Hello all,
The following is a brief history of my crypto-currency experience thus far and some lessons learned. I hope it is helpful.
I watched the price of bitcoin in the 500-800 price range for a while a few years back. Then I got seriously ill, had back surgery and a myriad of other health problems. Fast forward to July 2017 and I decided to give bitcoin and other crypto-currencies another look. I was shocked at the prices. Seeing the rise of bitcoin, ethereum and other alt coins I decided to start investing. Early through July and some of August I was amazed at how well my investments did. It seemed like the sky was the limit and every purchase was a genius purchase.
I then started selling coins whenever there was a dip in the price. This bit me bad when AntShares (now NEO) spiked from 5 USD to around 40 USD (I sold at 6 USD a few days before the spike). My first real panic sell was at around 4000 USD for bitcoin when bitcoin cash had it's first initial spike. I re-bought in at 4370 and watched bitcoin hit 5000, and plummet. I panic sold again at 4250. Through the next few weeks I attempted to day trade bitcoin, only to lose money due to second guessing myself and anxiety / panic sells and ill-advised buying at peak prices, along with exchange fees that quite frankly are way too high. Give me e-trade 5 USD per trade dammit! But I digress.
I finally realized I was going to lose all my money if I didn't just get out all together or buy and hold. My last panic sell was at around 3800 USD. I re-bought in with bitcoin at 3000 and 3200, and the rest of my remaining cash at around 3600. I've made peace with that and I'm fine with my investments going to 0 or to a million. I'll check back in a few years and see how they are doing.
Lessons Learned:
1] What goes up MUST come down. Crypto-currency is no exception. If you buy at peaks or all time high prices, you must be prepared for a drop.
2] What goes down USUALLY comes up, for coins that are good long term investments. Buying when the price is tanking is usually a good idea. If you look at the bitcoin price history, many price drops are followed by equal or higher price gains. This is riskier for coins that aren't proven, as the price drop may be the slow or fast death of the coin.
3] Many people and groups are manipulating the price through news / social media. Some people claim bitcoin will be worth a million USD per coin. Others say that collapse is around the corner. My advice: Learn about the technical aspects of the coin and make your own decisions and stick with them. Don't buy or sell because of what others are saying or doing.
4] Day trading - if you are disciplined and like the thrill this can work out and make you good money, without the risk of the coin plummeting to 0 and you losing everything. You MUST be disciplined and have a good analysis of trends, math and other indicators for the price. If you have automated trading software that is even better. For someone like me I realized this was a bad thing because of my anxiety, but for others it may be a good fit. Don't buy or sell too often as exchange fees will eat you alive.
5] If you aren't day trading, DON'T WATCH THE PRICE! This will just increase your anxiety and increase the risk of panic selling. If you want to benefits from price drops, put some limit orders on an exchange for where you think the price might tank to. If you've bought for the long term, hold it for a minimum of one year (you get the bonus of capital gains taxes, at least in the U.S.). Come back annually and look at the price. Decide when you'd like to "retire" and sell your coins only at that point, regardless of the price.
6] Invest in the big coins and a few smaller promising coins. It's hard to predict the future but I'd say bitcoin and ethereum are here to stay. I prefer coins that are more decentralized, which means dash and others of the like are out. Not saying the tech isn't great and the leadership solid, they just don't fit my fully decentralized vision of currency. But you must make your own choices.
7] This is mentioned a lot but worth repeating. Don't invest any more cash than you are willing to lose in it's entirety. I went a little high with my investments which was a mistake in hind sight. I'll be fine if I lose every bit of it, but it will still hurt a lot.
8] Until the last week or so I looked at my health problems as a real missed opportunity. If only I had started investing in crypto in 2016 or 2015! I'd be a millionaire! Wrong. I would have made the same mistakes that I made recently and may have stopped investing entirely, only to watch the price sky rocket and feel miserable.
9] If you are going to invest long term, it probably makes sense to take a chunk (75% maybe?) of your cash and invest the market over time. That way you smooth out the price and don't end up buying everything at a peak price. Keep the other part of your cash to buy when the price drops a lot.
10] Many people say you should keep your coins in an encrypted wallet or hardware device. This is solid advice, however most exchanges keep a good portion of coins in cold storage, so a hack the magnitude of Mt. Gox is less likely. If you keep your coins on an exchange, make sure you really trust the exchange and you absolutely must whitelist your ip address or wallet address for withdrawal, and for the love of god please turn on two factor authentication with Authy, Google Authenticator or another non SMS authentication. Text messages and phone numbers are easily hacked.
I'm bullish on bitcoin and crypto in general, especially with the recent ETF announcements. There's a lot of worry with China bans and Segwit2x, but I think it will work out OK. With all those worries, the truth is that if all of the USA and Canada can use regular old E-Trade to buy and sell bitcoin, it should be a fun ride, especially if other countries follow the ETF patern. I can only imagine the price if people are stuffing this into their IRA and 401K packages, removing more and more coins from circulation.
Thanks for reading, and please avoid making my mistakes. Good luck in your investments and trading!