Vlad's Diary: The Loser of the Crypto Boom (December 17th 2017)

It's pretty common nowadays to surf the internet and stumble upon news articles about Bitcoin billionaires and their unexpected rise amongst the economic and financial elites. By now, a large majority of us already knows the story of economic libertarians like Erik Voorhees and uncanny big shots like the Winklevoss twins (whom we best know from the movie "The Social Network", as recent history recalls them as losers of the Facebook deal).

But what about the rest of us, the small investors and traders who arrived rather late at the party and are subjected to the mercy of the bigger trading whales? To be completely honest, investing in cryptocurrencies (at least the top 20 coins in terms of market capital) is a lot like blind faith (mainly thanks to the greedy financial institutions involved) and you can never know what's going to happen next.

Sure, the last three months have been absolutely crazy and they brought massive price increases among all coins. It was all thanks to the incredibly rapid growth of Bitcoin, and the headlines about the king of cryptos have brought new and fresh money into the game.

However, it would be foolish to assess that the $500 investment of the average Joe really make a difference in the meteoric increase. Sure, every sum of money matters, but big movements happen only when dozens of millions are being traded. It's big sharks like financial institutions and banks that really shift the price and determine how and when the price increases, as the initial believers are usually a constant of holders who stick to their commitment through the good and the bad.

And this is how we get to my story: I'm just a regular guy who happens to interested in the latest technologies and write a PhD thesis on internet governance.

On a sunny day in June 2017 I've seen an advertisement which promoted Ethereum and mentioned that the price has increased a dozen of times within half a year. I took my time do to a little research, I've read just a little bit about the potential of the cryptocurrency, and I've quickly discovered the feeling that I would soon find out that we cordially call FOMO (fear of missing out).

Without hesitation, I've opened an eToro account (don't judge me, I didn't know any better at the time) and invested some of my savings into the promoted cryptos. I remember very clearly that I had to choose between Bitcoin (which at the time was around the $3000 mark) and a bunch of other "alts" like Ethereum, Ethereum Classic, Litecoin, and Dash.

My first mistake, that I somehow still regret, was that of buying the news about Bitcoin being a bursting bubble that will soon become worthless. According to my mindset, I've bought two Ethereum coins at the price of $370 - which at the time was the all-time high.

But the months that followed were not very friendly to ETH and I've soon learned that my money was on the wrong horse. I've tried to remain calm, ignore the fact that I was seeing red without signs of recovery, and try not to regret the fact that the same money could have been doubled in a couple of months if I chose BTC, LTC, or DASH instead.

Given the fact that I've held the Ethereum coins for a couple of months, I was glad to get rid of them with a $1 profit and move onto other ventures. I bought some BTC at the price of $4556 and lost my money while I was in vacation just because the price dropped by $1000. It was all due to the "stop loss" system on eToro (and probably every other trading platform which includes stocks and commodities), and I was genuinely upset that such an unfortunate event had happened. It really wasn't much money, but it was enough for me to get motivated to invest into something profitable and break even with this deal.

However, my bad decisions have just continued to roll. I bought XRP (Ripple) during the Swell conference while it was close to an all-time high, and had to hold the coins for another 2-3 months until that threshold was once again reached. My experience with the slow growth of ETH and XRP has made me ignore them in December 2017, and I couldn't foresee that they would rise exponentially. Oh, if only I held the coins and didn't overthink the situation based on meaningless graphs and patterns!

I've learned that the world of cryptocurrencies is wild and unsafe.

Unlike stock market assets where you have a fixed trading schedule, countless resources and analysis that are based on known facts, and slight fluctuations, cryptos are being traded 24/7, their predictions are purely speculative (and usually serve somebody's persuasive and greedy agenda), and their volatility is second to none.

Just last week, I've lost 30% of my money when I shorted XRP. I thought I knew the coin very well, was aware that Ripple artificially issues more currency for the sake of keeping the price stable, and thought the price would drop to 0.30 quickly. After all, the graphs and patterns indicated a lack of support and an average market capital that never fluctuates beyond the 10% mark. XRP seemed like a stable currency that's immune to pump and dump tactics.

But in a couple of days, the price of the coin has increased by over 200%, and once again there was no way for me to increase the stop loss threshold. At 0.$72/unit, one third of my investment money has magically vanished from my account, thus marking the biggest loss I've ever suffered.

At least now I know better and will probably never short cryptos again. It's a lot easier to just buy, hold, and wait for the price to reach a profitable era - well, at least in this early phase when the number of adopters is proportionally increasing and apps like Coinbase, Kraken, and eToro can be found among the most popular downloads on Android and iOS.

The relevant question now is: "What happened to the money?". Well, at this point I like to regard the crypto affair as a zero-sum game: there is no centralized manipulation of the price and the corresponding amount in fiat currency that we pay for a coin is determined by the scarcity factor and the supply-demand ratio.

So the small profits I've made had come from the irrational trading behaviors of other crypto enthusiasts, and my losses have gone to the wiser ones. It's a long chain which favors the one with the best strategy in terms of acquisition price and sell planning.

What I like to think is that my losses have turned into something good-natured.

I know for a fact that my small contributions have slightly inflated the market capital of the coins I've bought, but I wouldn't want to think that some big financial institution like JP Morgan is going to grow thanks to my foolishness and recklessness.

Also, I don't mind helping Bitcoin billionaires reach their privileged statuses, as long as they finance blockchain projects through ICOs (Initial Coin Offerings) and use their wealth for charity. This way, the wrongful predictions that I've made on the market would turn into a system of redistribution that takes the money where our broken society needs them to be.

Nevertheless, I know that this is a lot of wishful thinking. When I saw that Bitcoin has exceeded the $10000 threshold, I was actually happy because I knew that the early believers have reached the stage when they can afford to finance their dream projects. Because the original crypto investors aren't just a bunch of greedy individuals who can't wait to cash out their wealth: they are libertarians who want to disrupt the banking system and governments by creating a world where intermediaries (i.e. "the middle man") is completely taken out of the scheme through redundancy.

In a way, every hopeful $100 that we use to buy a Satoshi (or some other coin/subdivision) contributes to the growth of the system. And if we look at it this way, then maybe that we can tame our greedy overnight enrichment-seeking selves and think of the greater good. Cryptos can be an excellent way to redistribute wealth, but we should always be weary of the big banks and financial institutions that own a large part of the coins.

The whole story about cryptos and their rise into the mainstream is reminiscent to the fight between David and Goliath: one has a smart technology, while the other has the brute strength and proven efficiency in fights. Whether or not the good guy ends up winning and creating something greater, that's up to us. And that's why it's important to remember that we, the losers of the crypto game, matter!