I’m what a lot of seasoned crypto investors would call a noob. I made my first crypto purchase in September 2017 and started doing dollar cost averaging (DCA). My plan was to choose 5-10 good projects and continue to DCA through the end of 2017. I followed my plan and all was well.
The second part of my plan was to find a top 5 coin I truly believed in and use this as my store of value. I would transfer a significant portion of my portfolio to that coin in the first part of 2018. I knew the gains wouldn’t be as great as some of the other newer blockchain 3.0 alt coins, but I figured this coin should at least hold its value and make some profits while I continue my research on how to diversify within the crypto space.
In comes January and I put phase 2 of my plan into action. I sold positions in my traditional stock market portfolio to help build my crypto portfolio. I waited until 2018 because I didn’t want to pay the capital gains tax for 2017. I knew 2018 would bring more clarity on how US investors in the crypto space would be taxed and I wanted to use the whole year to create my tax strategy. This seemed like a good idea since we knew at the end of 2017 it was clear that trading between cryptos would be subject to taxation in 2018.
My top two store of value coins I considered were bitcoin and ether. I choose to go with ether because it was faster and cheaper to transfer, strong dev community (which seemed to me more aligned on goals compared to bitcoin devs), the ethereum protocol was more functional and scaling the protocol seemed like a top priority. Most of all the bitcoin futures market scared the hell out of me. When people talked about an opportunity for institutional money I felt like it was an instrument for pure market manipulation and I wanted to stay away from this at least for now. What I didn't realize was how much bitcoin itself influences the entire market.
Phase 2 was rolled out, ether was my store of value and all was good until we had a family emergency occur. So I decided to step away from crypto for a short while and focus on family. My entrance back into crypto was met with a sea of red. A Jason, Freddy and Michael Myers massacre blood bath. I knew crypto was volatile but it felt like my soul left my body. Not wanting to panic I told myself not to make any decisions on that day, but rather analyze the situation and take the best course of action. I decided I would HODL and as the days continued the blood ran greater in the streets.
I went from a 24% loss to over a 50% loss. Emotionally I forced myself to detach, look at the bigger picture and form a strategy. It’s not a loss or a gain until you sell. So I’ve decided to sell. OMG sell and take such a big loss. Here goes another weak hand. YES I’m going to sell and here is why. When life gives you lemons make some delicious lemonade. By selling I will lock in my loses which I will use to offset the capital gains I made from selling my traditional stocks at the beginning of the year. Plus deduct up to $3,000 in loses and transfer any additional loses beyond $3,000 to the subsequent years if they’re any there. I then plan to buy back once I feel I have a buy signal. Even if that means buying back right away. I’m not leaving crypto, but strategically I think I have an opportunity, if you can call it that, to save some money in 2019 so I will take it.
I believe in the concept of blockchain technology and its future. 2018 I believe is the year when innovation in this space will explode and the conspiracy theorist in me feels this was a well coordinated attack to drive the price lower for better price entry for certain individuals or entities.
All in all this has been a great year for me. Although I’ve lost significant money, what I’ve gained in knowledge is much more valuable. I’ve gained better insight into this crypto space and how it works. Failure is the ultimate mentor for success. I keep a diary of lessons learned and investing principles specifically for crypto now, which I believe will continue to serve me in 2018 and beyond. Even if it takes the whole year I believe ether will reach its all time 2018 highs again.
Here is what I’ve learned and my plans moving forward. 1.) I will revert to dollar cost averaging as my main strategic play 2.) If I make any bulk purchases again every entry point will have a corresponding loss exit point placed at the time of purchase to minimize my tolerable loss 3.) The only store of value I will personally recognize for now is USD; by keeping lots of cash on hand you have better buying opportunities in times like this. My main failure was assuming ether would hold its value relatively well compared to the other alts. So if ETH was down 10% and another coins were down 40% there would be a good buying opportunity, but when all are falling at the same rate the opportunity is very slim. 4.) The market is tied to bitcoin. This was my second mistake assuming that alts could stand outside of bitcoins influence. I’ve realized alts rise and fall when bitcoin does. Even the top 10 coins are subject to this so always analyze how bitcoin is trending and take this into consideration. I haven’t seen this market evolve into sectors yet; the only sector is bitcoin, at least this is how I see it.
I have not been this excited about something in awhile as I am with decentralized ledger technology. This technology will change the world and I’m in for the long term. Remember money can be made and lost. Don’t lose yourself when investing in such a volatile market. I felt myself doing this so I’ve tweaked my plan, recorded my lessons and will continue to evolve with this space.