So, there have been many changes since the last post. I am now using a different exchange, Binance. There are several reasons I made the switch, but at it’s core it works better for me. The fees are low enough that the strategy I am working on has a chance. The app is great, and they provide a lot of data. Seriously, if you are getting into crypto, give Binance a look. CLICK HERE
Before I get into the weeds of the matter, let me get out the disclaimer. I am not a certified financial planner, and what I am sharing is nothing but my own experience. Bitcoin has proven tremendously profitable for many, it has also lost many a lot of money. I am working to minimize the risk, but no investment strategy is foolproof, least of all one which is based on something as ephemeral as Bitcoin.
I think why many are skeptical of cryptocurrencies is that all we hear are the extreme examples. Type in “if you had invested 100 in Bitcoin” into your favorite search engine, and be prepared to feel like you missed out on something huge. The first hit on Bing takes me to an article showing that the $100 investment in 2011 would now be worth over $1,000,000. Type Bitcoin into YouTube and be prepared for a slew of videos explaining arcane geometry and signs indicating that you must buy Bitcoin NOW!
On the other hand, Warren Buffet, the Oracle of Omaha, lauded as the greatest investor of our time, has some pretty harsh words for bitcoin. “”Stay away from it. It’s a mirage, basically…The idea that it has some huge intrinsic value is a joke in my view.” Charlie Munger has been even more colorful – “”And I think the people who are professional traders that go into trading cryptocurrencies, it’s just disgusting,…It’s like somebody else is trading turds and you decide, ‘I can’t be left out.'”
So what is the truth? Have we missed out on some huge opportunity? Yes, of course, unless you got in early. Boy do I wish I had a time machine to go back to 2011. But what about today – is it all risk, a soon to pop bubble? Or is there an opportunity? I believe there is.
If you follow the latest developments on Bitcoin you will read of a recent event called the ‘Halving’, or to some, ‘Halfing’. Without getting into the arcane depths of crypto currency, what this means is that the supply of new Bitcoins is going to slow down. So those mining operations you may have heard about with rooms full of computers are going to get less profitable. What will this mean for the price? (BTW – a great video about some guys exploring an abandoned town in Canada, which is home to a Bitcoin mining operation is HERE) Some are sure the value is going to skyrocket, others are equally sure that it will plummet. Others think the value will eventually go up significantly, but not right away. Nothing too major happened right after the Halving, but many are convinced a big shift is coming.
Some things to know about Bitcoin investing. You don’t have to buy whole Bitcoins. This is good, because they are priced at thousands of dollars right now. You can buy a tiny fraction of a Bitcoin. It isn’t the only crypocurrency – there are many others. They are traded like stocks – there are even exchanges. Trades can be relatively cheap, at least on a percentage basis. And Bitcoin is quite volatile.
My approach is still a work in progress. This past week I have been experimenting with a strategy, that minimizes risk, but still provides a reward. I think it is doable. It isn’t easy, or passive, and it won’t be quick. It doesn’t have anything to do with the “halving” or any other long term strategy. I cannot predict the future, and I have no idea what Bitcoin will be worth tomorrow, much less months from now. I think most of the strategies out there based on the shape of the price curve are pure nonsense and based on the logical fallacy that “dice have memories.” If you role a fair die 5 times, and it hasn’t rolled a 6 yet, your odds of rolling a 6 do not go up. You aren’t ‘due’ a 6. The die doesn’t remember what it rolled the last 5 times. Your odds of getting a 6 are still 1:6.
So do I think Bitcoin’s movements are random? Not completely – rather they are part of a complex system, which makes it essentially impossible to predict. It’s something like the weather – fairly easy to spot short term trends, most of the time. Sometimes you will have a surprise rain shower, but usually you know what is coming in the very near future. Long term – who knows. The psychology and strategy of the investors, especially those who trade large quantities, will drive the price, and predicting the mood of thousands of people is essentially impossible. Sometimes there will be indicators that the mood is changing, but it can change again just as fast. Trying to predict the long term outcome of Bitcoin is slow motion gambling in my view. But I do think there is a better way.
I am reasonably confident that my approach will allow me to grind out a return which at first might seem small and slow, but which is actually pretty phenomenal. I truly believe this is the way to go. Trying to get rich all at once is a suckers bet. For a few it works great, but for most it is a disaster.
Interested in cryptocurrency and Bitcoin? I know this is a bit of a departure from previous posts – let me know in the comments what you think?
