After a month of playing around with cryptocurrency, I can both confirm and repudiate some of the points I made in my first blog post on investing in crypto. I sold everything and came out with a 14% profit after accounting for tax and all the myriad fees that I ended up paying. Not bad for what amounted to a few minutes of work.
Stick with BTC and drop the others for now
I’ve began to demur at the idea of getting a wide swathe of coins. I lost money on Litecoin and made small gains on Ethereum. That’s not to say these other currencies aren’t interesting or an important step in the development of cryptocurrency: We need Litecoin’s faster payments, Zcash’s security and the functionality of Ethereum has potential. For now, they are long shot investments.
For now, I’m going to stick with Bitcoin and maybe Ethereum. The others seem to rise and fall with Bitcoin anyway.
It’s all about whims
I take it all back about dollar cost averaging. If I see Bitcoin take another big drop, I’m buying. If it rises enough, I’m selling.
The thing is, I don’t want to really keep much money tied up in Bitcoin. I still have the feeling the whole racket is going to collapse at some point. Nonetheless, it looks like buying and selling on short-term cycles can pay off.
Don’t stress, don’t get greedy
I bought my Bitcoin at 4k, watched it drop to 3k and sold it at 6k. It’s important to be content with the profit I turned by selling at 6k. Sure, it could hit 10k tomorrow, but that wouldn’t mean I lost out — I turned a tidy profit in any case. That hesitation between making a respectable return and waiting to win the lottery could easily lead to losing everything.
I stick by my initial point to never put in more money than you’d be happy losing. This is something more like gambling and entertainment than investing. If you keep the total amount you put in under control, there’s no need to panic when you see a sudden drop.
I wonder how much of the money in cryptocurrency is pure speculation at this point. I still don’t see a great use case for Bitcoin and Ethereum and nothing for the bundle of other coins out there.
Given that this is mostly people who can’t afford more traditional investments like real estate, true believers in the blockchain or people too bored for index funds, this thing is going to collapse like a giant pyramid scheme. Nonetheless, it’s fascinating.