Introduction and my first cryptocurrency experiences
As this is my first post, a brief introduction is in order in terms of my history and involvement with cryptocurrencies. By profession I am a software developer with relative success I would say, and definitely a bit of a techno-nerd.
I had noticed this "bitcoin thing" from an early enough date but decided to do nothing about it regrettably. I first took note of cryptocurrency in a serious manner during 2014, when a good friend of mine convinced me of its merits. It was that "ah-hah" moment where I realised what decentralized currencies could mean to the future of the world at large. So, my first forays into the world of cryptocurrency was in mining litecoin and other scrypt algorithm based currencies. It was worth it, I managed to pay off a relatively medium to high-end gaming GPU at the time (9280x) in a short frame of time. After that, mining difficulty started to get to a point where it was only slightly profitable - so I stopped. I held on to the bitcoin I made during that time, I kept nothing in altcoins back then.
I resumed my interest in cryptocurrencies during late-2015 when I first read about ethereum. This idea of decentralised server-less applications really did blow my mind, and I could see the potential for the technology, but never would I have imagined it would get as big as it is today. So beyond reading about ethereum I did nothing much about this interest and still held on to my bitcoin. Come mid-2016 I started taking note of some pretty phenomenal ethereum and other altcoin growth and decided to re-enter the game. This time in a far more serious manner. I traded on poloniex, I mined ether and I was well back into the game. Mining was moderately profitable then, but after around 3 months of mining electricity cost started to really cut in to the profitability. Although considering what has subsequently happened to ethereum, I should have never ever stopped mining ether.
Experiments in trading and why I believe in buy and hold...
When it came to trading though, my successes were outweighed by my failures. I tried all manner of trading strategies, from EMA, Bollinger bands, MACD ... none of them really worked all that well mostly because no model can ever reliably predict the future. Which is not to say it can't work. Fundamentally, I do believe trading can work IF you are in a position to devote most of your day to watching price movements, but I am not one of those people. So, which brought me to the realisation that there is only one thing that will work for someone like me. And that is investing with a buy and hold strategy, and when I do trade it will be in extremely rare cases involving a shift in my long term strategy.
This is also a good time for a disclaimer. Anything I do say is not with the intent of providing any form of financial advice. I will simply be blogging about my own experiences and opinions on various currencies, and if you do choose to follow whatever I may doing that is your decision. I am mostly doing this to document my experiences and it forces me to plan properly and organise my own trading strategy, and for this to be an evolving experience. And obviously I would appreciate any criticism and insights from whomever is reading this. If you have never invested in cryptocurrency, realise that this is a volatile but potentially highly lucrative space and make your peace with that and accept it before doing anything.
My long term strategy...
Anyway, the realisation that dawned upon me is cryptocurrency as a whole is snowballing. The tide is rising at a rapid rate and all boats are being pulled up. And because this is a volatile space investing in just one coin is dumb. What I am certain of is cryptocurrency will not be getting any smaller, and in fact is still in its early stages. A decentralised economic model just makes so much sense that I struggle to see how it can be stopped. Governments may try at some point and probably can slow it down, but you cannot stop something that exists everywhere on earth and with such momentum and intellectual power behind it. So, it seems reasonable to expect the growth to be nowhere near to being done. Compared to active trading strategies, where you are dealing with rapid fluctuations on a daily basis, and as tempting as it may be to try and flip a currency for exponential growth, it is also very risky. When you think of the near certainty of a rising value of cryptocurrency as a whole over time it just doesn't make sense to do anything but buy and hold.
So essentially, my strategy from now on will be one with very much a long term outlook and one based on cryptocurrency as a collective. That is not to say I will be randomly investing in coin, I do need to place my investments in coins that have a higher chance at having a good long term future.
My strategy (for now) will be this :
- Invest 50-60% of all my holdings in safe haven currencies that are likely to grow further but not necessarily at the rate that newer currencies can do - right now that means ethereum and bitcoin.
- The remaining 50/40% will go towards other currencies that are smaller right now but with potential. Each month I will assess this and decide where I want to be investing. In my next post I will be focusing on these, looking ahead to the month of June. How I will rate a currency will be as follows :
i) Does this currency offer anything that sets itself apart from its competitors ... ie: it isn't just another bitcoin clone and is doing something that can be of value.
ii) Sentiment analysis of the community - I will be using sources such as reddit for this. Here I look at things like, is the community actively discussing what can be done with the platform or are they discussing price speculation. Price speculation is usually no good to me and tells me the platform is less likely to have long term viability. Seeing a community that is excited about the technology is what I want to be seeing here. Also, the general positivity and vibe around the community and the coin in question.
iii) Evaluate the development team, how active is the development team in terms of moving a platform forward. Is the development team backing it technically strong ? Do they have direction ? Are they transparent ? I cannot always directly evaluate this; but by studying development updates and in cases where I can access open source repositories to check the commit activity I can make as accurate a judgement call as someone in my position could hope for.
iv) Marketing team, the greatest development team in the world can do nothing if their currency isn't being correctly marketed.
v) Price analysis. Typically for longer term investments the aim is always to try and buy as at low a position as possible. So if a currency is currently going to the moon so to speak I will be very careful and probably not invest in it then. For this part I will give myself targets for price entry points.
vi) Release schedule and events timing. Prices typically go up with major development releases and conferences that have a likelihood of news announcements (and seriously, who would announce bad news during these events). So for each coin I will examine the release schedules and events. This will influence timing around investments.
More to come shortly...