stayed stable at $0.01 then it would have gone on to become worth $10,000 or $100,000 or $1M. But if you look at the list price, you would say that its value has been around $500–$600 for years now — and more recently as low as $200–$300. That’s not a prediction about what it will be in the future — that’s just about what it was worth in the past.
Of course, a bitcoin isn’t really worth anything at all; all that people have to trade with them is whatever they can get from selling something else they already own. If no one were willing to buy bitcoins for anything, they couldn’t do anything useful with them at all; and that’s why their value keeps falling whenever there is news of coins being stolen or shut down or lost (for example, when Mt Gox collapsed).