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About me
I wanted to share some of my experiences from my first 3 months of trading Crypto-currency. I certainly can't proclaim to be an expert or even an intermediate. However I've been on a steep learning curve and am up on my initial investment. So i thought I'd share/dump my words of mild wisdom on the ever receptive Steemit crowd.
I started buying Bitcoins earlier in the year thinking they'd be a great alternative to the abysmal interest rates on my fiat savings. For most people putting your hard earned cash into a bank account which pays 1.0% interest is rather demoralising. It was then I bothered to read more about the fastest growing store of value in the world today. I got past the traditional media fuelled scare stories of bitcoin being the currency of the underworld. It was the first time I acknowledged the technical magnificence of the blockchain and also the tidy increase in bitcoin price.
After buying my first bitcoins my interest and curiosity soon took me into the world of "Altcoins". Before too long I was signed up onto 5 different Crypto exchanges buying all sorts of coins...most of which lost me money. I quickly learnt some major lessons in Cryptocurrency.
1. Do your homework
They say Bitcoin is a volatile currency - and it's true. However compared to most Altcoins - it's as steady as they come. Altcoins are subject to much more vicious swings in value (aka pumps and dumps) than Bitcoin. A new release or news report of a real world adoption of a product can send its coin through the roof. Likewise the slightest bit of negativity (or sometimes no news at all) will send its value crashing.
I can’t emphasise enough the point about trying to understand what you’re buying in to. Google, Bitcointalk, Twitter, Poloniex Troll Box* can all be good sources of information. Understand the product, understand what it does and what problem it solves. If it still makes sense it might be worth your money. Otherwise leave it alone – as you’ll just be outright gambling. No better than throwing your cash on the horse with a nice name running in the 3.15.
All my biggest losses have come from jumping on a bandwagon of a coin that has risen in value suddenly. Nearly every time you get in too late and you’re left holding a big expensive bag of nothing. You’ll quickly read that there are some relatively stable altcoins which tend to hold their value and don’t pump/dump as much as others. They tend to be the coins that have actual real world purposes (or be a by-product of such) and also have a future.
*NOTE: Polo Troll Box information should be treated with a handful of salt. There’s as much garbage as there is genuine good info. However listen to the right people and don’t fall for every “to the moon” or “is dead” comment and you can pick up some great advice.
2. Variety is the spice of Life
There are really only a few coins that are worth holding long term – Bitcoin being one. That said unless you plan to buy some coins and lock them away for years you’re going to try and trade them. Your portfolio should contain a number of different coins to diversify your collection and reduce risk. The ongoing drama around the DAO and ETH was a lesson to a lot of people of how endless possibility/speculation/greed (and a $120M fund) can be destroyed in a few hours. Some people will have lost a small fortune had they hedged their bets on just those coins during that time. Bitcoins are great for keeping long term, although not adverse to their own ups and downs. Others such as Factom, Counterparty, and Steemit to name a few have very exciting futures. When you buy a coin have a plan for when you want to sell. Rarely do impulse trades work. Spread the investment across a few strong coins and you’re more protected against unexpected dumps.
3. F.O.M.O.
Fear Of Missing Out - This is an emotion I battle every day. It is the cause of most bad decisions. Feeling like a boat is about to set sail and you have to be on it, to make some “easy” money. It hardly ever works out. Normally if a coin is already 200% more expensive in 24 hours – the boat has long left. Do yourself a favour and wait for the next opportunity. I’m small time but have lost £100s if not £1000s already - jumping on the back of a pump which soon collapses. It goes back to points 1 and 2 above. Do your research and understand what you’re buying in to. Don’t buy some crappy coin because you think it’s a sure thing – it usually isn’t (at least in my experience). F.O.M.O never really leaves you – you just learn to understand when to control yourself.
4. Don't believe the Hype/FUD
There are a great many resources for reading and discovering news about all the coins in the Crypto universe. I mentioned previously some sources but there’s lots of Crypto dedicated news outlets (such as Coindesk amongst many others). A lot of this is good information. But there is also a lot of hype about on the internet. Other traders looking to dump their expensive bag of nothing on somebody else. Or just criticising a coin as being “dead” trying to induce a bout of panic selling so that they can pick up some more coins on the cheap. The internet is full of these people and they’re often successful. Read lots but challenge everything you read. Never take advice or opinion as gospel. Advice is usually worth exactly what you pay for it. Ask yourself who is telling you this information and what their angle is. It’s pretty obvious but in the excitement of it all it’s easy to forget the simple things. I admit I’ve fallen foul a few times of selling something I though was going to crash based on the rantings of a few seemingly knowledgeable traders. I regretted those particular trades even today. B*stards.
5. When to walkaway
The old adage about sometimes the right trade is no trade is absolutely true. Sometimes the market is stagnant. Sometimes the “best coins” are all down and the scam coins are up. If you have the feeling that there isn’t much to trade with then walk away. Things change so fast in the Crypto world. Tomorrow is another universe of possibility. Buying a coin for the sake of it will often end in tears. Of course a vocal minority who instigated a pump on a coin will implore you to get involved. Plus there’s some “experts” who claim there’s always profit to be made. Occasionally things will work out but quite often it won’t. Don’t be emotional, nobody makes any money trading by making irrational decisions. I’ve learnt this lesson by losing money on trades I didn’t really plan to make. Most other traders will do the same too.
That just about wraps it up. The big thing to takeaway I guess is to review your behaviour. Challenge your decisions and ask yourself ‘if this is the right thing to do’. When you suffer a loss and you will suffer more than a few, think about why it happened. What did you do, or not do. Then remember not to make the same mistake again.
I’ll provide another update in the next month or so (if there’s any interest in this) talking about how things have progressed and developed. Assuming I’m not bankrupt by then. Thanks for reading…