Tag Archives: Bitcoin

A Beginner’s Guide to Investing in Bitcoin and Other Cryptocurrencies

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While you normies were enjoying Thanksgiving, those of us who have pledged loyalty to our new digital deity were losing our collective minds. The entire cryptocurrency market shot up to all-time highs across the board, seemingly thanks to the fact that South Korea’s second largest bank tested bitcoin wallets, an influx of new cryptocurrency investors join the market every day, plus the expectation that a bunch of big money will enter the market when the hedge fund CME and the NASDAQ add bitcoin futures in the coming months. I mean, look at this year-to-date bitcoin chart. This is nuts. We are definitely in a bubble.

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But you can still make money in bubbles. The phrase used by those of us who have jumped in on this supposed rocket ship is “moonward,” and given the angle of that bitcoin chart, it feels like we’re at least in the troposphere. It seems like it’s impossible to lose money in crypto right now, which creates FOMO (fear of missing out) that has surely fueled this astounding rise. There will no doubt be a proportional correction to this wild rally (and some of it has already happened), so buying right now may not be the best move (I am not a financial advisor nor a cryptocurrency expert, so consider this my legal disclaimer that you should obviously not mortgage your house because some guy on the Internet wrote a thing).

Bitcoin is now one of the 30 or so largest currencies in the world, and it looks to be dragging several other cryptocurrencies up along with it. Despite all this progress, cryptocurrency is still in an incredibly early stage. While bitcoin may look expensive at around $10,000 per coin, that’s a bargain compared to the $55,000 per coin that some quants have pegged a 2022 bitcoin price at. Bitcoin is replacing gold as a store of value, and the market for gold is still roughly forty times larger than bitcoin.

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Ari Paul used to run the University of Chicago’s billion-dollar endowment fund, and he left to start a cryptocurrency hedge fund. Paul wrote in Forbes this week that “it’s 1994 in cryptocurrency”—comparing it to the internet revolution which began in the 1990s. This is another giant leap forward in that arena, and it is the entire impetus behind people like me flocking to cryptocurrency. We are at the forefront of another dot com boom. It just isn’t in the stock market because bitcoin was created as a direct response to the crash of 2008 that nearly liquidated the entire global economy.

Coinbase—an exchange which has investment from an array of Silicon Valley titans and the New York Stock Exchange—is adding 125,000 new accounts per day, and it now has more users than Charles freaking Schwab. If you haven’t invested in cryptocurrency yet, you probably know someone who has, and if you are curious about how to get in on the action, I am here to help.

I didn’t know much about cryptocurrency to begin 2017. I had taken an interest in bitcoin over the past decade as a novelty. I liked the thought of having a real challenger to the international monetary system, and conceptually, it made sense to have a decentralized monetary system underlying a software platform—since that’s where more and more commerce is taking place each year. I never thought that the envisioned revolution was possible, and that as soon as the banks wanted to, they would squish bitcoin like a bug. I bought some at $400 and sold it around $500 the day of the Brexit referendum (thinking that they would vote to remain and bitcoin would fall), and watched it shoot up from there. At that point, I assumed I knew nothing about this space and decided to take my money and run.

Fast-forward to early 2017: I have a new job writing at Paste, and my friend who has already invested in this market is badgering me to get into Ethereum at around ten dollars a coin. After a lot of pressure, some luck obtaining unexpected capital, and a report that Microsoft was involved, I invested in Ethereum at $15 per coin. As of this writing, it’s trading around $440. As my initial investment has risen exponentially, I have moved some of it into other coins to reduce my overall risk, and in the process, I have learned a lot about a subject I knew nothing of earlier this year. I believe this puts me in a unique position to simply explain a wildly complex market, and this column is an attempt to provide some basic guidance for those beginners who are in the same spot that I was in ten months ago.

1. Sign Up for an Exchange

Let’s start with the absolute basics. If you want to buy something, you’ve gotta go somewhere to buy it, and the cryptoverse is no different. Sign up for Coinbase first. This is the Wild West, and there is no safety net for any screw-ups.

Regulation is coming, but it’s not here yet, so even though bitcoin was created to avoid centralization—that’s not where it is now—and I believe that it’s actually a good thing thanks to the lack of maturity of this market. There is no other U.S. exchange as trustworthy as Coinbase. Your coins are 100% insured, and when traders lost (at least) millions when Ethereum flash crashed from around $300 to ten cents and jumped back up, they refunded everyone who lost money. They claim to hold $10 billion in the bank for their customers, and by all accounts, are the only exchange with a real safety net for their users (if you’re dumb and you get hacked, that’s on you. There is no one to help you pick up the pieces, that money is just gone—which brings us to number two).

2. Enable Two-Factor Authentication

You should have two-factor authentication on every account that’s important in your life. If you haven’t heard of it, then boy do you have some catching up to do to be secure in the digital age. Hackers are everywhere—especially in the crypto world. This literally is the Wild West, and save for an exchange like Coinbase, if your crypto is gone, it’s gone. Don’t enable the option where they send you a text, because hackers can scrape together enough of your info off the web to call your cell company, impersonate you, get your texts forwarded to a different phone and then you’re completely screwed.

3. Accept What You Don’t Know

I come at all this from an economics perspective. I studied political science in college, and concentrated my studies in international relations. The moment I read about how Argentinians and Venezuelans are parking their wealth in bitcoin to avoid hyperinflation, it all clicked. Bitcoin is the every man’s Swiss bank account.

I’ve made money on Ethereum thanks to an article forwarded to me by a friend, alerting me to the fact that JPMorgan and Microsoft were heading a group of companies that look like it could double as the illuminati. Those two massive firms were all the explanation I needed to see where this tech was headed. The Ethereum Enterprise Alliance is filled with businesses who want to build the next generation of blockchain apps on this platform, and I couldn’t describe their tech to you beyond what you find in the first few sentences on its Wikipedia page, so I generally avoid investing in any of the so-called “alt-coins” that require the more technically literate to truly understand their value. If you’re a coder who could care less about global economics and politics, you may feel the opposite, and your investment strategy should reflect that. Invest in what you know.

4. Are You a Long or Short Trader?

First off: you’re long. The easiest way to look smart is to buy bitcoin, Ethereum, Litecoin and bitcoin cash, then hold them. It’s possible to become a millionaire in this market if you’re patient. Coinbase is the only mainstream exchange, so any coin on it automatically has an advantage of being more stable thanks to consistent demand. I aim to have at least two-thirds of my portfolio consist of bitcoin, bitcoin cash, Ethereum and Litecoin at all times.

The overall goal here is to consolidate your positions around what is effectively gold, silver and bronze in the cryptoverse, while gambling on the smaller “alt-coins” that you find on exchanges like KrakenCEX.IOPoloniexBittrex, or Bitstamp (stay the hell away from Bitfinex for now—there are far too many questions surrounding their viability). It may seem tempting to try to go all in on the next wave of coins at a seemingly cheap price, but sticking to that philosophy is guaranteed to lose you money eventually. Blue chip stocks are blue chips for a reason, and bitcoin, Ethereum, Litecoin and bitcoin cash are the cryptoverse’s version of Amazon, Google, etc…

How you go about making long or short trades depends on your trading skills. I have lost money finding that I am bad at playing the day to day market, so I never make a trade with the intent to make another one shortly thereafter. The shortest amount of time I look at is usually quarter to quarter. I have a friend who always seems to buy and hold the wrong coins, and they have found that they are better at playing the day to day emotions of the market. This strategy is far riskier and much more difficult to master, but there will be some who feel more comfortable looking at short term moves than trying to find long-term entry points into the market. Think about where your strengths lie before you lose your investment finding out.

5. Understand Bitcoin’s Influence on the Market

Bitcoin is to the crypto world what the U.S. dollar is to the global economy. One literally could not exist without the other. Bitcoin is the cryptocurrency that most exchanges make you purchase other cryptocurrencies with, and it is the only cryptocurrency with mainstream branding, so the market’s moves are inextricably linked to bitcoin’s.

Bitcoin cash is a fork of bitcoin (meaning that it has similar tech, but it was tweaked for faster and cheaper payments), Ethereum is kind of a competitor with different tech, and Litecoin is like a poor man’s version of bitcoin. This isn’t a hard and fast rule, but simple market logic has shown that when there is FUD (fear, uncertainty and doubt) in the bitcoin markets, scared money rushes to safe havens. The aforementioned coins are typically where scared money winds up—however, as “alt-coins” have become more popular, you are seeing more of an ebb and flow between those markets and bitcoin. If you’re thinking about making a trade, don’t do anything until you look at bitcoin’s chart versus these others to see if any patterns are developing.

6. If Something Sounds Too Good to Be True, It Probably Is

This one seems obvious, but it’s really not. In any investment market, people are susceptible to snake oil salesmen selling them on something they don’t understand, and I’m not being hyperbolic when I say that crypto is the Wild West. No one is around to help you if you get bamboozled, so be extremely careful with your money, and be prepared to lose some. These are the very early days of this movement, and a lot of creative destruction lies ahead of us. The wrong move could wind up costing you thousands or even millions down the road. I am in a Slack group with other crypto investors, and one of our friends who invests in the traditional market for a living wrote this when I asked for his input:

Key takeaways are very simply: don’t worry about the price of the coin. Worry only about getting your percentage gain that day. Don’t be greedy. And the best part? All you need is to find a coin that will go up 2% in the time you hold it. Could be a day, could be an hour. In 365 days, with a $1k initial investment, you can make over 1 million dollars.

Patience is the key to doing well in this market. There will be wild swings, and in order to maintain a profitable portfolio, you must endure the inevitable crashes without panicking.

7. Listen to Smart People

With all the madness in the markets, it’s best to lean on expert advice to help wade through the FUD. I have been following various crypto investors, day traders and software developers on Twitter, and most of what you have read so far has been informed by the people on this list that I put together. News outlets like Coindesk are helpful to keep up with the day to day happenings in this space.

8. Don’t Forget About Taxes

The IRS classifies cryptocurrency as a property, so that is how taxes on it are paid. If you cash out your investment for dollars, it becomes subject to taxes, and if it is less than one year since the initial purchase, you will pay much higher taxes on it. I still haven’t hit my one-year mark, so all of my trades have been crypto for crypto. As soon as the figure has a dollar sign next to it, the IRS gets involved.

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Investing in these tokens is philosophically the same thing as investing in the stock market. These are companies providing a service—so ask yourself questions about the viability of the business, the market, etc… Just because someone has a good idea doesn’t mean that it fixes a problem that people want fixed. If you can’t wrap your head around the tech, it’s OK to walk away. You’ll definitely be wrong sometimes, but in the long-run, that’s a winning play. It’s easy to overthink something that’s this new, but cryptocurrency is quite simple when you boil it down to its elemental principles:

 Crypto is the gas that runs the next generation of software (blockchain tech).
 Our world is built on software.

Meaning that you are investing in the oil propelling the next iteration of the Internet. No one really saw the value of things like e-mail in the early 1990s before they became intrinsic to our lives, and blockchain technology will function the same way. We’re quite a ways away from all of this hitting the mainstream market (meaning you have time to build up your investment, don’t feel the need to rush everything in to the markets right now), and it’s still incredibly speculative—so that’s a knife that cuts both ways.

On one hand, it creates more volatility—meaning that you can lose a whole lot of money very quickly. But on the other, it creates more volatility—meaning that you can also make a whole lot of money very quickly. Profiting in this market just comes down to timing, discipline, knowledge and more luck than any of us want to admit.

How to Earn Money with Bitcoin Exchange

Bitcoin Exchange

Bitcoin is similar to any other form of currency and the only difference is that it is digital. You can save, spend, and invest your bitcoins. Bitcoin is considered one of the most used crytocurrency since it was introduced in 2009. It earned even more popularity when its value increased significantly to $266 from $2 between February and April 2014. Its market valuation was over $2 billion during this period.

 

It is possible to earn money through Bitcoin exchange. The exchange process is similar to what happens during physical currency trade. When it comes to physical currency, its value is largely influenced by a country’s financial and economic health. This also applies to Bitcoin but the difference is that the value is determined by how much effort your computer makes. You can trade this currency just like any other commodity.
There are some cryptocurrency exchangers such as ALFaCashier that you can use for exchange. ALFACashier is a popular currency exchange service that offers an affiliate program for people who want to exchange Bitcoins. The service offers a VIP level for highly active affiliates. With this level, affiliates get about 20% off every referred conversion they make in future. The affiliates also get complete banners in different formats that they can use on forum posts and web pages. With a VIP status an affiliate can generate regular passive income by simply referring new people to the service.

 

Bitcoin Exchange - Illustration

Bitcoin Exchange – Illustration

If you are a smart investor, it is possible to make a huge amount of money by transferring money around the different markets. But you also need to be very careful because it is also possible to lose a lot of money in the process.
If you are thinking of starting Bitcoin exchange, it is important to determine if there is demand for this currency. Your success will depend on whether there are people who are interested in using Bitcoins. You need to identify good contacts as well Sending and receiving currency can be a challenge in some regions and this creates a perfect opportunity for you to earn money through Bitcoin exchange. You get to decide how much you will buy and sell your Bitcoins for but it is necessary to look at what other people are offering to give you an edge.
The Bitcoin values tend to fluctuate several times in a day. This means that you have to be very careful and ensure you make transaction orders at appropriate times. You can make significant loses if you fail to watch the changes in value carefully.
The Bitcoin market is very volatile and this means that most investors prefer to offload their currency as fast as possible to prevent huge losses in case of a crash. There have been talks of regulating the Bitcoin market to eliminate criminal elements who may take advantage of investors. If this happens, the Bitcoin markets will actually becomes safer and this will encourage commercial interests. Some investors consider the imminent regulation as the end of the Bitcoin but this is not the case. Regulation will actually help to reign in on the wild fluctuations in terms of value. This might help to reduce big crashes and make it safer for investors to exchange this currency.