written by reader Cryptocurrency

By mandrels55, July 17, 2017

It seems as though lately there is much talk out there about Cryptocurrency. Bitcoin is at the top of the list but recently many have spoke about POTCOIN. Any insight on getting into this form of investment would be helpful.

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July 18, 2017 3:46 am

In fact right now looks to me like a reasonable entry point into crypto land, with the recent concern about a possible split in bitcoin having led to a general market decline. Cryptocurrencies are very volatile so in a week or two the situation could have changed a lot. I’ve been in cryptos for a few months, staking around 2.5% of investible assets. The space is unregulated so it’s not for widows and orphans; project teams can and occasionally do just walk off into the sunset with investors’ money, and the investors have little recourse. While crypto is not entirely a bubble, there are similarities with the dot com bubble at the turn of the century, with people putting money into dubious ventures. It may well be that at some stage, as with the dot com bubble, there will be a big crash that will take the good projects down with the bad and provide a good entry point for those who don’t like to ride bubbles.

If you want to get in, the first practical step, and for now the hardest one, is to buy some bitcoin. There are many websites such as Coinbase (largely for US residents) or Coinfloor (UK) that will sell you bitcoin but you will need to provide scanned ID, the customer service on these sites is typically poor to non-existent and some sites have large buy/sell spreads (10% is not uncommon).

Once you’ve bought some bitcoin you can open an account with one or more cryptocurrency exchanges, a relatively simple process. The US-based bittrex.com is the exchange I prefer to use, although no one exchange covers the entire market. There’s a list of the coins available at coinmarketcap.com; you can toggle between viewing USD prices and bitcoin (BTC) prices.

The cryptocurrency markets are super-volatile so you have to be able to live with that. The altcoins (coins other than bitcoin) tend to amplify bitcoin’s movements so one investment tactic could to be in altcoins when bitcoin is low (like now, perhaps) and scale out of altcoins into bitcoin as the market rises, gradually increasing the value of your portfolio in terms of bitcoin.

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Travis Johnson, Stock Gumshoe
July 18, 2017 2:37 pm

We’re all spitting into the wind trying to figure out what will happen with cryptocurrencies, but there are dozens being introduced seemingly every week now, and the vast majority of them will almost certainly turn out to be worthless… I summed up my sentiment about the cryptocurrencies in general in a Friday File a few weeks back here, but my basic conclusion was:

“I can’t put a real price on them with any rationality and think there’s a non-trivial possibility of any cryptocurrency failing and losing 90% of its value almost instantly, so I’ll keep my positions small. But it sure is fun to watch them.”

I still feel that way. I’ve seen the few cryptocurrencies I hold (litecoin, bitcoin, ethereum) rise in value by 1,000% and then fall by 50%, and I can’t, with a straight face, tell you that $1,000 for bitcoin makes sense but $2,000 or $200 does not. There is no basis for valuation… but there was no basis for valuation of most of the dot com stocks in 1998, either, and many of them soared by thousands of percent (and a few survived to become “real” and hugely profitable in the end).

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