Hey there, welcome to my blog!
I fell down the rabbit hole of cryptocurrencies in May 2017. I saw that Bitcoin’s price was on the rise. It’s price at the time was around USD 1,800.
I liked the challenge of understanding it and I also liked the idea of making a lot of money from it.
I’m a speculator by nature. Whilst I’d like to be an investor, I know my nature is to speculate, to gamble.
But with cryptocurrencies I’ve tried to apply the lessons of my previous mistakes.
Don’t spend more than you can afford to lose
A lot of people will make a lot of money here, and a lot of people will lose a lot of money. We’ve all heard the stories of people who sold their apartments to buy Bitcoin. That’s insane. Nobody knows what will happen to Bitcoin in the future. We can look at the probability of it being here in 10 years and it might be probable but nobody knows. If this is the case, then the person who has sold his apartment is running the risk of losing money that literally put a roof over his head.
Think of any money that you put into Bitcoin or any other cryptocurrency as gambling money. It’s money that if you lost it, it might sting but it wouldn’t hurt too badly.
Don’t use leverage
I used to do financial spread betting. This allowed you to take a bigger position than you could really afford. Leverage isn’t bad in itself. Leverage is everywhere in finance. It’s there when you take out a mortgage to buy your house. i.e. you have a deposit but the bank lends you the rest of the money that you didn’t have in order to be able to buy your house. That’s totally normal.
Where leverage is dangerous though is where the prices moves are magnified.
So if buy the underlying asset itself, and the price goes down 10% in a day, then I’ve only lost (on paper) 10% of the total capital that I put down for the asset.
BUT if I have 2x leverage, and the price goes down 10% in a day, then I’ve lost 20% (on paper) in a day.
Most retail traders when given leverage will use too much. So a 10% price move down could wipe out all the capital that you put down.
With Bitcoin and cryptocurrencies in general, the use of leverage is madness because of how volatile the assets are. Look at coinmarketcap.com. Look at the price moves in a day. Prices can move 10%, 20%, 50%! It’s massively exciting but be very careful with leverage.
I don’t use any leverage. I buy the asset with money I can afford to lose and I hold for the long-term. It certainly makes it easier to withstand the price moves up and down. In fact, I don’t really even notice the price action anymore. I check a few times a week.
Enough about that. I’m still loving the ride and we’re still so early into this new frontier of cryptocurrencies and blockchain. In this blog, I write about my journey into it and I come from the perspective of my own experience. I hope you find it useful and informative. Let me know if you have any questions at all.