Life of a Small Time Cryptocurrency Investor — 2020 Review
Advice for New Investors of Cryptocurrencies
These medium posts are intended to share my experience(s) with the crypto world as a cryptocurrency & blockchain enthusiast. These posts are for anyone to learn from my mistakes and triumphs as well as providing me an outlet to talk about this space!
This is not investment advice just how the chips have fallen for me so far. The greatest knowledge I can pass on to you is, make sure that you Do Your Own Research!
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Look How Far We Have Come Already!
“Bitcoin is dead”
“It’s a Scam”
“It’s fake internet money”
Well, well, well…
Hasn’t the last twelve months been an absolute blast! Bitcoin is up 307.4% on its YTD valuation and seems to be creating new all-time highs throughout last month.
It seems the madness of cryptocurrency investing is here to stay once more. So here I am writing to this for anyone willing to read and share in our passion. There are going to be many new people entering this space once again, as soon as the old ATH was passed, the next hype cycle can be confirmed.
2017 was fueled by the ICO boom and the effects of the halvening, retail capital drove up the price, and “get rich quick” ideology was the catalyst for many people entering the market. The boom also was due to innovation with new projects and blockchains being conjured out of computer wizardry.
Then it all went pop and the market corrected with many inexperienced investors losing large chunks of their capital chasing the next big thing. The bear market and crypto winter was a tough period for an investor to endure. But time helps to cleanse the market somewhat. Allowing projects to emerge with real value attracting usage and innovation. While scams and unrealistic projects fell away.
2020… a New Paradigm?
COVID.
That’s how to sum up 2020 regardless of who you are or where you live. This global pandemic will have screwed around with your life in some way. The response, when asked about this year, will be the same, no matter what.
The world is going through a notable part of future history textbooks, and to be honest, we are not doing too well with it. This black swan event did reveal the fragility of our current financial system and set it into absolute chaos.
Through lock-downs, travel bans, and the slowing of international trade the modern global supply chains were really shaken up. It actually began to affect peoples day to day lives and highlight problems that have been bubbling under the surface for a while.
It also brought to light this fragility and ignorance people have towards finance, how fiat money is a house of cards that can not be sustained without serious invention. Printing more money, adding more numbers to the screen, allow debt to continue to pile up and bail out those companies who were ill-prepared.
This is good for bitcoin and one of its primary reasons for its creation, post the financial crash of 2008/9. To be an alternative financial system to what exists at present.
The fear of inflation by big money players and the decreasing purchasing power of cash and low yielding interest rates on bonds and treasuries. This means holding cash is a problem long-term.
Gold is still a strong contender as the best store of value, but unlike 2017, this year bitcoin was seen as a viable alternative asset. As well as legislation and financial infrastructure now existing to facilitate such transactions.
This switch in big money ethos towards cryptocurrency over this past year is why things are going so crazy and price discovery mode has begun. There is a lot of white space on the chart above, no one has any idea where it could go, but we all hope that is up. So far this is proving true, but the ceiling on this is a complete unknown.
Defi boom of 2020
Just like in 2017, Etheruem lead the way with the ICO hype, in 2020 we have seen the rise of Decentralized Finance, mainly built on Ethereum.
While Ethereum has yet to return to its ATH, the innovation and development of this new sector within cryptocurrency has absolutely exploded over this past year. Heralding a suite of projects focused on offering financial-type systems but in a decentralized manner.
Taking the ideology of being your own bank, and having control of your money. Defi now facilitates people to lend, stake, borrow and earn interest all through smart contracts negating third parties and middlemen taking a cut.
A significant improvement in the general cryptocurrency space is the rise of decentralized exchanges. During the last cycle, Binance and Coinbase were key for most people entering the space, trading could only really be done on large centralized exchanges.
With the development of Uniswap, Sushiswap, 1Inch exchange, and many more, people no longer have to rely on a big centralized entity locking them out or crashing during peaks.
Yes, there have been some problems, scams, and tokens listed on these platforms, but it is all part of the learning curve and growth of a new industry within a new set of assets.
Exciting times. Some amazing projects and ideas are emerging out of this space. Like 2017, some survived and flourished. I see in defi 2020, some projects becoming the new stable, picking which ones is the challenge!
Life of a Small Time Investor
The goal of any investor is to make a profit. This year as a small retail investor I am happy to admit that my overall portfolio is that I broke even since 2017.
I was too heavily weighed into altcoins in the first phase of my cryptocurrency journey, joining this space in late 2016 and riding it up and down ever since.
Most of my gains have been through the last two quarters with BTC and Ethereum leading the charge. These gains have offset the 60% to 80% losses on some altcoins plays I have made along the way.
No Lamborghini on the moon for me just yet!
I want to share the key things I have learned from this last year of being a cryptocurrency advocate.
- Dollar-Cost Averaging is the way forward.
Regardless of your current situation, committing to invest a set value every month, whether it 10 bucks or 10,000, is the most effective way to invest in the cryptocurrency space in my opinion.
This coupled with having longer time-frame expectations for returns,
- What is Bitcoin going to be worth next year, five years, ten?
Always invest no more than you are willing to lose, and make sure your house is in order before pumping money into any investment, cryptocurrency or otherwise.
But by buying just a set value on a set timescale (weekly, monthly, whatever) it really does snowball and culminate in a nice little stack at the end of a year.
If you think Bitcoin is going to be 100,000 someday, it shouldn’t matter to you when this is, every day it isn’t is just an opportunity for you to get a little bit of of the pie.
Though let us be crystal clear, the days of buying bitcoin for a few thousand and it becoming multi-millions is long gone, that was during the first couple of halving cycles, and alas we didn’t listen back then.
- Altcoins are high risk, high return play
At present Bitcoin has outperformed pretty much every altcoin in the top 100 coins by market cap. Not to say that there are not many projects with merit and use case in this list.
There are also many still in the top 100 coins that are dead in the water, Remnants of what they hoped to achieve, or just projects that despite good fundamentals, did not have the user base it needs to become a success.
BUT… if you want to try to find the next x1000 gaining coin, delving into altcoins with small market caps. For these smaller valued coins, old-school absurd gains are possible. Be warned this is the wild west, the gambling, shots in dark type territory, and alas I learned it isn’t for me.
However, if you are new, fortune is not on your side, and only the very few will be able to make this scenario a reality.
I have committed moving forward to only use less than 1% of my funds for altcoins with market-caps under 100 million.
Finally…
- Stay away from Margin Trading!
Simple. If you want to trade, that is totally fine. Just do not use margin trading platforms, as greed will consume you. You will borrow and gamble, cause yourself stress and grief. The fear of liquidation will eat into your day-to-day life, you will see charts when you close your eyes to go to sleep.
It just isn’t worth it.
So what’s next for 2021?
Prior to the breaking of the ATH of 20,000 many people watching the space thought we’d have to wait to this quarter for that to happen. We were wrong. History doesn’t repeat itself but it does rhyme.
I think 100,000 Bitcoin is coming sooner than we think, but no one knows. All I know for sure is to stick to whatever plan you have and keep at it. As I write this today Bitcoin has hit another ATH, so if you’ve ever bought bitcoin you are up, that cant is a bad start to 2021 no?
Happy New Year!
