Bitcoin is going through the roof

February 9, 2021 | roger nunn

Bitcoin is currently worth around $46,000 each. As usual, most of the altcoins follow suit with some dropping in value and some making spectacular gains, far higher than Bitcoin itself.

It is a rising market, where it starts to feel as though the sky is the limit. I prefer the expression of going through the roof as it indicates a barrier and brings the expectation that there will be a drop afterwards.

As far as making money is concerned, sitting and hodling in a rising market is just asset appreciation. It looks like a good money maker but it’s only real when you sell the bitcoin and realise the profit. It’s a good feeling when the market is rising and you can see yourself getting richer.

However, being a trader is something else. It means studying the different coins, buying low and then selling as they rise to take the profit. It is less exciting because you can always imagine how much more you could have made if you had waited a bit longer.

The harder thing is how to make money on a falling market, something that happens often. It means building a buy and sell strategy that makes use of the relative difference in value between various coins, buying and selling to take advantage of price changes.

How to do it? This is the trail that many of us are hoping to follow. It’s not easy.

What is an altcoin?

February 3, 2021 | roger nunn

History shapes language. First there was Bitcoin (there had been previous attempts at electronic money but no real success). Just ask most people about cryptocurrency and you will get comments on Bitcoin being a criminal’s money. Most people are not even aware that there are other forms of crypto.

The development of Bitcoin spawned a lot of interest in developing alternatives, supposedly able to address its short-comings. Disagreements in the mining communities resulted in copies (hard forks) of existing coins and developments of new ones. Extra ideas, such as programmable inputs were also brought in.

Now there is Bitcoin, Etherium and lots of alt-coins. Lots and lots, measured in thousands of new coins and tokens. I have separated Eth from the altcoins because of its huge market capital and because it is used a base for the creation of many other forms of crypto.

Bitcoin has increased hugely in value over the past 10 years (large fluctuations make it more exciting), so it is now considered a store of value, rather than a currency. However, its increases are dwarfed by some of the increases (and price drops) in many of the altcoins.

The problem is knowing how to choose an altcoin to buy and then when to sell it. Even when you find one that is increasing quickly, it is exciting enough that your inclination is to go on riding it up to the top. Where is the top? Nobody knows?

So what to do? Build and apply a strategy (logic not emotion) systematically. Usually this means researching a coin, buying it and then selling when it reaches a pre-determined price. Not very exciting, but it can be profitable.

Apparently it is now an alt season. Try to figure out what that means.

One way only from fiat to crypto

February 1, 2021 | roger nunn

When you want to buy crypto (probably bitcoin) you can create an account on any of a number of exchanges and simply transfer fiat currency straight into the crypto of your choice.

This might be more difficult in a jurisdiction with monetary controls but it works easily for me, being based in the European Union.

Once you have the crypto on your exchange account you can trade it for other cryptos or transfer it easily either to another exchange or to a wallet.

It’s seamless, easy, usually cheap and very fast and of course it operates 24/7.

Returning the crypto to fiat feels slow and heavy by comparison, with banks taking some time to make the money available. It really feels like a step backwards in time, like returning to writing cheques for bills and then waiting 3 days for the funds to clear.

I can wait for universal adoption of crypto, easy transfers without the cost and time lost using fiat

What is a crypto exchange?

January 24, 2021January 24, 2021 | roger nunn

I am writing about individual parts of the crypto world as if they are discrete. They are not discrete but I like to see the function of each part as separate, it helps me to see clearly.

Holding crypto is a matter of having the right series of numbers, something that is simplified through software in wallets. Trading crypto is the ability to buy crypto with fiat currency ($, €, etc), exchange one crypto currency for another or buy fiat with crypto.

Buying crypto with fiat or selling it back relies on using banks, and so is subject to bank charges, regulations and delays that can be imposed at any time.

An exchange is one way to trade one crypto for another. The user creates a trading account on the exchange and then can transfer crypto from a wallet for trading. The exchange does not normally buy and sell the crypto directly, it is a market place where traders put in buy or sell requests. So when you want to exchange crypto (e.g. exchange bitcoin for etherium), you are relying on another trader who wants to make the same trade reversed. The exchange simply facilitates it by hosting the traders’ accounts and charging for the service.

Once you start trading in crypto you see the benefits of a market that is open 24/7, has fast trades and low costs. It doesn’t help you choose your strategy, though, as it’s easy enough for the crypto that you are hodling to drop hugely in value in a matter of minutes.

Using an exchange can be very exciting, though, especially if you can learn to control your emotions and follow a trading strategy.

This is a very simplistic view of exchanges, it is supposed to help by giving an overview of its place in the crytpo world

What is a crypto wallet

January 21, 2021 | roger nunn

Understanding a crypto wallet necessitates getting your head around the way that crypto works.

When I started looking at Bitcoin I learned that getting access to the coins is done through simply knowing the right unique string of numbers. This the only way to access your Bitcoin and is what gives rise to the expression “Not Your Keys, Not Your Coins”.

A wallet is software that stores the numbers for you and provides an interface for transferring (or trading) your coins. The software is password protected. When it is installed, it creates a set of recovery words that can be used to re-create the numbers in the event of forgetting or losing the password.

The recovery words can be used by anyone to use the coins so they are usually written down and hidden away safely.

In writing this I realise that although I use software wallets to keep and transfer coins I don’t have a clear enough picture of how they work. I will read more about it.

As software wallets are susceptible to being hacked or being emptied through information collected through a phishing attack there are also hardware wallets.

Hardware wallets are used to store the crypto numbers and accessed through software. This means that the coins are protected through both the software and needing physical access to the wallet. This extra level of security brings an extra level of complication, as with most things on the internet.

How to keep my money safe

January 18, 2021 | roger nunn

We all want, I think, to keep our money safe. After all, what’s the point of going to work and finding that the money you have been working for is not worth what it was. Even if you keep your money safe from theft or loss, there is a nasty and constant drain on your value.

Inflation.

Inflation is so much part of our financial world that it seems to be inevitable and we just get used to the idea that our hard-earned money is worth a bit less this year than last. This loss of value is what happens in good times, it is so insidious that most of us just put up with it.

I read an interesting comparison where it seems that in Roman times, I full suit of clothes for a soldier cost around 1oz of Gold. As far as I can see, it is still the case. This shows that inflation is only the result of the usefulness of inflation to decision makers. I am not going to write about how central banks work, it tends to be technical and doesn’t really add to the point I am making.

In the current climate of zero interest rates for savers and massive “quantitative easing” I can not see any easy way to avoid the likely inflation that is on the horizon. Gold is a store of wealth but it has quite high storage costs.

I believe that this uncertainty is the reason for the current increase in interest in buying Bitcoin. No one, at least so far, is able to take it away from you. When you link this to the big profits that can be made in trading in “ALT coins”, it is not surprising that so many people are getting into crypto.

Bitcoin is designed to be immune to inflation. Let’s hope it stays that way.

Am I too late to invest?

January 16, 2021 | roger nunn

I find that people often want to start investing (in shares or in crypto) following a news item that talks about skyrocketing values. The news item usually gives headline figures showing how much someone has made or could have made in a particular market.

Most of the time the changes in crypto are much faster and much more extreme than in shares, so I this is the most interesting case.

Bitcoin is an good example. It is now close to its all time high (ATH) and so does that mean that I have missed my chance to invest?

No.

The price of Bitcoin (in US$) goes down as well as up so there is always likely to be the chance to make money. I am only talking about the simplest of trades, buying or selling at the current moment (spot).

All through Bitcoin’s history it has had ATH values, all of which have later been surpassed. There are well known patterns of price change, none of which is perfectly predictable but all of which are sure to happen.

One of the easiest to follow is the phrase “pump and dump”, where buyers (usually automated traders) keep on buying in a rising market, thereby pushing the price higher and higher. While it is rising you can sell at any time and make a profit. After a period of time, there will be a big sell off (dumping), where the price drops very fast.

So it is never too late to invest, just make sure that you sell before the next dump. By the way, choosing the right moment is easier said than done.

I’ve made a profit

January 14, 2021 | roger nunn

There is a very good feeling that comes when you sell coins for a higher price than you paid. The same thing happens in lots of businesses but few of them happen so quickly or directly from your phone. I like making a profit, but it doesn’t always work.

So let’s say that you have bought some crypto, watched its value 5X or even 10X and you sell it. Great, you have now improved your finances by making a profit. It is very satisfying if you are very clever (or just lucky) and sold just before the price dropped. However, it is unlikely. You are more likely to sell and then watch the price go on up and up, which brings a feeling that you should have waited.

Now you have your profit and feel successful. The problem is, what next? The difference between when you started and now is that your capital value has increased, but you still need to decide what to do to make more profit.

This is why you need to have a strategy that includes buying, selling, extracting profit and using it to build your portfolio.

My strategy is fairly simple. I don’t sell at a loss, and sell some of my holdings as the prices rise. Of course the outcome of this is that I accumulate various coins that have not risen since I bought them and that I never have a really big profit that comes from a large investment that goes up 100X.

I listen to various youtubers who devote a lot of time to forecasting the most likely big gainers. The ideal would be to find one who uses our money to make a profit. There are lots of people offering this possibility but it doesn’t fit with the idea “not my numbers, not my crypto”