Discovering Crypto-Currency

Discovering Crypto-Currency
August 18, 2017

The flawed model.

As a twenty-something kid wandering around in the world, I believe we commonly find ourselves lost in the battle of life. Our entire existence to this point has been based off, pretty much, one model: go to school, go to college, get a job. It’s the kind of thing my father used to preach to me as a kid. Waste your childhood in school so you can get a better job – he never mentioned how open ended this model is. It never actually leads to satisfaction of any kind; and, what about the fact that every single other person is following the same plan?

Since about seventh grade, I have been interested in investing. My social studies teacher showed me his ScotTrade account, and the charts were extremely fascinating. I began reading books, starting with “Investing For Dummies”, swearing I would stake my live savings in one of the various markets. As I started to grow up, though, I began to wonder what investing actually is. When you put your money into the market, you aren’t getting anything in return, so who is benefiting and who is losing? Since there isn’t a physical asset or something worth its’ weight in fiat (printed currency), you’re just gambling against numbers that rise and fall based on….nothing?

After preparing for a couple months, I decided against investing in stocks altogether. An about-face was made, and FOREX was discovered. It was difficult to understand stocks and commodities, since the entire thing is based on imagination; but, currency pairs, I could understand that. A friend suggested babypips.com, where anyone can sign-up for free trend analysis classes online. I completed the entire offering, and began “paper-trading”, or trading with a fake account against the real FOREX market. Truth be told, I did horribly, having lost about two-thousand fake dollars in the JPY/USD market. While I understood pennants, bulls, bears and Fibonacci retracements, I simply could not figure out why the market was moving the way it did. It felt impossible to catch a break. FOREX had shit on me, just like it does to 90% of everyone else who attempts day-trading.

Once again, I was without a platform for investment. My hard-earned capital sat stagnant in a “savings” account, gaining less than .01% interest, American-bank style.

Long-term investing

After a completely failed venture into day-trading, I became aware of another form of investing. While most people try to earn a living from various markets by trading multiple times every day, there is a small minority of traders referred to as “holders”. These people are playing the “long game” by moving as much money as they can and simply waiting until the market mirrors what they want to see. You see, in trading, the only way to be defeated is to click the sell button at a loss (unless you short the market. If you short, you have balls made of steel). With this as your theory, all you need to do is be patient and hope for a little liquidity.

Long term. Got it. But what do I “go long” on?

In 2013 I got orders to leave Japan and transfer to Washington state. I decided to take thirty days of leave at home near Chicago, and because it was winter, I had a ship-load of free time. After days of endless clicking around online, I started to see information about Bitcoin. Allegedly, there was a peer-to-peer exchange of wealth that did not include any fees, was anonymous to use and completely decentralized. Being pretty suspicious of the government in general, this sounded like a really interesting idea. I downloaded a program called GUIminer and began “mining” bitcoins; without a fraction of understanding anything I was doing.

After running GUIminer for a few days nonstop with complete disregard for my father’s electricity bill, I started to find stories about what Bitcoin was being used for. I was completely ignorant of the “darkweb” and was flabbergasted to read about online drug exchanges and sex-trafficking. For fear of being raided by the FBI or something, I deleted GUIminer along with whatever it was that I successfully mined.

Later that same year, Bitcoin exploded upward from around two-hundred bucks to more than 1,000. Though it was just a “bubble”, Bitcoin had shown what it was capable of. If I had a time machine at my disposal, I would head back to that same year (or before) and stake everything I have on Bitcoin. Better yet, I’d use my near-perfect credit score to go tens-of-thousands of dollars into debt to buy Bitcoin; because today, in 2017 bitcoin is more than three times the value of one ounce of gold and it will soon approach four. That is the type of investment I want to make…something that has the ability to return multiple times the amount of money I initially invested. No need to watch charts all day, no need to take a class to understand fucking Fibonacci (although, I would encourage you to do as much research about this stuff as you can).

What is cryptocurrency?

Various cryptocurrencies have come a long way from their days of being utilized on the darkweb. While I am sure that’s still a possibility, the technology is becoming more and more accepted. Along with that, it can also be utilized to purchase goods from certain websites. That said, to really understand what the technology is capable of, you need to put in the effort and do some reading. For now, here’s a pretty brief summary of what the block chain is and how it works: http://mitsloan.mit.edu/newsroom/articles/blockchain-explained/

The way I explain it to my nay-saying friends and family is even simpler. Cryptocurrency is like a streamlined evolved version of PayPal, or any other internet-based money moving services. The difference is there isn’t an overhead company chopping away at 12% every time you transfer money. In fact, with the exception of an extremely small network fee (like less than ten cents), there are no fees to utilize crypto. The actual fees go to miners, who build super-sick computers that actually transfer your money on various crypto networks. Most cryptocurrencies are perfectly safe to use. In fact, pretty much the only way to get screwed over nowadays it to let yourself get screwed over. I’ll go over some resources and various ways to stay safe below.

So you might be interested, but do you start?!

Well, as I mentioned above, you should do some independent research before jumping right into it. If you like forums, bitcointalk.org might be your cup of tea. If you prefer learning from youtube, I would suggest a couple channels: Crypt0, Louis Thomas, and The Dollar Vigilante (TDV is absolutely bat shit crazy, but he is pretty knowledgable and makes great points). If you don’t like forums OR youtube than I don’t know what to tell you other than maybe cryptocurrency ain’t your thing, which is perfectly acceptable.

Once you have conducted some research and you made the decision to jump in, I would check out coinbase.com. Once you make an account, you can start trading fiat for three promising cryptocurrencies: Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). Coinbase is great to start out on, and they even have a phone application. After you start buying larger amounts, or maybe day-trading, the fees become pretty excessive, however. After a certain point, you’ll want to move to a real exchange like Gemini, GDAX or Kraken. These exchanges allow you to use trading friendly tools like stop-losses and various ways to order.

Do not leave your currencies on the exchange. This is something many newcomers overlook. The sheer excitement of investing for the first time, or maybe diversifying with crypto, leads many people to just buy and walk away. While cryptocurrencies are perfectly safe, leaving them sit on your account in an exchange is not safe. When you log into your account, all you use is a password. If your computer has a virus on it, someone could absolutely obtain that password. Furthermore, the website obviously knows your password, which leaves it susceptible to DDoS attacks and whatever else.

If I shouldn’t leave my cryptocurrency on the exchange, where should I put it?

There are many options for various “wallets”. Most of them are software based, and I don’t really think they’re that much safer than just leaving your currency on the exchange. My preferred storage method is with a hardware wallet. Hardware wallets are easy to use, plug into a USB outlet, and usually have no internal power source; making it impossible for someone to get into the wallet. I have personally handled and used both the Trezor wallet and the Ledger Nano, and I believe either one make perfect options for storage. They are both about the same cost and, once you provide the initial cash, will keep your cryptocurrency safe for many year. Also, it is worth mentioning that if you lose or destroy your wallet, both the Trezor and Ledger come with a “recovery seed”, which will allow you to recover your wallet safely and securely; even if you no longer have possession of your original hardware.

Here’s a photo of the Trezor, just so you don’t have to strain your brain anymore to imagine it:

Trezor.jpg

Lastly, I would like to offer a great website that provides charts for checking out pretty much every currency available. cryptowatch.com provides a simple platform with all the tools you could really want for charting, if you’re into that kind of thing. Understanding charts and what they’re telling us is a big part of investing in any market, so I won’t really go into that.

The entire summary of this post.

Mainly, I wanted to encourage people to consider taking a look at cryptocurrency. It will change the way humans do business with one another, and I believe the currencies are here long-term. The goal is to convince family members to purchase cryptocurrency as soon as possible as a means toward financial freedom in the future. That said, I also really enjoy learning about block chain technology. Perhaps this outlet will allow me to learn more.

I bought my first Bitcoin at around 1000 USD and sold them at about 1400 USD. That was a pretty decent gain, but if I had “played the long game” I would have about 15,000 right now. Which is a tough pill to swallow, but it’s PEANUTS compared to people who bought stacks of BTC under 10 bucks apiece and are now taking profits in a post-4K bitcoin world. However, I do believe Bitcoin and other cryptocurrencies have just barely started to scratch the surface of their true potentials. The sky is the limit and now is the time to get in. You won’t be one of the early birds, but it’s comparable to helping Henry Ford purchase his first assembly line; their is outstanding potential.

Now get out there and buy some crypto. -Error