Cryptos 101

My 7-day course on how to lose money on crypto

Day 3: Now trade!


You've HODL'd and bought utility tokens. Congratulations! You've become a member of the crypto universe. Now what?

While you are waiting for the value of your coins to drain away, you can lose money even faster by trading in tokens, sometimes known as alt-coins and sometimes trashcoins.

WHERE TO TRADE

The exchanges I use are Coinbase (for quick, almost free SEPA [European] transfers, euros only), Binance for a large choice of coins including its own reduced-fees token, and Kucoin, for an even wilder choice of alt-coins, including WAX and HAVVEN.

They are all good at telling you how to do it, as is YouTube.

Guess what? Immediately I spoke nicely of Binance, it shut down trading because someone filched investors secret keys and sold one SYSCOIN for 96BTC.

Then it forced everyone to change their secret keys.

I told you this was not financial advice.

ICOs

One of the most reliable ways to give away your money is through ICOs, standing for Initial Co(i)n Offerings.

With ICOs, for now you need only know that you commit yourself to holding tokens for a period of time and then hope you can cash out when the price tanks, as they usually do after going onto the open market.

As of 26 June 2018 there were 1588 cryptocurrencies. Why would any world need that many different kinds of currency?

For slower self-extinction try some of the formulas promoted by crypto gurus.

BUY THE DIPS

The idea behind this advice from analysts is that when the market goes down, you have an opportunity to buy tokens cheaper than before.

Lucky newbies have had the chance to buy the dips since the beginning of 2018. That old faithful bitcoin would have cost you $14K per token on 1 January 2018.

On 26 June you could have bought one for $6152, 43% of the price. Of course 57% is what you would have lost if you had 1 BTC on 1 January 2018 and didn't sell it until that day.

According the theory you would sell when the price went up. Unfortunately, as the chart from coinmarketcap shows, there don't seem to have been many occasions when the price went up and the indication of trading volume at the bottom doesn't indicate much trading.

You could have tried to sell, but might have a hard time finding a buyer until the price dipped low enough for the other people who buy the dips.

BUY ON THE RUMOUR, SELL ON THE NEWS

The theory behind this strategy (?) is that everyone gets excited at rumours, but news is always disappointing.

Unfortunately, aficionados can't tell you where to find the right rumours: will bitcoin tank to $2.5K or go to $50K this year?

Most YouTube gurus will warn you off Twitter, Facebook, Telegram, Discord, Reddit and YouTube.

Of course, the more people listen to the rumours about prices and act on them, the more likely the rumours are to become true — i.e. become news.

But can the message be true of all news?

I've become an addict to crypto news sites. Just this week I could read that "Banks Have Become Skeptical of Crypto: Swiss National Bank Executive" (Surprised that a major business which is likely to tank if cryptos take off, is not that keen?).

"Blockchain in Switzerland : Blockchain will 'Penetrate' its Entire Economy" (oh, that's what he meant).

"Are Bitcoin and Ethereum Playing You Dirty?" (Now what do you do about that?).

DOLLAR-COST AVERAGING

This recommendation by trading gurus seems to have two meanings. One is to buy a set $ amount of a crypto currency at regular intervals no matter what the price, instead of investing it all at once. This averages out the variations in price.

If you had put $6152 into biitcoin on the first of every month, you could have bought 43% of a bitcoin on 1 January and about 85% of a token on 1 June when the price was around $7171.

Of course you could have got 15% more if you'd waited till 26 June.

The other version of dollar-cost averaging could lose you money even quicker.

Perhaps it should be called dollar-cast averaging. Say your $10K investment goes down 10%. You put in another $10K and this reduces your loss overall to 5%.

Of course, it's still the same loss in real terms but it looks better on the charts, and it is supposedly easier for the price to make up 5% than 10%.

But once it's gone down 10% is it likely to bounce back? Or is it more likely to continue on down? Pretty soon you may have lost 10% of $20K ($2K) rather than $1K, i.e. double your losses.

In fact, your initial $10K will have lost 20%, i.e. $2K + the 10% from the second investment (a total of $3K). You will have $7K if you take out your second investment instead of $8.

But at least you will have been doing something instead of just sitting there. And maybe you won't have to pay trading fees that will reduce your capital even further (dream on!)

P.S. If you tripled your investment in the losing token, you could have reduced your overall current loss by 1/3rd. But if you believe this sort of arithmetic, you don't need this course to help you lose money. You'll do well enough on your own.

No this is not financial advice! Lots of people will tell you anyone can make a lot of money from the crypto market. It may be true.

You have finished Part 3 of my crypto investing course following up on superforecasting cryptocurrencies (i never found a way)

Day 1: Get some tinkerbell tokens and HODL
Day 2: Pick something that will be useful

Tomorrow: Technical analysis: Chart your way down