This is a warts and all update of my current Bitcoin investing journey.
A quick introduction to Bitcoin
By now many people understand the basics about Bitcoin:
- It’s virtual currency which operates with no central authority or banks.
- Is used to purchase goods and services online and in person.
Today, one bitcoin worth £2000 (I may have well as made this up as it fluctuates so much) has a higher value than one ounce of gold with a worth of £979.
If you invested £1000 in 2013 you would have £26,000 now. To put that into a real world perspective, in 2010 developer Laszlo Hanyecz bought two pizzas with 10,000 bitcoins. Today that would be worth $20Million! (21/06/17).
There are a limited number of bitcoins. So how do you get some?
There are four main ways:
- As payment for goods or services.
- Purchase bitcoins at a Bitcoin exchange.
- Exchange bitcoins with someone near you.
- Earn bitcoins through competitive mining.
Bitcoin investing is like
From boredom to Bitcoin
My Bitcoin investing journey started in May 2016. I was working in Bangalore and had some spare time in the evenings. So thought I would give it a spin and see what happened. It also dawned on my that I get much more done when travelling (this may be a different update).
Getting started in Bitcoin investing is difficult
I was set and ready to buy Bitcoin but wasn’t sure where to start. Apparently, in Shoreditch London, there is a cash machine where you can put in cash, and it will top up your bitcoin wallet at a 10% fee. Untraceable cash deposit? That sounded a bit dodgy and expensive.
After some research, I found Coinbase, a digital currency exchange site. To join I had to upload my passport and get confirmation from my bank. Then I could only get Bitcoin by doing a SEPA transfer to Europe as Bitcoin wasn’t supported in the UK. This might get even worse if Teresa May gets to pass her internet regulation bill.
This transfer took over a week and a half. Once it went through I was able to swap my Euros for Bitcoin.
Once this happened my desire had died a little, which may have been a good thing. I was still in Bangalore and still had some time to kill in the evenings, so I bought four bitcoins for around £1000.
Bitcoin trading platform
Now, this is where it gets exciting. Coinbase has a full trading exchange, called GDAX.
With GDAX you can place a limit order which defines the price you wish to buy or sell at. It is both exciting and terrifying to use! Ultimately, using GDAX is cheaper than exchanging directly through Coinbase. It is a full on trading platform, so don’t go in without researching well first.
After having a dabble with GDAX I think it is mainly driven by bots. This becomes apparent when you try and sell a bitcoin for a set amount. Just as it is about to be taken someone pops up in front of you in the queue. I’m now investigating trading Bots and will report back on this soon. I think there is an opportunity for money to be made day trading using this method!
After my first two days of Bitcoin trading, I was €700 up. There is a nice smug feeling you get at work knowing you are making €350 a day on top of your actual salary.
What goes up can crash down
This smug feeling lasts only until the adrenaline rush kicks in from losing €700 a day when it crashes!
When Bitcoin crashes it crashes hard. When the value crashes hard the exchange closes, just like on Wall Street, watch the film Gold for a good example of this. Closing the exchange stops panic selling to reduce the currency totally collapsing.
So, while you are at work, or asleep, you have to suffer through the knowledge that you have lost thousands, and there’s nothing you can do about it (unless you have a bot that can sell for you at a limit).
So I lost out a little
I did hang on for a couple of days and it recovered a little, so I sold and got out and did more reading.
If I had kept my Bitcoin in the exchange my £1000 would have been worth around £6000 1 year later.
Should you try Bitcoin trading?
Only day trade Bitcoin if you are:
- A massive adrenaline junkie
- A great bot coder
- Understand trading and one of the above.
- Have money to burn (my contact details are below)
We will try a combination of all three next and will report back.
Bitcoin (and Ether) investing
I stopped the short term investments and looked to the long term. I now have a system of investing a small amount each week in Bitcoin and Ether. I am currently well up on my investment after the first six months.
It is slow and steady gains but I think this will make the most sense long term.
Ether is another cryptocurrency like Bitcoin. It is gaining traction, as banks are starting to use it in transactions. It seems crazy to not fully understand what you are investing in, so I will report back on Ether shortly.
It’s estimated by many that Ether will level out with Bitcoin or get a higher market value, so the price could increase tenfold over the next year. But I have found that no one in this space that talks about it really know what they are talking about.
Should you invest in Bitcoin? Or Ether?
Short answer, yes.
However, there are some things to consider:
- Only invest if you can afford to lose what you invest.
- Look at it as part of a long-term investment.
Invest in Bitcoin because it is being used more than ever. Invest in it because there is a lot of money being pumped into it at the moment. Invest in it because it is the way of things to come.
Here are my 10 reasons why I invest in Bitcoin.
In conclusion.
Go for it, don’t bet the house on it, and be careful.
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