The ‘set-and-forgetter’

I contacted a friend of mine today. In November last year I had advised him to invest in STEEM just before Hardfork 16.

With the reduction in inflation and relatively cheap price, STEEM seemed ripe for someone to invest. I told him a bit about the currency and he decided to invest a modest amount. He bought around 2350 STEEM for £250. He is not much of a blogger, so I set it up so that he followed my curation trail and earn more rewards.

He then did what I suggest a lot of people should do when it comes to crypto....

He got in then forgot about his investment.

Fast forward to today and he has almost 3000 STEEM worth around £2500.

I felt obliged to text him the good news.

“Now THAT’s what I’m talking about!” He replied.

To him, he had simply put some money in a speculative venture to find it had grown 1000% in 6 months. A fantastic return. He had no idea what had occurred in the interim.

The ‘micro-analyst’

Around the same time I told my friend about STEEM, I told my work colleague. Coincidently he also invested £250.

Being a colleague I see him pretty much every day. Once a week, we exchange tales of the joys and woes of investing. He’d tell me about his pension fund investing and I tell him about my speculation with Cryptocurrency. He’d get angst about single digit percentage falls over a period of months. I’d brush off triple digit daily swings.

My colleague was across the bear period of STEEM. The hardfork came and contrary to my prediction, the price went down. It kept going down. I couldn’t make him any promises of when it might up. He asked what I was doing. I was buying more STEEM. I could tell he thought I was crazy.

Then STEEM began to turn. Unfortunately for him, it turned just at a time when he needed some cash for to repair his roof. He asked how much his STEEM was worth. It had gone up to £300. But relative to Bitcoin, the STEEM price was pretty low.

“Great.” He said. He decided to cash out his STEEM, despite me expressing my reservations. However for him, a person used to 8-12% gains pa from Investment funds, a 20% return from shaky STEEM investment looked good.

He needed the cash asap so I bought his account for £300. Needless to say, I don’t mention how much his STEEM could have been worth now!

Opportunity knocks

So back to my friend, who is now sitting on £2500 worth of STEEM. After digesting the news, he text me back with the question I was dreading,

Should I invest more?

I know why he asked. Instead of £250, I’m sure he could have easily have put in £5000 back in November. He was just dipping his toe in with £250. Had he put in £5k, his account would now be worth £50k. No small beer after being 6 month invested.

He also saw that, despite the parabolic rise in cryptocurrencies over the last couple of months, I’m only cashing out a fraction of my STEEM portfolio. Maybe I’m onto something he should be in on? My friend isn’t the type to shirk in the face of an opportunity.

If he had probed deeper, he’d find out that I’d only cashed out some STEEM as a hedge against a correction. If STEEM were to fall again, I’d have cash to reinvest when it finds it new bottom.

Unsustainable bubble

I was honest in my text reply. I showed him the coin marketcap chart:

It’s a graphic illustration that we are in an unsustainable bubble. Yet what do I know… the market is still going up! Who is to say the crypto marketcap won’t balloon from $80bn to $150bn before ‘correcting’ to $100bn for a period of time then going again?

Looking specifically at the STEEM chart it could go either way:

It’s tempting to look at the July 2016 bubble and think STEEM could explode again, only this time without the crazy inflation to hold it back. Alternatively it could burst when the crypto bubble pops. Or it could dip a little and go sideways for a long time… who the fuck knows!

He’s tempted to ‘jump on board’ the crypto train, even if only to ‘disembark’ in a few weeks. We agreed to speak later.

I'm not sure what I’m going to say when he calls later.

The only advice I can give him, is that if he is going to buy STEEM (or any crypto) be prepared to let his money marinate for the long haul and also be prepared to lose it all. From my time in crypto, coins can go sideways (or down) for months (even a couple of years) before going parabolic in a matter of days. If he is going to invest in crypto at this moment, he should only invest in coins he personally believes in and even then look to price average his way in.

The non-naïve Believer

I believe in STEEM which is why I was buying all the way down to 6 cents. Even at 6 cents, people were posting, people were passionate, some believing in the currency… some despondent... but they cared enough to participate and engage with the blockchain. There are currencies with multi-million (and billion) marketcaps and nothing but tumbleweed in their forum and relatively few transactions in their blocks.

However despite my belief in STEEM, I’m not naïve about the crypto market. This is why I’m spreading risk and cashing out some crypto into fiat as it appears to overheat. If I’m wrong (like I’ve been on many occasions), I’ll cash out a bit more when it goes up more. If it corrects, I’ll be there to pick up some more crypto on the cheap. This approach works for me.

I think I’ll tell my friend, if nothing else have a strategy for buying, selling and holding. I don’t know whether STEEM is going up to $2 billion within two month or down $20 million. However having a clear idea of what you’ll do in either scenario will stand you in good stead!

Thanks for reading!

Disclaimer: none of this should be taken to be trading or investment advice... just random musings from a complete stranger online!