On the Christmas Day 2017, one of my friend was talking about BitCoin, the popular cryptocurrency, and how it costed A$18,000 to buy one. He wished he had bought a BitCoin when it was still trading for $4000. In 2018, BitCoin rose to $23,000 and fell back to $4300 just before Christmas 2018 (surprise!) and I asked him again, if he would buy it this time. He replied, 'No, mate. I will wait until it gets to a further low; who knows what it might be worth in few months time?'. He never bought any and I cant fault him. Nobody knows how low/high a BitCoin can get to. By the way, as of today, buying one BitCoin will set you back $71K!
Based on my own 4-year experience, I share my Crypto learnings here. I am not a financial adviser or Crypto expert and these are my own views. Do your own research before investing.
Crypto currencies = Lottery. In Lottery, it is either an instant win or instant loss. With Crypto, it could be the same, but takes a while. With Crypto, you can cash out if you are clever and not too greedy. Unfortunately, in both cases, many people lose money while some take the 'winnings'.
All crypto currencies including BitCoin(BTC), can technically crash to zero as they are not endorsed, guaranteed by a Government or another agency. For instance, normal paper currency is backed by Government, it will fail only if the Government declares bankruptcy, that is technically possible too. In case, if Government decides to enter Crypto world, they would most likely develop their own crypto currency. After all, they are the governments and they can make the rules to govern it.
It seems that any capable techie can create a new crypto coin. This means that the cryptocoins that are trusted by majority will live and gain traction. BitCoin being one of the first-movers and as a popular one in the market, ever Tom and Harry are betting on it. When crypto market crashes, probably, BitCoin will hit zero, the last. Crypto currencies will live as long as people have trust in crypto.
My approach with Investing in Crypto is that ask yourself 'If you lose the money that you invest, will you be happy and carry on with your life?' Invest only that much money. For me, it is $50 per quarter roughly, it might be $5 or $500 for you. When investing in chunks of $50, I assume I am spending on a restaurant meal and would not see that money ever again. When I invest, I plan to leave it for a long time, at least 10 years or until a point where my I can exit with what I invested.
Next, I do not follow Crypto market/news at all and I do not have time to read and track all the 985+ crypto coins. So, I diversify my little investments. Using the $50, I buy as many newly-listed, bottom-of-the-chain coins that costs less than a dollar. Sometimes, I would my $50 buys 30 different crypto coins (E.g BitCoin, Ethereum, Steem, DogeCoin) or more. I just buy 1 coin each or part of a coin worth $1.
Some of those little-known coins, that I bought have vanished from the market. They basically lost the trust from investors and hence marketplace removed them. There went my $1 and $2 sums of money. I am happy because my investment is only a couple of hundred an year. That's my comfort level for investing in lotteries, sorry, Crypto.
To report success, I bought 5000 DogeCoins (the dog currency) for $30 in March 2018, they were worth $313 in Feb 2020. More on that, later in this article. There is another one, I bought 5 LINK/CHAINLINK coins for $2.9 in Feb 2019 and it is now worth $212. I have no idea how it went up so high.
Here's the most obvious and most important bit of information. You make money when you sell a crypto coin that you bought. With the DogeCoin or LINK, I can cash them now when I feel I have had enough profit/loss. This (when to exit) is something, as an investor, you would learn as you go. What if the DogeCoin hits $30,000 or what if it crashes to zero. As I did not invest large amounts, I am prepared to wait for long time. Of course, when you cash out, you must declare the profit and pay the taxes. Tax office is watching how much you spent and how much got back.
So, the summary: Do NOT not invest your life savings in CryptoCurrencies, definitely, do not borrow to invest in Crypto; when you lose borrowed money, you lose the money twice. Buy fractions of popular coins and/or any coins that are less than $1 and hope they go up in value.
If you think what if your grown-up son/daughter in 2033 would say, 'Mom, I wish you had bought some of the Bitcoin when it was $65k, look now it is $340K', buy a fraction of BTC for the money that you are not afraid to lose now. At the time of writing, $50 buys 0.00074844 BTC. Don't be greedy to buy a whole BTC now at today's price of 65k. The same grown-up son/daughter should not say, 'Dad, I really wish you had not spent that $65K for 1 BitCoin in 2021, for now the BTC is no more and you could have invested that $65K on my Uni degree!'. Assuming 65K can still get a Uni degree in 2033! If you choose to sit on the fence and not bother about Crypto currencies, that's absolutely fine too.
If you want to make quick money in Crypto, follow Elon Musk on Twitter. He seems to influence the crypto market by simply tweeting a Dog picture - the reason why DogeCoin (the dog currency) sky-rocketed in Feb 2020.
One of the main reason why I was able to buy so many diverse coins for such small amounts is because of CoinSpot (referral link in the first comment), the Australian-based currency trading platform. They charge me only 1% commission which means I pay 0.01 if I buy $1 worth of a crypto coin. To compare this with a Share trading platform like CommSec-the Commonweath Bank's Share Trading Platform, when I buy a share with CommSec, they charge me $19.95 commission per transaction and I wouldn't be buying a $1 share and certainly not many such $1 shares. By the way, I talked about CommSec for illustration purpose only, you can not buy Crypto Coin from CommSec.
You may ask what about the 'Bob from UK who forgot his crypto password and so lost his millions of BitCoins', yes, that's a different kind of physical device wallet to store your crypto currencies where no recovery is possible except with the correct password. I did not go that path and neither should you, unless you know what you are doing!. With trading platforms, your crypto coins are in a digital wallet, you can reset the password and Two-Factor Authentication etc.
If you are thinking to invest in Crypto currencies, you can join CoinBase, a digital currency exchange based in SFO California, we’ll both receive A$12.88 in Bitcoin when you buy any digital coins worth A$128.81 or more on Coinbase. https://www.coinbase.com/join/ponnus_7ow
For Australian readers, you can easily register yourself with CoinSpot. If you want a gift of $10 worth of BitCoin, use the following referral we will both receive $10 worth of Bitcoin each when you complete your first AUD deposit. Referral code EW14MT or Invite Link — https://www.coinspot.com.au/join/EW14MT
Thank you for reading! I hope you got some idea on Crypto Currency now. Ask your questions in comments, I am not an expert and will try to answer as best as I can.
P.S:- Do not ask me what will be the price of X crypto coin in 2033, I have no idea :-)