The Bitcoin club

| roger nunn

There is a gradual public acceptance that there might be some value in crypto currencies, specifically Bitcoin. Those who invested early on and didn’t lose their private keys have made significant increases in their wealth.

I remember being interested in the idea in 2012 but didn’t buy any because it was a lot more complicated at the time. Buying and trading wasn’t easy and of course now I wish that I had made the effort.

Everything is clear with hindsight so now I’m looking forward to get it right this time. I know that is always some risk but without being involved I can’t expect to benefit.

I have small holdings of a number of crypto currencies and some bitcoin. Some bitcoin here means some part of a bitcoin.

In the long run I believe that the value of bitcoin will continue to rise and eventually owning one whole bitcoin will be like being a multi millionaire in today’s world.

So owning one Bitcoin will be like being a member of an exclusive club, and those people who are lucky enough to hold thousands now will be the wealthy ones.

Bitcoin has crashed.

| roger nunn

Bitcoin has just dropped by about 10%. It’s a disaster, we must sell quickly!

I don’t believe that at all, I’m just mimicking the feeling that a get from the press whenever bitcoin dips. I also chose 10% as being representative rather than exact because it has happened many times and fully expect it to happen again.

Unfortunately the disaster type of comment sells stories and in so doing creates more selling and price drops. It’s very sad for those who get emotionally involved with their holdings and sell as the price drops, thereby losing money.

I like the volatility of crypto as it allows me to make money. I sell some of my holdings as the price rises, thereby making some profit.

When the price drops I buy some more and then wait for it to rise, so enjoying the volatility.

Stable prices are more boring, something that will happen as the market matured. In the meantime long live volatility.

Crypto, what to read about.

| roger nunn

I think it’s great to be involved, even though only slightly, in one of the new developments in finance.

As it is a new (ish) technology, it is changing very rapidly with new ideas appearing all the time.

Decentralised exchanges are a good example of rapid change. A year ago trading was done through an exchange who listed the coins and facilitated exchange, changing a fee on the way.

Exchanges have proliferated and got rich in the meantime. They have made it easy to buy crypto and then exchange it or return it to fiat.

Now we have decentralised exchanges appearing that automatically match transfers without direct fees. The exchange works differently with users being able to stake their crypto and share in the fees generated.

My problem is that however much I read (and watch) there is more new stuff being generated, creating new parts of the crypto world.

So I will follow the new developments such as creating NFTs and only get deeply involved when it seems to lead to change.

Spreading the word on crypto

| roger nunn

Yesterday I made a short presentation to family members to explain what crypto is all about.

I have been interested in bitcoin since around 2015 and spent many hours reading and watching videos before starting to trade it myself.

I went through the 2017 boom and the drop that followed, all the while learning about it and watching new developments.

Now I am even more convinced as to its long term viability, especially as I believe that the decentralised consensus is an excellent way of linking the power of spending to real democracy.

However, finding a way to present this view of the future without appearing to be a fanatic proved to be very difficult.

I ended up by talking about the reason for bitcoin’s development and the benefits it can bring wherever value needs to be maintained or transferred.

I am working on totally non technical presentation that gives a newcomer an idea of What and Why, followed by How.

Looking to the future

| roger nunn

For about a week I have been trading futures, based on the rise and fall of bitcoin relative to the US $.

I have been using very small amounts of money with only 10 X leverage. This is because leveraging multiplies losses as well as gains. I put in stop-losses that sell your holdings automatically if the price starts to drop.

It sounds as though it should be a winner and seems to be for the professional traders.

I found that for the amount I was willing to risk, the fluctuations minute by minute were enough to very quickly move the price to my stop-loss level. This easily limited my losses and I managed to make a few gains. However I had to pay fees for every trade and I found that I was losing overall.

This last week saw an end or at least a break in the bull run so I couldn’t rely on a steadily increasing bitcoin to ensure profitable trades.

So I lost a bit but now I feel that I understand what it means to short or long a future contract so I consider the loss to be acceptable.

In the end futures trading can only be a form of gambling, we can’t know what will happen in the future.

It is exciting when you make a gain.

What are Bitcoin futures?

| roger nunn

As part of my ongoing attempts to understand the world of crypto I have been researching the idea of futures. As far as I know, it is impossible to predict what is going to happen in the future. However, I have been following a number of youtubers who consistently make profit on trading in futures.

So how can it be? Surely buying and selling in the future is either guesswork or just gambling, neither of which seems to me to be a good long term strategy.

This only scratches the surface so don’t be surprised if I miss out important parts of the action.

I have found out that I can use “leverage” to allow me to make or lose multiples of the money that I put into a cryptocurrency. A base idea is that I have to deposit enough money to cover any possible losses and then I can buy a contract that takes the change in the value (in US$) of the currency and multiplies it by the leverage factor. This allows me to make very big gains compared to the actual change in the value of the underlying asset.

I don’t like the idea that the reverse is also true as my losses are also multiplied.

The way the you make money is by allowing the multiplier to act when the price goes up and by selling quickly if the price drops. Luckily the mechanics of it is taken care of by the software on the trading site. This is called a long contract, with the reverse action being called shorting.

I have been testing out the action and so far have not managed break even. This is because there are always charges to be met, so you have to make big gains to cover the costs as well as the loss making trades.

I have to say that it feels like gambling to me, and is very time-consuming.

The ever expanding world of crypto

| roger nunn

I find that I only really understand something when I do it myself. This applies to all new things in life but at the moment I’m still trying to get my head around the constant development of crypto.

I have been trading cryptocurrencies, trying to get the feel of buying low and selling on the way up. Everything is converted to equivalent values in US $, making it easy to see when the value has risen. However, this ignores the problem of fluctuating value of the $, so it would be best to find something else to use as a baseline.

There is nothing that doesn’t fluctuate in value, so I just stick to the $, this is best until bitcoin stabilises, probably sometime in 2023.

My newest experiment is in looking at NFTs. Non Fungible Token. As I see it, the difference between an NFT and a Bitcoin is that each NFT is numbered and unique while bitcoin is seen as more generic. You can own (control) a bitcoin, but no one really cares which one it is.

To try to get my head around NFTs I decided to create a work of art and put it up for sale as an NFT. NFTs are built on the etherium blockchain so I had to work from an etherium wallet. I used Metamask.

I had to save the artwork (a sketch of a new type of car) onto the blockchain and put it up for sale on an online market place. It sounds easy and is fairly straightforward. However, nothing on the public blocckchain is free, so you have to pay (in gas, the payment system in etherium) for it. It is worth choosing the time of day as the price in gas depends on how busy the blockchain is at any moment.

Thats’s my first experience of NFTs, I will now experiment with making more and maybe selling some,

Crypto 24/7, isn’t it great?

| roger nunn

When I started buying and selling Bitcoin I was happy to find that the trading can be done at any time, that the markets never sleep. This was good because it is so different to the stock markets, which are only open 5 days a week, as well as being closed on national holidays.

However, there is a downside. Me, not being a machine needs to eat, sleep, have fun and socialise with other people. While I am not in front of the computer I cannot monitor my potential gains/losses from crypto trading.

I have decided that trading has to take second place to normal living and so deliberately leave my computer alone, obviously have first checked that I wont lose badly in the event of a big drop in the market. In fact, this is the case even when I am sitting in front of my computer as I cannot effectively monitor all the different parts of the crypto market and its multitude of coins, tokens and derivatives. I haven’t even got my head around the future direction of DEFI, and its constant evolution.

Therefore I have a plan of switching on and trying to follow the general direction of the market before formulating any buy/sell plans for the day.

I have to say that I really don’t see any way that a human can get a good feel on all the parts of the market simultaneously. This observation is borne out by listening to many different online trading YouTubers, who seem to be able to make money by using different tactics in different markets.

So I like using trading bots to act for me, but so far they seem to be limited to trading crypto pairs chosen by me. I am looking forward to the development of Machine Learning based decision models that decide what to buy and sell in real time. It will be less exciting but a good way to create a passive income without doing anything.

What to do with the money

| roger nunn

At the moment we are in a Bull market for crypto. It actually just means the that prices (in Fiat currencies like the US $) are generally rising. Bitcoin’s market cap (value of the number of coins times the current price) is more than 50% of the entire crypto market and so the market generally follows its lead.

There are fortunes to be made by trading within crypto, getting into coins just before they pump. Obviously choosing a coin is an inexact science, but it is exciting when you catch the wave.

The Bull market will eventually end and there are numerous people explaining what they think will be the timing, as you can expect huge reductions in value, especially with low cap alt coins. So the widely acknowledged strategy is to sell some of the coins as they go up “locking in” profits. This works well enough and you can then re-invest the profits in the next potentially good high flyer.

My problem is the same, however much profit I make. Assuming that there will be a Bear market sometime this year, I need to know how to keep my profits safe.

Keeping you money safe is the same problem whether or not you are a crypto enthusiast. The explosion in supply of fiat is very likely to result in inflation in the long run, so getting out of crypto is like getting out of the flying pan into the fire.

So it looks in the end that hodling in crypto (some at least) is going to be a long term strategy. I’m waiting for more people to accept bitcoin for big purchases, like houses or cars.

Exciting financial changes are here but not everyone realises it yet.