Instead of funding my Roth IRA and buying dividend stocks with the money, this year I decided to dip my toes into Cryptocurrencies. We've all heard of Bitcoin, but did you know that there are almost 900 Cryptocurrency coins out there? There are new coins launching Initial Coin Offerings every few days. In 2017, over 300 new coins have entered the marketplace. Most of these new ICOs are powered by the Etherium platform, which has led to a big spike in Ether coin value.
With the recent rise of Bitcoin and Etherium, the press has pounced all over this space. Many reports are speculating that Cryptocurrency bubble is right around the corner, while others say it's just the beginning. I tend to agree that the value of Bitcoin, Etherium, and a handful of other coins is just starting to heat up. I see this space as a long-term hold, where we are just entering the second phase of many.
I've gone back and forth about investing in this space and I can honestly say that I should've listened to my gut. I almost bought $5,000 in Bitcoin at $225 and $10,000 in Etherium at $22. I didn't or you would've read a blog post about the massive earnings I've made. How much? A lot of money! $5k in Bitcoin would've given me 22.22 coins. The value of those coins as of this writing would be $60,582. $10k in Etherium would have given me $90,000 dollars.
With gains like this it's easy to understand why many believe investors have missed the boat on these investments. I seriously doubt it. In fact, I foresee both coins going way up by 10x to 50x from their current price.
What the Heck is Cryptocurrency?
A Cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. These currencies run on blockchains. Blockchain technology has been hailed by many as a major disruptor to the way things are done today, because they are cheaper, faster, and more secure than traditional processing methods.
Here's a good introductory article about Cryptocurrencies and descriptions of the most popular coins.
What the Heck is a Blockchain?
In my opinion blockchain technology is the future of computing. Blockchains will create and increase the value of cryptocurrencies. The most efficient blockchains with real value add will win. Choosing the winner, well that's the trick. I mentioned that there are tons of coins out there, but only a few platforms. Bitcoin, Etherium, and Ripple are the three big platforms out there. All other coins, termed Altcoins are blockchains and coins built from one of these three platforms.
For non-engineers this can be a tough concept to follow, but there are some good posts out there that explain platforms, blockchains, coins, and the potential gold mine waiting for those who invest in them. The article that I think best describes how it all works and why it's going to be big in the future was written by Cameron McLain, titled "A Brief History of Blockchain: An Investors Perspective."
Cameron's post was the first I read that dumbed the concept down enough for me to feel comfortable taking a chance in this space. He opened my eyes to the thousands of possibilities for blockchains. These possibilities lead me to believe that some Altcoins will be very valuable in the future.
The Cryptocurrencies I Bought and Why?
Sorry folks, I didn't buy Bitcoin. I wanted to, but my investment would have yielded 2 coins. I decided to start with the #2 coin out there, Etherium. In June, I bought 20 Etherium (ETH) coins at a price of $150.27 each, totaling $3,005 dollars. A few days later, I had a Litecoin (LTC) limit order go through at $27. I bought 55.55 LTC coins totaling $1,500.
My total investment in Cryptocurrencies at that point was $4,505. Things got crazy from there. Etherium went on a wild ride up to $400 a coin, and Litecoin nearly doubled in price, up to $52 dollars. I almost sold everything and called it a day, essentially doubling my investment in two-weeks. But I choose to hold most of the coins.
I did sell half of my Litecoin at $47.52, for profit of $508. I also sold 5 Etherium coins at $364, for a profit of $1,075. I took the $1,583 of profit and bought some lesser know Altcoins. I now own 7 different Altcoins. My total coin count is 38,805 coins.
The chart below is my Cryptocurrency portfolio. These currencies trade 24-hours a day and volatility is high. It's common to see profit/loss changes in the thousands of dollars over a 24-hour period. As of today, I've lost $390.08. I expect this to dip further in the short-term, because most coins have recently spiked in price and many investors are selling coins and capturing revenue.
Back to the profits. I took my profits plus another $1,000 and bought the following coins:
Ripple (XRP) - 5,000 coins at $1275
Iconomi (ICN) - $110 coins at $225
Stellar Lumens (XLM) - 7,500 coins at $283
Etherium (ETH) - 5 more coins at $183
SAI Coin (SC) - 25,000 coins at $469
Golem (GNT) - 1,150 coins at $734
Total investment is $6,972.78 at a current market value of $6,627.55
Cryptocurrency Takeaways
This is the first of many posts I plan on writing about Cryptocurrencies. In future posts, I'll highlight each coin and explain why I chose these coins over the 900+ available options. There are a few more coins I'm watching and interested in buying and there are new coins coming out every few days. Because of this, I may choose to switch my portfolio, but unless some major correction happens I'm not planning on buying any new coins just yet.
Speaking of major changes, tomorrow, July 31st is a huge day in the Cryptocurrency world. Bitcoin is doing a hard fork that will create Bitcoin cash and this could send waves through the market. If you've thought about buying, tomorrow could be your day. Many investors have sold Altcoins and stocked up on Bitcoin. If this continues tomorrow many coins will be on sale. Having said that, the selloff has been going on for several weeks, so many Altcoins are already depressed. There are deals out there now.
If you're interested in buying Cryptocurrencies, you'll need a broker. Coinbase is a very safe U.S. based broker, backed by big names in banking. Coinbase sells Bitcoin, Etherium, and Litecoin. Coinbase is having a promotion. If you sign-up using this link, and invest $100 dollars, we both get $10 in Bitcoin.
What do you think about Cryptocurrency? Do you think it's the future or a scam? Are you invested in Cryptocurrencies now? Please share your thoughts.