Introductory post - Chapter 1 of my guide: "Crypto investing for dummies"

Hi, My name is Steve Kelly. I live in Sydney Australia, I enjoy surfing and investments I first invested in bitcoin when its price was about USD300. I have followed the crypto market since 2011. I made millions of dollars and lost hundreds of thousands. I want to share with you this guide I'm putting together. This will be the first chapter.

Chapter 1

Money Surfers

The first thing you need to start investing in the crypto currency market is to remember to only invest what you can afford to lose. Only invest savings that have been sitting in your bank account for six months or more and you don't know what to do with. You do not need a low of capital, you can start with USD1000. Despite what some people may tell you, all investments carry some degree of risk, the larger the risk the larger the reward. Similar to surfing, big waves are the best to catch because they are the most fun. However, they are also the most dangerous.

At this point in time investing in crypt currencies is potentially speaking the most profitable investment and trading activity a normal person can do. The crypto currencies’ market for traders is like the Nazareth Portugal for surfers. All big wave surfers aspire to catch waves there which can be over 40 meters high. It is virtually impossible to paddle such waves; therefore, surfers must be towed-in. In October 28, 2013, Brazilian big-wave surfer Carlos Burle might have ridden the largest wave ever. It is estimated the wave was 30.5 meters. Similarly but in a completely different setting, the early adopters of crypto currencies have seen a ROI of over 40 times.

There are two reasons why traders enjoy the crypto market. The First is volatility, professional traders and seasoned retail traders alike, pursue volatility. The crypto market sees fluctuations of 10 to 100% on a daily basis. In 2017, several crypto currencies have seen increases of over 1000%, early adopters’ who held their investments have been rewarded handsomely. However, several people lost money because they didn’t know what they were doing. They were trying to surf when they could not even swim. All crypto currencies will see massive fluctuations on both directions and severe price adjustments and can potentially drop the value of coins more than 60% in a week. Despite this, in the long term all cryptos have presented a growing trend.

While risk adverse people may avoid assets such as crypto currencies, for traders there is no better place to be right now. Expert traders can generate profits of over 60% per dollar invested in the short term and in the long run these profits can increase way over 100% per dollar. As a matter of fact, the best gains have been achieved by those who bought and held for longer than 3 months. However, cryptos may not be the best option for those who panic because their investment dropped 20% in a day. To deal with the massive fluctuations in prices one needs to have a cool headed approach and have ambitious but realistic goals.

There has been much debate about the nature, usefulness and most importantly about the valuation of crypto currencies. The most popular example, is bitcoin, to some people it is nothing more than a scam and they cannot justify the value of the coin; to other people bitcoin should have an ever larger price. If we analyse how value is given to most things in society, we will realize there will always be a group of people who cannot see the value in things, while other people see a lot of value in the same things. For example, to some people designer hand bags are worth thousands of dollars, while for others a cheap handbag will do. Some people will pay hundreds of dollars for bottled water while others will drink from the tab. Your pet dog or cat may be invaluable for its owner while for other people they are just a regular dog or cat. The point is that value is determined by what people are willing to pay, this text does not pretend to influence your perceptions of value. If for you cryptocurrencies do not have value then that’s your opinion. However, if you believe cryptocurrencies have value and the potential to change the world please continue reading as I will provide you with a roadmap on how to grow your capital investing in cryptocurrenciess.

The first thing we have to consider when thinking about the future is to look back at the past and historical trends. In the long term most cryptos have presented a growing trend. While the future cannot be predicted, we can estimate what is going to happen by relying on statistical models and looking at what happened in the past. However, before going further it is necessary we examine the most important cryptocurrencies individually as they can be very different. While some cryptos solve real life issues and have the potential to change the world, others are nothing more than a scam or a pyramid scheme. Below there is a summary of the most important crypto currencies starting with bitcoin.

Bitcoin

Bitcoin is the first crypto currency; it came into existence in January 2009. There is a lot of controversy regarding who created Bitcoin. The only known facts are that it was created by an entity or person named Satoshi Nakamoto. There are several theories (some are quite crazy) about whom or what Satoshi Nakamoto is. However, regardless of its creator, the idea of a decentralized, global currency based on a public ledger revolutionized the idea about what money can be and do. While the real purpose behind of bitcoin remains unknown, the vast majority of people believe that its purpose is to serve as an electronic payment method that does not rely on banks and allows international transfers instantly and with lower fees compared to payment methods such as Western Union, Money Gram, Paypal, etc.

Despite the controversy surrounding bitcoin origins, the coin has developed to become a new type of asset. That’s right bicoin is a new class of asset, as the bitcoin network grew, the number of users also grew, this made transaction slower and increased transaction fees. While the transaction fees are still competitive for big transactions, microtransactions are not viable anymore. The evolution of the coin was such that bitcoin can no longer be used as a currency in the sense that it is no longer convenient for everyday purchases. Instead, it has become a wealth transfer method. What this means is that large amounts of wealth can be transferred quickly and in a cost efficient way. In simple words, this means that bitcoin is no longer good to buy chewing gum but it is better suited to make big purchases such as cars and or real estate. It can also help you transfer your wealth internationally. If you constantly travel and have income streams in several different countries, converting your fiat currency to bitcoin is a great method to cross borders with your wealth.

Bitcoin opened the door to the development of blockchain technologies and applications. Bitcoin also inspired many blockchain entrepreneurs to create their own coins. ( Vitalik Buterin (Ethereum), Charlie Lee (Litecoin), Chris Larsen (Ripple and Stellar), Jackson Palmer (Dogge Coin and Verge), etc). While some claim we are at the start of a financial revolution, others believe the fad is going to end soon. What do you believe will happen? Well I do not have a crystal ball and cannot predict the future. However, in the long term bitcoin was a great investment and early adopters and holders have become millionaires and in some cases even billionaires. There are several predictions that argue the price of bitcoin will continue to increase. This means if the demand keeps growing at the same rate as it’s been growing the price of a bitcoin will increase in terms of fiat currency. There are two reasons for this growth. First fiat currency loses value over time . This is what it’s known as inflation, the purchasing power of fiat currency drops overtime. Second, bitcoin supply is limited, once all coins have been mined there will be no more left. If the demand continues to increase, this will drive the price of bitcoins further up.

Challenges

While there are many reasons that justify a further increase in the bitcoin price, there are several challenges. The first challenge to bitcoin adoption is the government. There are two main reasons as to why Governments represent a challenge to bitcoin adoption and growth. First, Governments want absolute economic control, therefore, when a revolutionary idea grows to a market cap of billions of dollars. It is just natural that governments will want to take control over the idea and retain financial control. However, if they cannot get control then they will try to ban and make crypto currencies illegal. Bitcoin and crypto currencies are currently illegal in the following countries: Algeria, Bolivia, Ecuador, Kyrgyzstan, Bangladesh, and Nepal.

Second, due to bitcoin and all cryptocurrencies not being regulated, there have been several issues and criminal activities linked to crypto currencies. For instance, several exchanges have been hacked and coins were stolen by hackers, investors who got scammed, and people who used the coins to purchase illegal stuff such as drugs and weapons. While most of these negative consequences or uses are not exclusive to bitcoin as most crime has actually being financed by fiat currencies such as the American Dollar and the Euro, it gives governments the perfect excuse to intervene and try to take control over crypto currencies. The most famous criminal incident regarding bitcoin dates back to 2013. Back then there was an illegal market placed named the Silk Road on the dark web. The people trading in this criminal marketplace required anonymity and privacy. Therefore, bitcoin became the currency by default for transactions in the Silk Road black marketplace.

The third challenge to bitcoin adoption is lack of education and reliable information about investing and understanding the market. To understand the market one must first know how the market behaves. For a surfer there is nothing more important than being able to read sea and understand the wave patterns in the ocean. Similarly an investor must be able to read the market and know when a wave is coming so he or she can be ready to catch that wave. While bitcoin has been discussed by mainstream media several times, figures show that in United States and other western countries most people still do not really know what bitcoin or cryptocurrencies are. Thus, there is a large proportion of the population that has no idea what this thing is and those who are aware are not able to understand the market. Furthermore, they are overwhelmed by number of ICO and Scams that it is difficult for a bitcoin enthusiast to really know what to do in this volatile market.

Despite all the challenges, bitcoin has showed that it is a resilient asset as it has seen more scandals and crashes than any other asset. While past performance is not indicative of future performance. Bitcoin has survived and thrived. For example, bitcoin saw major crashes due to the Silk Road (2013), Mt Gox bankruptcy (2014), Chinese ban on ICO (2017) and Tether auditing (2018). My prediction is that Bitcoin, like it did in the past, will overcome any challenges because it is the future for storing value and trading large amounts of wealth and the trend seems to be massive adoption. I dare to say that crypto currencies will one day become mainstream and every people in the world will have some type crypto the same way everyone in the world has access to some money. That being said, bitcoin is just the entry door to the crypto market as there several other coins that solve real life problems and have the potential to change the world.

Next week I will post the next chapter