As Bitcoin goes, so go alt coins...
In February of 2017 I took the plunge and bought a crypto focussed newsletter and started my education into blockchain technology and into the companies that are creating incredible businesses. Since then, I've been working to add all of my monthly cash flow into alt coins. I want to explain how I'm doing my investing and provide some perspective I think is original.
When I started it took weeks to get my Coinbase app set up so that I could move dollars into it and buy Bitcoin (BTC) and Etherium (ETH). After a few weeks of finally being able to make my first purchases, Coinbase locked my account because my social security number was incorrect. I learned that Coinbase really has no customer service to speak of.
I waited weeks before finally opening an Abra account, because I needed a way to get Bitcoin so I could buy my positions. But you could only move $500 a day and $1,000 per week or $2,000 per month. So I opened a Gemini account which took 5 weeks to finally have security clearance. Meanwhile I opened a Kraken account as well. Gemini worked for three transactions ($500/day or $1500/month) and then no longer could do transfers from my Fidelity brokerage account.
Meanwhile, I knew we were at the very beginning of the blockchain revolution and was frustrated at how slow and difficult it was just to get BTCs so I could move them to an exchange to buy the Alt Coins. Why can't we just buy the alt coins directly with our fiat dollars? For me I only needed to get BTC because this is the currency by which the exchanges transact to buy other cypto coins. In truth, you can now buy cryptos with ETH and a few others as well, but clearly Bitcoin is the first order crypto token/coin.
A few months ago Abra offered a bank wire option. For the beta trial they allowed $15,000 per day to be deposited or withdrawn. A month later they increased the limit to $30,000. As the interest in cypto/blockchain investing hits mainstream, there should be options that increasingly make it easier to invest.
However, getting Bitcoins to buy Alt Coins is still relatively slow. If it takes 2 days to move dollars from my bank account to Fidelity, then another 2-3 days for it to clear, then another 1-2 days to get it into Abra, you can completely miss opportunities like we are having now to get coins at perhaps the last great prices before the entire market takes off. I can't directly hook my bank account to Abra, because it doesn't recognize it.
So I've been thinking. Most people seem to be investing in Bitcoins and most are talking about and worrying about its price in dollars. I want to make a statement that some may not agree with:
If you are investing in Alt Coins, it doesn't matter what price BTC is when you buy it. How can I possibly say such a thing...
Last week I sat down with our tax accountant at work for lunch and asked him how to technically handle taxes for crypto investing. He told me that every time we buy and then sell it should create a taxable event. I argued that it should be only after I sell my cryptos back to USD. He argued that if I buy BTC and then trade them for an alt coin, this is technically a taxable event. I finally got him to agree that the government is interested in tax on capital gains (gains above the price you buy something at).
If I buy $2,000 in BTC and send it to an exchange and 5 minutes later I buy an alt coin, there was actually no capital gain and I should therefore be able to ignore the transaction of buying BTC to buy alt coins. There was no capital gain, so the tax authorities should not care. So to me, it doesn't matter if BTC is at $20,000 or at $10,000. I really only care in the end what is my dollar value of the alt crypto token. In other words, if I bought $1,000 in BTC and then used the fractional BTC to buy an alt crypto position, I can just look up the dollar value of the alt crypto in coinmarketcap.com and record the number of coins purchased on my cost of $1,000. This dramatically simplifies the tracking of my positions for the day when I sell back to USD and put this money back into my bank account.
Now, there is a big reason to care about the price of Bitcoin...
As Bitcoin goes, so go the Alt coins.
Today Bitcoin is moving back toward the lows we saw a few days ago during this correction. I'm learning to have patience and not buy too early. I picked up $2000 of BTC on Friday at $8200 and it was a great price and turned around immediately and bought two $1,000 positions in alt coins. I only care about the price of BTC, because the lower it goes, the lower the alt coins go. I was able to Friday get an awesome number of coins for each of $1,000 position, so my cost per coin was 50% what they cost just a week earlier.
I want to encourage everyone to learn to embrace corrections not as times to panic, but opportunities to get positions. We will have plenty of corrections on our way to new all-time highs in the blockchain/crypto market. Save your money and have it ready for corrections. Research the coins you want (websites found on coinmarketcap.com) and pull the trigger when the markets gives us these gifts of opportunity. This asset class may be your single best chance to change your entire financial position. Please take advantage of it.
One last thought. In 2018 we will see >$5T dollars (trillion with a T) flow into this market. The institutional money is just now entering. That means hedge funds, endowments, family offices, pensions, etc. As they enter the market, we will see the entire market cap expand/explode. Today (February 4th) the market cap for all the cryptos (market cap is the number of coins x the share price) is sitting at $385B. At the beginning of January the market was above $800B. We have greater than a 50% correction. By the end of the year it will be multi trillion dollars in size. Keep this in perspective and do everything you can to study the websites of your favorite cryptos to find those that are solving big problems or disrupting existing business and have the teams behind them to succeed and that will be around in 5 years from now.
Good investing!