One Bitcoin is currently trading north $8,000 as of writing. The total market capitalization of all cryptocurrencies is over $240 billion.
Bitcoin (BTC) is up over $2,000 since last month alone.
Since 2013 BTC has gone up, up, up thousands of percentage points.
Cryptocurrencies like Bitcoin have made millionaires. An entire industry that didn’t exist ten years ago has a market capitalization of hundreds of billions.
Much of the focus of this website is in alternative investments. I think the stock market is overvalued and a lot of the financial products peddled by wall street are bad deals, at least for customer. The alternative investment du jour is without a doubt cryptocurrencies more specifically Bitcoin, which as of writing is trading northwards of $8,200.
Are you afraid of missing out on the cryptocurrency craze? There a couple ways to squelch this fear.
I’m not quite this excited about Bitcoin and Cryptocurrencies and I think it’s important to be informed
Option A: Don’t Own Any Cryptocurrencies
You don’t need to own any cryptocurrencies. You don’t need to own one Iota (that is a cryptocurrency) of Bitcoin, Litcoin or Lisk. If you don’t want to learn more about them, or speculate on them that is your choice. It’s a valid choice and it might even be a great choice.
But I’ve decided to make a different choice.
As I’ve said before I’m personally skeptical of cryptocurrencies as a long term store of value. I also think there are superior alternatives.
But the market has continued to grow and a lot of people think it is the next big thing. They compare it to the “dot com” boom that took place earlier in the century (there was also quite a bust if I remember correctly). I was skeptical of Bitcoin when it was $1,000 and $4,000 and I’m skeptical of it now that it’s over $8,000.
Option B: Take a Measured Approach
Bitcoin could continue to climb to the moon or it could go to zero. It could also do both.
Being on the sidelines and watching cryptocurrencies climb higher and higher is difficult. People like to buy things as they are going up. But buying out of fear of missing out is a horrible idea that will in all likelihood results in bad decisions and losses.
In my most reasonable mind, I believe that Bitcoin will not be the future of cryptocurrencies. I think it’s unlikely to go to zero but I think it will drop precipitously. I don’t think cryptocurrency technology is going away, but I think some other, better cryptocurrency technology will eventually supplant Bitcoin.
The nature of digital technology is that it becomes obsolete and is replaced by newer, better technology.
I don’t know the future. That is just my opinion and my best, most reasoned judgement of the technology and the facts as I understand them. I know I could be wrong.
So I own some cryptocurrency so that I’m not on the sidelines and I am benefiting from the rise in price. But I only own what I can afford to lose.
Is Bitcoin the Google or the Next HotBot.com?
Is Bitcoin the next Google or Apple? Or is Bitcoin the next hotbot.com or pets.com?
If you’ve never heard of hotbot.com that is exactly my point.
Is Bitcoin the next Facebook, or is it the next MySpace?
I don’t know.
I do think that from a technology perspective there are many other coins and cryptocurrencies that I think are superior to Bitcoin. I know that when I’ve tried to use Bitcoin as a medium of exchange it stinks. It’s expensive, especially when the network is busy, and it takes a minimum of 10 minutes, and usually 20-30 minutes.
There are other cryptocurrencies that are faster, more anonymous and more secure.
Bitcoin is lousy for payments and attempts to make it better have thus far not come to fruition.
Maybe it will be better for payments in the future. Or maybe, as some people argue, Bitcoin doesn’t need to be used to day to day payments, that it can just be a “store of value” like gold that doesn’t change hands very often.
I can’t foresee the future but I do see benefits in cryptocurrency technology. But at the same time this technology is, in my opinion, very difficult to value.
Is BTC expensive or cheap at $8,000? I don’t know. It seems expensive to me, but I’ve been wrong (or early) for years.
Will Bitcoin’s robust network, name recognition and first mover advantage allow it to maintain it’s dominance? I don’t know.
Fortunately I don’t need to know.
As I said before, no one needs to own cryptocurrencies. It’s a personal choice. But I don’t want to sit on the sidelines in case cryptocurrencies are the “next internet” or “next radio”.
So what are some details of this option?
How not to Fear Missing Out on the Cryptocurrency Craze: A Strategy
Part 1: Only buy what you can Afford to Lose
Cryptocurrencies are highly speculative and highly volatile. That is why I think it is very important to only purchase an amount of cryptocurrency you can afford to lose.
For example, I bought about .5 BTC on Coinbase at $7,000 before the Bitcoin segwit2x fork (which didn’t happen). I intended only to hold it through the segwit2x fork. I then watched as BTC fell to $6,000, representing a $500 loss. But because I had only bought what I could afford to lose I was able to hold through that dip, and when Bitcoin rallied back to mid $7,000 I was able to reduce my position at a profit.
If I had bought more than I could afford to lose, it would have been harder not to panic and sell to cut my losses.
Part 2: Diversify
If cryptocurrencies become mainstream and go up another gazillion percent, you won’t need to own that much of any one to make a handsome profit. There are over a thousand cryptocurrencies with a market capitalization over $244 billion. Of that $244 billion Bitcoin accounts for the lion’s share, at $140 billion and the top ten account for nearly $220 billion, or about 90%.
Some are going to go to zero and disappear, others might stagnate, and still others might continue to go up in value and over the next 20-30 years and represent a great speculation.
Some cryptocurrencies like “1337” (see https://en.wikipedia.org/wiki/Leet), MiloCoin, or the cryptocurrencies named after an English-language obscenities, are in my opinion not worth owning at all.
By owning a handful of the more promising cryptocurrencies, one increases the likelihood of owning one that really takes off.
Part 3: Goals and Discipline
If I had kept all the Bitcoins I bought several years ago, and sold them today, I would have made somewhere around $45,000. If I had kept holding them who knows how much they would be worth in the future. Instead, I’ve bought and sold Bitcoins and other cryptocurrencies over the years and probably made a few thousand instead (I’d have to check my tax returns to know for sure).
Throughout that time I’ve held some cryptocurrency and it has steadily gone up. One of my mains goals with cryptocurrency was not not lose money and I’ve succeeded thus far in that goal.
Is your goal with cryptocurrencies to try to pick the top? Is it to double your money and get out? Is it to buy and hold until Bitcoin goes to $100,000?
Because cryptocurrencies are so volatile right now I think it’s good to have a goal and then exercise the discipline to follow it. Decisions made based on emotion tend not to consistently work out.
No thanks, but I am interested in buying some Bitcoins on Coinbase.
You’re at a coffee shop drinking a latte, taking advantage of the free Wi-Fi and reading the latest article on HowIGrowMyWealth.com. But then you realize you forgot to pay a bill that is due today. So you login to your online banking website and pay your bill. You continue to sip your latte go back to reading the article.
What you just did is risky. Not reading the article of course, but using public Wi-Fi to send confidential information.
Unfortunately there are unscrupulous characters out there who will try to steal your personal information
Unsecured Wi-Fi in a public place is dangerous to your wealth and privacy. Someone else could have been on that Wi-Fi network and used a “sniffer” to monitor the information being sent and received between your device to your bank’s website. Thanks to HTTPS the most sensitive information from your bank should be secure–but with the right tools bad people would still be able to see the sites you go to and see any emails or instant messages you send.
It’s fairly alarming how much people can see with readily available tools. Eric Geier of PC World was able to view emails, instant messages, logins and websites of people on an unsecured Wi-Fi network.
The Importance of Security
I’ve worked in Information Technology for over a decade. I’ve worked for small businesses, startups, three fortune 500 companies, a non-profit and online-only virtual companies. I understand the importance of security. I also value my privacy.
While websites that use HTTPS to safeguard vital information is helpful–one of the best ways to protect your privacy when browsing the internet on an unsecured network is virtual private networking (VPN). It essentially creates a secure tunnel between you and the website you’re accessing and prevents malicious hackers from intercepting the data you’re sending and receiving.
As more and more of what we do is conducted online it becomes more and more important to take steps to protect your digital life.
LifeHacker.com has this to say about VPN:
The most important thing you need to know about a VPN: It secures your computer’s internet connection to guarantee that all of the data you’re sending and receiving is encrypted and secured from prying eyes.
TechHive does not mince words about the importance of VPN:
One of the most important skills any computer user should have is the ability to use a virtual private network (VPN) to protect their privacy. A VPN is typically a paid service that keeps your web browsing secure and private over public Wi-Fi hotspots. VPNs can also get past regional restrictions for video- and music-streaming sites and help you evade government censorship restrictions—though that last one is especially tricky.
To that last point, if your government is censoring information it is probably illegal and thus not advisable to use VPN to circumvent any laws.
VPN means Serious Security
The best security comes in layers. Any online banking webpage worth anything will have an HTTPS that secures your most sensitive information. But that won’t stop hackers from spoofing fake site and exploiting vulnerabilities in the HTTPS protocol. Even if you’re accessing an HTTPS site, your ISP and hackers can still tell what sites you’re going to, even if they can’t see all the data being sent back and forth.
A VPN provides an extra layer of security on top of HTTPS sites because not only does it encrypt the information you’re sending and receiving, but it also prevents anyone, whether it be your internet service provider or a malicious hacker, from viewing the sites you’re going to.
Using VPN helps ensure that hackers and other can’t view your online activity.
I’ve been using a VPN to secure sensitive data while on public networks for years. There are many VPN providers but I use TorGuard. They are fast, affordable and they don’t keep any logs. You can sign up for TorGuard here: https://torguard.net/aff.php?aff=3596
And for a limited time you can sign up for 2 years of secure browsing for just $49.99 by using the above referral link and then using the following coupon code: TGLifetime50.
Protect your Online Wealth with VPN
Banking sites, brokerage accounts, email accounts: these are all at risk if you access them on an unsecured connection like an airport, library, hotel or coffee shop. Using a VPN in these high risk places ensures your valuable personal information is safe.
You owe it to yourself and your loved ones to educate yourself on Virtual Private Networking (VPN) and reduce the risks you face when accessing confidential information in via public Wi-Fi.
TorGuard is one such VPN provider that I use and recommend. Take a look at their services and if you decide to sign up be sure to use the coupon code TGLifetime50 to get 2 years of secure browsing for under $50.
8 November 2017 Update: The fork that was supposed to happen has been called off. It was decided there was not enough support.
Bitcoin is likely forking again as a result of new code known as Segwit2x. Forks are negative for a cryptocurrency from a store of value perspective because they are essentially inflationary. However, this could present an opportunity similar to when Bitcoin forked to create Bitcoin Cash (BCH).
In theory, if a cryptocurrency hard forks it should reduce the value of one currency by the amount gained by the other. So if the market cap of Bitcoin is $6,000, it forks, and the new crypto is $500 the “original” BTC should be worth $5,500 all else given. This is similar to how dividends work with companies, where the value of the share is automatically reduced by the amount of the dividend. Now there are two cryptocurrencies instead of one, which compete for market share.
However, one of the last times Bitcoin had a significant fork, the advent of Bitcoin Cash, both Bitcoin and Bitcoin Cash went up. I think this is illogical, but the market will do what the market will do.
I’m skeptical of Bitcoin in particular and cryptocurrencies in general. However, I’m willing to try to profit from them provided I only use money I can afford to lose. People who bought into bitcoin when it was trading for a few dollars have made a fortune with BTC trading upwards of $7,000. A new hard fork is scheduled to happen on November 16 called Bitcoin2x (B2X). It is another attempt to address some of Bitcoin’s shortcomings.
Bitcoin Cash and Bitcoin Gold are some of the recent Bitcoin Forks
This fork is somewhat unique because it might not be a fork at all, at least practically speaking, because everyone might switch over to this new Segwit2x code.
But this could an opportunity to get some “free” coins–albeit not without significant risk. Simply buy some BTC on coinbase and then transfer them to your account on GDAX (run by the same folks who run Coinbase). GDAX has already indicated they will credit accounts with BTC with an equal amount of B2X.
So, if you were to have 1 BTC, after the fork you would then have 1 BTC and 1 B2X. It is my opinion that B2X will probably not be worth as much as the BTC, but will still be valued and it is “free” money.
Some of the Risks with Segwit2x
There is certainly a lot of risk with cryptocurrencies and they increase during hard forks. Here are the possible scenarios:
1) Bitcoin forks, there is now BTC and B2x.
2) Bitcoin does not fork, B2X is not adopted
3) B2X is adopted, and everyone switches over to it
I don’t have an opinion on Segwit2x as a technology at this time. In either of the three scenarios the desired outcome (as far as my strategy goes) is for the overall value of the BTC and or B2X to be higher than it is now.
However, it is possible that the fork does not go well and in the ensuing chaos both the price of Bitcoin and any forked coin goes down, or bitcoin goes down, or the new coin goes down.
So it’s certainly not a strategy for widows and orphans. But I think it is worth considering. I took this approach when BTC forked to create Bitcoin Cash (BCH) and it worked out for me.
It’s important to make sure you have BTC in GDAX or another location where you will be able to take advantage of the fork and that your BTC is there by the 14th or 15th (fork will likely happen at some point on the 16th).
As always I’m not recommending any particular course of action or strategy. You need to make up your own mind.
If you already own bitcoin, you might consider ensuring that they are held in an exchange that will support B2X, so that you get this “dividend” as some are calling it. If you don’t have any Bitcoin and would like to buy some, you can do so AND at the same time support this site. Simply buy $100 or more of BTC using this Coinbase referral link. If you do we’ll both get $10 worth of BTC. Not bad.
The Bitcoin Segwit2x is risky, but recently it seems like all news is good news for Bitcoin and despite large setbacks Bitcoin continues to rally higher.