We had a fantastic ride up in the last month of 2017 for all cryptocurrencies.
My newly created crypto portfolio from end-Sep was already up +500% by then, mostly thanks to XRP which went from $0.20 to over $3 in a matter of weeks. As I told my close buddies, this was indeed the forming of a bubble and I was trying to enjoy the ride while it last. My biggest mistake was not to take some profit as I was greedy. I was also on vacation most of Dec, away from my PC and not being able to place orders securely.
My strategy at the start was to go into the top 10 cryptos to maximize the bang for the buck for my initial capital. I figured that the biggest ones would have sufficient liquidity to get in and out. By then, Bitcoin (XBT) was also getting too expensive in absolute value to initiate a meaningful new exposure. The others had a much lower price to enable me to create a sizeable position.
The more research I did on cryptos, the more I realized the shortcomings of Bitcoin relative to the newer ones. They were better than XBT in terms of speed, transparency(and/Or)secrecy and quick adaptation to newer applications. Etherum (ETH) was one such competitor that was created by its 23 years old founder. I read about the hard-fork he did recently to recover from a hacking/thief incident. This, in turn, created another new crypto called ETC (Etherum Classic). ETH was already $288 per token by the time I bought it in late Sep. It is currently around 1k.
Ripple XRP was the other one that showed a lot of promise as many banks were open to adopting it for new blockchain initiatives. I decided to bet most of my “ready to lose it all” capital on XRP as its token cost was only 20 cents. The main setback was that it does not have a limited maximum amount like Bitcoin (21 million tokens), but its potential supply was quite huge (running into the billions).
The crypto euphoria ends abruptly by the second week of Jan as a series of negative news took a toll on it. Asia was the speculative fever central of cryptos worldwide and a number of Asian governments had started to announce that they want to control or shut down unlicensed exchanges. Korea was the one country that was especially crazy over cryptos and their exchanges were usually commanding a premium of as much as over 40% in terms of prices. KRW was a very much controlled currency and I could see active pumping of prices happening every Sunday afternoon (cryptos trade 24 x 7). Coinbase and other American OTC exchanges also announced that they will begin to exclude Korean related OTC prices from their price aggregators. This only serves to accelerate the downward spiral of prices, up to 50% for some within a week.
Where do we go from here? I still strongly believe that BlockChain is here for the long term and it is going to smash and destroy the way businesses are conducted. Cryptos are just a by-product of this earth-shattering movement that will be coming. The very idea that governments think that they can control cryptos is just this – wishful thinking. Its very existence was borne of a desire to escape from fiat currencies which central banks have been abusing for years since the GFC days of 2008. Very soon, they will start to realize that they cannot control something that cannot be controlled, does not respect borders and which is manned by the masses in a fully transparent way. The open ledger of blockchain managed by millions of individuals will trump over man-made central banks.
My strategy now? I have been expanding into more cryptos, having gone into 16 types to date. Some can only be traded via Bitcoin and ETH crosses, hence it was also an opportunity for me to take some profit in XBTUSD/ETHUSD and reinvest the funds elsewhere. Kraken has been a bit buggy of late, so I have also initiated the process to open another account in Bitfinex to hedge my bets on unregulated exchanges just in case. I am still bullish on XRP, my biggest holding. I hope that I can take some money off the table if it reaches its old highs again. As I have told my friends, I may want to recoup back my initial capital and then keep the rest of the positions to partake in the crypto journey.
We can see that various asset classes are starved of volatility in the era of easy money and hyper asset inflation. Cryptos are the only game in town that provides this adrenaline rush of Vols. We will see more opportunistic players coming into this asset class in 2018 to try to profit from it. As more people come into this area, we will see a validation of Blockchain and cryptos as the next evolving step of a big technological trend.
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