The #1 Mistake Beginners Make Investing in Crypto
Bitcoin and altcoin investors tend to measure their cryptocurrency gains in US dollar terms. While this is fine to do with Bitcoin, your altcoin investments should always be measured against Bitcoin to determine whether or not you generated value for yourself.
If you aren't keeping track of how your performance would have been had you just bought Bitcoin rather than your current investments, you are measuring your performance incorrectly and may be destroying more value than you know despite the fact your portfolio has doubled in US dollar terms!
In any other asset class out there, investors compare their returns against a relevant benchmark. Whether it's the S&P 500 or the Barclays aggregate, there is always a way to measure whether or not you're under or overperforming. With cryptocurrencies, the benchmark is Bitcoin. But you shouldn't just think of your profits in terms of Bitcoin: You should also think of basic TA in Bitcoin levels too.
The reason for this is because all other cryptocurrencies see substantial amounts of volume from their Bitcoin cross-currency pair. That means support and resistance lines, channels, moving averages, RSI and many other indicators are all measured in Satoshi levels rather than USD. The USD value you see on Coinmarketcap is just for convenience rather than utility. I cannot give you the equivalent USD level, as some requested in my last video, as any given Satohsi level for a cryptocurrency will vary widely depending on price of Bitcoin.
I provide more specific examples in the video, including a failed trade of mine that (to this point) has destroyed over 50% of value! I hope you enjoy and as usual, I look forward to your thoughts in the comments.
@cryptovestor, You have about 3500$ worth of SBD in your account, You should sell it, I don't think it's going to last.
Explanation for high upvote : https://steemit.com/steem/@transisto/temporarily-pausing-my-anti-abuse-efforts-while-sbd-is-off-the-chart
This makes a lot of sense. If you account for the BTC not for USD you are betting on the crypto market, and this is the strategy I chose (and the strategy I think we should all choose if we believe in crypto and not just in making quick buck relying on the greater fool theory)
That outlook seems more like hindsight bias to me, Bitcoin is in such a hysterical environment that comparing other cryptos to it becomes meaningless. There's no fundamental reason for Bitcoin to be increasing at all, let alone quickly, which is not true of other cryptos on the market. I would much prefer to invest in value, or at least potential, neither of which Bitcoin has right now. Any utility value it could have has been destroyed by speculators filling up the blocks and driving fees up prohibitively high. The only thing it has going for it is the terrible "digital store value" case, despite not being used as a currency in any significant way. Since there's no value to store, almost all of Bitcoin's price is irrationally driven. I don't find any fault in being wrong about how far FOMO can drive Bitcoin's price, the risk of flash crashes or a complete collapse of its market cap is simply too high to have exposure to.
What you're saying makes a lot of sense, BTC is the medium of exchange, you buy and sell in and out of BTC, however I wonder what the IRS would make of this argument?
Would they just look at the apparent USD "gain" that you made and come looking for taxes on what is effectively a loss in BTC terms - if you were to convert back to fiat?
@cryptovestor why do some charts follow the pattern of USD and BTC at the same pace, but others like your ARK example don't? For example LTC and TRX track with both USD and BTC but if you look at ETH it's more like the ARK chart in your video.
I just watched this video based on you recommendation from the "2018"video. I appreciate the investing strategy you provide. But aren't you relying in Bitcoin to be the ultimate value reference? I mean, as it its right now, for example with Ripple that mooned in spite of Bitcoin falling, didn't investors in that specific case got more value comparing ripple to USD than measuring in satoshi? (even though it also increased in satoshi levels). What I mean I guess is, in the beginnings of 2018, do you still hold Bitcoin to be the ultimate value reference. I'm just getting started so, please, if my question is stupid just say (you or anyone else): YOUR QUESTION IS STUPID. But please explain why...
THANK YOU for explaining this concept so well! I'm a newbie in crypto and it's been so helpful to hear the explanation.
It's funny, this is what I ended up doing intuitively, simply because I couldn't wrap my mind around the btc/usd conversions. Pricing everything in BTC is the only thing that made sense.
It's also funny that I've done a couple of small trades and have NO IDEA how much I gained in USD! Really depends on the price of bitcoin that day. LOL