Adventures in Cryptocurrency
So, for the past few years I've been investing little bits of money here and there into Bitcoin, Ethereum and Litecon. Over the past two years alone I've managed to see a 10x return on my investment (sometimes 15x at some points). First I'm going to talk a little bit about what makes Bitcoin special, and ultimately why I ended up investing. Next, I'll show you some of the numbers I'm looking at right now. Finally, I'll give you a few pointers if you're looking to invest a little bit of money here and there like I've done (and still do).
The one promise I want you to make me before you continue is that you share this post...
consider it your way of paying it forward on your road to making a few bucks.
I really want to get the word out about this opportunity for a few reasons. Over the long term, I think cryptocurrencies are redefining what we think of as "money". And, over the short term I see it as a low-stakes investment solution for people who don't have many options - ultimately it's a currency that's based in equity, anonymity, and a decentralization of power. But, that's a conversation for another day... Let's talk about how you can get started.
Part 1. How I got involved, and Why
- Bitcoin is more like currency trading than stock trading.
- Bitcoin is a deflationary currency.
- There are very few fees and regulations on buying and selling Bitcoin
Bitcoin is more like currency trading than stock trading
I spent some time trading stocks for fun and one of the real limitations was that I could only buy stocks as a whole. In other words, if you want to buy Apple stock (APPL) right now you would have to spend around $150 a share. You can't buy half a stock, or a quarter of a stock. You can, on the other hand, buy any amount of bitcoin you want right now (the smallest amount is called a Satoshi).
Without going to deep into why this is a problem, it basically means that you can't really start investing in the stock market meaningfully unless you have a lot of money on hand, or you're comfortable investing money over a long period.
Lastly, the power in Bitcoin is that you aren't just buying a share of a company, you're trading currencies. So, if I wanted to, I could pay someone with Bitcoin right now; you can't really pay someone in stock.
Bitcoin is A Deflationary Currency
Most forms of currency are inflationary. What does that mean? Think of it this way... the more of something there is, the less valuable it is. So, every time someone prints another $1 bill, every other dollar bill in the world is worth a little bit less. The thing with cryptocurrencies is that there is increasingly LESS of them every day. I'm not going to go into too much detail here but every year there are half as many bitcoins "mined" (or, "printed") which means that they will becomes increasingly more rare until there is only a certain amount and that's it!
There are very few fees and regulations on buying and selling bitcoin
If you've ever tried stock trading out you've probably realized quickly that it's almost impossible to make any money with all the fees various services will charge you. One app that I've found that flies in the face of this and I use as a result is robinhood - which I totally recommend. In fact, I had a bunch of stock in Monster.com (by Randstag) and when they were acquired Robinhood helped me complete the final sale paperwork for FREE - very cool.
This is all to say that Bitcoin transactions have NO FEES. Now, that doesn't mean that apps like coinbase don't charge fees (they do), it's just not inherent in the currency itself. You could download your own wallet and do everything free of charge. Coinbase's fee goes toward putting that legwork in for you, and it is a lot of legwork. I'll gladly pay $2 when I withdraw several hundred dollars worth of multiple currencies at will.
Part 2. The Numbers
I've been invested for a little under 2 years at this point; here are some screenshots from one of my accounts (see: below).
As you can see, day-to-day the number doesn't usually fluctuate that much (or monthly for that matter), but over the past few months, and generally as the currency gains popularity, it's been going up significantly. I've noticed that the price goes up and down based on two main factors, and are probably not unlike other currencies:
- Stability = Demand
- Adoption = Demand
Fun Story that backs up my two points above: As an experiment, last year I invested a few bucks into bitcoin just before the Brexit. I hypothesized that instability in the european market would have an inverse effect on decentralized or well-established currencies (like Bitcoin). Lo and behold, the day after Brexit there was a massive selloff and my Bitcoin went up substantially. In other words, I had a positive data point substantiating my idea that Bitcoin could serve as a "transitionary currency", which people were using to hedge their bets in local markets. Basically people were thinking of bitcoin like a "wait and see" currency while their respective countries went through an unknown financial change. Very cool.
Part 3. The tips!
Here are a few tips to live by if you're going to get started with bitcoin, or any other cryptocurrency.
- Pick a coin with a blockchain that's been in use for some time. You hear about these people who invested in bitcoin early and are now cashing out in the tens of thousands (or more). The truth is, those people invested for fun, and it wasn't as much a financial decision for most than it was just a fun happenstance.
- Use an app that's easy to use and easy to understand - I use coinbase. There are a lot of reasons I use coinbase, but without going into the weeds about "hard forks" and the nuts and bolts of cryptocurrencies, I'll simply leave it at that.
- Don't invest money you can't afford to lose. Seriously... invest $5 a week or something like that. Don't invest your rent money or something like that, because the price does go up and down day to day and there are no guarantees with trading stocks or bitcoin.
- Start with Bitcoin... it's not going anywhere. There are a bunch of currencies out there, and Bitcoin is the most stable. There's also Ethereum, which is also getting mature. And then there's Litecoin, which is pretty new and might be a place where a lot of money can be made.
Remember: You don't need to buy a whole bitcoin, you can buy $5 or $10 at a time ($1 = roughly 0.00040 at this moment).
- Cash out when you've made your money back. This is a gambling tip that holds true for any kind of investment. I've already long withdrawn my first few hundred dollars back from my investment once it doubled. In other words, I've only got free money to lose. Think about it.
- Don't freak out if you lose a little bit at some point. Last week my cryptos (cryptocurrency is annoying to write over and over) were worth $1,500 and this week they're worth $1,400. Sometimes there are buying rallies and sometimes people sell - don't freak out.
- Leave your money alone for as long as you can. This is key. I can't remember how many times I saw my $100 investment turn into $700 and $800 and think, "man, I could pay most of my rent with that... But, I'm leaving it there because it is ultimately an investment for me. If you want to make a couple bucks and dash - that's cool too.
Here are the currencies I currently trade
In order of how long I've been invested, and the order that I suggest you get started.
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference.
These apps run on a custom built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open source, global payment network that is fully decentralized without any central authorities. Mathematics secures the network and empowers individuals to control their own finances.
Alright, so get out there and spend some coffee money on this very cool new type of currency! And let me know how it goes. Feel free to reach out on Twitter or if you're a close friend of mine, feel free to reach out through the usual channels. <3
p.s. Part of my professional work requires me to have a somewhat-working knowledge of blockchain technologies, policy, and internet standards. So, although I'm not a Bitcoin professional (there aren't too many of those), this information comes from a place of both technical acumen and pragmatism. Always invest at your own risk. Also, I have NOT spell checked or copy-edited this post. It's the weekend and I'm doing this for fun.