Since 2017 was the a big year for cryptocurrencies, I suppose I’d be crazy if I didn’t mention my participation in the game.
I’ve followed bitcoin since 2012 and sadly I can’t say I was one of the early adopters. I had intentions to, but finances always kept me from investing early on. In,I think May 2017, cryptocurrency prices literally exploded. I decided to start to pay more attention and see what kind of trouble I could get into.
Speculation vs. Investing
The first thing I did was begin to purchase a little bit of bitcoin on a credit card. I started simple. Just enough to pay off my credit card debt (which was amazing).. Still nothing too crazy. I made some decent gains, but I know very well the difference in investing and speculating. I think it was Benjamin Graham’s book ‘The Intelligent Investor’ that taught me about that principle, however late it may have been in my life. I say so, because back in 2014 I lost a few thousand dollars in speculation of foreign exchange markets. It doesn’t sound like much until you realize it was everything I had at the time.
So needless to say, I learned another important lesson that year. Don’t speculate with money that you can’t afford to lose. Most would argue to not speculate at all. Perhaps I should define speculation vs investing as I understand it.
The easiest way for me to do so is to tell you to imagine the gold mining days of ‘49. Men excavated the earth hoping to change upon mind-blowing treasures. Or for the younger generation, I’ll compare it to Minecraft… haha just joking. Most the time it was just dumb luck that someone stumbled upon a vein of gold.
Investing on the other hand is making an educated ‘expert’ purchase based on historical data and mathematical literacy with the expectation for the value of that purchase to increase.
Back to cryptocurrencies. I won’t claim that there aren’t those out that do mathematically decide when and how much currency to invest in. You see success stories daily, recently, of people who have figured out a method that works. But the vast majority I imagine were like me. Merely speculating that if I buy I’ll earn. Hopefully they are also like me in avoiding the temptation to use money that I can’t afford to lose. By september I learned how to trade cryptocurrency without being bombarded with fees and have enjoyed each watching the roller coaster we know as bitcoin.
2018
At the beginning of this year I was able to sell my townhouse back home from which I gained a small sum of money. I shouldn’t call it a gain. More of a withdrawal from the ‘savings account’ I called my first home. Luckily most of the money I had initially deposited remained upon the sale.
I’ll be writing more about this sale in the future but it’s timing couldn’t have been better since the closing date of the old was the same day as the purchase date of last Monday’s post. Upon winning the auction we have 120 days to make payment. In the process of trying to find a way to transfer money I noticed that the dollar to euro rate was rising painfully against me. So I settled on the idea that I would buy cryptocurrency and transfer it to myself and sell it in euro because the exchange rate was the best option. The risk I held was a 15 minute window in which the price could rise or fall before I could resell the currency. It would also take some time to move all the money this way. I figured with some gains and some losses it would potentially be better than the definite loss of paying a fee to another exchange platform and I had 120 days to do it. If I had to choose a faster way however, I’d much rather use Transferwise. It’s what I usually use to move money and the fees are much lower than traditional banks.
During my transition of money I decided to use a portion of that money to do some day trading during the month of February accumulating approximately an additional $1,500 as of today. Again on the larger scale of things it’s not much. But in the area I live, there are many people who would be grateful for a job with a wage like that.
My strategy has been to buy and sell units of Ether daily and make incremental returns. There could always be the large upswing of value in which I’d regret not just leaving the money invested. But the point of speculating is that hindsight is 20/20. You can always look back and say, ‘If I had sold here and bought there I would have made $X,XXX.XX sum of money.’ But you never know exactly where that turn is going to take place. So in buying and selling in smaller price movements I guarantee smaller increases instead of accumulating failed guesses.
There has been a few times where I invested at the top and the price plunged. I admit, the first time, I was scared into selling for a loss, but the loss was insignificant. The only factor always looming in my mind is, ‘How stable is the ethereum economy.’ In one month alone I saw two big price drops. The big drop will be when cryptocurrency is officially stopped by the governments of the world. But I imagine them ultimately adopting the blockchain model as opposed to blocking it.
In fact I have an idea in how to do just that, but it is such a large scale project, It doesn’t fit into my present goals.
If nothing else, I’ve had a lot of fun feeling like a day trader. I realize there will be some tax implications I need to learn about. But I have to call this experiment in cryptocurrency a success!
