Hi Steemit,
I started investing in crypto assets in August 2017. Since then, I gradually expanded my portfolio and became good friends with insomnia. I invest hard earned money in projects I do not fully understand and which I suspect are much overvalued already. I either mourn theoretical losses when markets go down or freak out about missed opportunities when they go up. I check coinmarketcap way too often. I never read white papers. I tend to buy into coins because youtubers recommend them and people on the project website look like decent nerds. I get on everybody's nerves talking about crypto and half of my friends and family probably have an "I told you so" speech prepared for the moment the bubble finally bursts.
Still, in a weird sense, I am having a blast. Stress at work does not get to me as it used to - I can always escape to a fantasy land where cryptos have ensured my financial independence and where the job is only a hobby. I feel like I am part of an avantgarde, a pioneer in an exciting world of can-do. I believe in the technology and I learn about it every day. My portfolio grows steadily. And recently I started toying around with ICO ideas with friends and started reading up on taxation and regulation in the crypto space.
So, what does this make me? I guess, in a way, I am the bubble personified. Irrational exuberance in action. On the other hand, cases like myself might be a symptom of healthy mass adoption. In any case, let me share my experiences - I hope they will be helpful to other newbies and interesting to veterans, who might wonder how this crazy scene looks like to an outsider. For there are a lot of people like me in the crypto space these days and many more to follow, like it or not..
Phase I. From Ignorance to Interest
The first time I encountered a crypto currency was in 2013, when a bar I used to frequent started accepting Bitcoin as a means of payment. There was a small sign on the counter saying "Bitcoin Welcome" and I remember how my buddy and me laughed it off as nerdy eccentrics and never bothered too much. Yeah..
Over the following years, Bitcoin randomly popped up in the news, usually when it had passed some value threshold previously considered unattainable. Each piece of news was accompanied by gloomy predictions that the bubble was about to burst, Dutch tulips and all. I did not have any funds to waste, found the technology behind it way too complex and thus did not bother too much.
This only changed when in early 2017 Bitcoin went completely through the roof and my greed finally got the better of my laziness. I started doing some basic research and found, to my surprise, that this was not a Ponzi scheme but a whole new way to approach financial transactions. And it could make you rich, too. Intrigued, I vowed to get me some Bitcoin. But about the same time my son was born, my job was demanding and I found the concept of exchanges, wallets and lots of other stuff highly confusing. So I decided to postpone my entry to the brave new world until I had some time to get my head around the basics. That time came when the generous German social system allowed me to take three months of parental leave starting in August 2017. While the days were spent changing diapers and living the family live, evenings allowed for some crypto research and, soon, crypto investment.
Phase II. Getting Up to Speed
Googling "bitcoin investment" I quickly ended up reading lots of articles, blog posts and forum threads about the crypto world. My major takeaways were:
- Bitcoin is just one of many crypto assets - there is a huge space of technologies & applications, most of them blockchain based.
- The blockchain is, primarily, about transparent decentralization of transaction processing. The idea is that you do not need a middle man (e.g., a bank) to ensure that a transaction between users A and B is conducted correctly. Rather, the community ensures this and it does so in a transparent manner. There are a lots of ways to approach this technically and there are many more competent people to describe how exactly it works.
- Blockchain technology, disruptive as it might be, is not without its flaws (transaction costs, energy consumption, the role of miners, scalability..). There are projects trying to come up with completely new technical approaches, most notably the "tangle" developed by the IOTA team.
- Not all cryptos are "currencies" - financial transactions are just one group of use cases. The range of potential areas of use is limitless in theory but still pretty limited in practice. The term crypto assets is great to describe this vast space.
- There are people who claim that blockchain / crypto applications will eventually replace the internet as we know it, grabbing power from facebook & google and handing it to the people. Others say that these are pipe dreams. The truth is probably somewhere in the middle: On the one hand, there is a real need for change and a disruptive technology to enable it, on the other hand people value convenience and governments may not feel inclined to promote decentralized applications eluding their control.
- A central concept are ICOs - Initial Coin Offerings. Just like a regular company going public, developers of crypto assets turn to the market to attract investment. To that end, they issue coins or tokens, which rise in value when the use of the application grows but which do not give you any kind of leverage or voting rights as an investor. The earlier you invest, the cheaper the coins and the greater the risk that you are duped.
- Never - as in "never" - should you invest any money in cryptos that you cannot afford to lose.
Having gained a basic understanding of exchanges and wallets, I was ready to go. And genuinely excited about a technology that might change the world for the better, not least by taking any financial woes off a well-deserving individual like myself.
Phase III. First Investments
I managed to register at the German exchange bitcoin.de and bought my first bitcoin for a couple of hundred Euros. The course at the time was about 4000$. I also registered at bitfinex to buy IOTA, as it was one of the few projects that immediately made sense to me. Rate was about 80 cents. Iota wallets seemed terribly complicated, so I left the IOTA tokens Bitfinex. What could possibly go wrong, right?
Psyched as I was about all this, I felt obliged to tell every person around me about crypto. Reactions were mostly skeptical and then markets went south shortly after I had entered because of bad news from China. Not only did I fear that I was about to lose all of the money I invested, I also loathed the idea that all the crypto haters would be proven right. And me proven a fool. I then went on a 6 week trip with my family and vowed to erase cryptos from my mind for that period. At least I tried, still wasting some beach time with dark thoughts of the crypto apocalypse, but holding on to my coins.
When I checked the markets for the first time again in late October I was really nervous - and then, seeing Bitcoin somewhere around 7000 Dollars, nothing but relief! Maybe this was not a pipe dream after all..
To be continued - I will post part II shortly :-)