Q&A no.1

I’ve been getting a few questions regarding my crypto life/experience, so I figured I’d answer them here for everyone to see instead of burying them in the comments. So here are the first ones.

What coins do you have in your portfolio?

I have a total of 35 different investments broken down into the following:

• Profit takers
• Moon bags
• ICOs
• Permanent holdings
• Passive income

This is actually more than I would like, and I tried to cut down a few weeks ago, but there’s a good reason behind each of those investments – 99% are solid projects in early stages that have huge potential for growth. I break these down as follows:

• Profit takers – coins that I expect to rise steadily for some time (e.g. AION, VEE, ITC). When these coins hit a pre-determined figure I sell 25% and use the money to reinvest in other projects that have more potential for growth, or just sell to my Bitcoin stash. If I think they are close to reaching their potential, at least in the medium term, I sell all but a moon bag.

• Moon bag – a small investment which has a great idea behind it (HST, PYLNT, NAS) and has the potential to be huge long term, but is often very niche. These coins could go up many thousands of times if the project hits, but this is not guaranteed by any means, so I only put a small amount in. Moon bags are also comprised of the last portion of a profit taker, just in case it flies. I don’t keep an eye on these coins unless their profit goes up exponentially, then I consider if/when to escalate it to a profit taker.

• ICOs – these are coins that are tied up in ICOs and I’m either waiting to receive them or they haven’t yet hit exchanges, so I can do nothing with them for now.

• Permanent holdings – I have three coins, NEO, BTC and ETH, that I always hold. BTC is an essential for me, whatever the weather. It still has the power to wreck the alt market, so it’s best to keep it both as ballast for my overall portfolio value and also because at the end of the day it is Bitcoin, and it could well be worth a small fortune as time goes on. I keep a stack of ETH both for long term value and for ICO contribution, and the same with NEO.

• Passive income coins are coins that I have locked away for masternodes or other forms of passive income (PPP, VEN, INN). If you’ve read my other posts, this is something I am looking more and more into.

In terms of the actual coins I hold I’m not going to list them all, but if I tell you that currently my biggest bags in terms of USD are BTC, ETH, VEN, NEO and DRGN then you can see I usually go for quality coins with real potential. I am bagholding one coin (PAC, absolute travesty), but I’ve learnt over nine painful months to stick to quality.

How did you get to £250k?

It would be easy to say DragonChain, and to an extent this is true. This chart shows my portfolio value at the end of November last year – guess when DRGN launched?!

So obviously DRGN made a huge difference to my portfolio value, but I have built on the success of that to get to this point. To date I have only invested about £3k, so I’ve proved you don’t need a huge stash to start off with. Here are the three overall strategies I would suggest give you the best chance of making the kind of returns I’ve made:

Good coins early - find good coins with real world application and big potential, and find them early. Search social media, fine reputable commentators, take their tips, research these coins yourself, and, if you like what you see, put in a little money. If the coin begins to gain traction as you expect, invest more. For example, I bought some VEN at $0.24, more at $0.87 when it got bigger and yet more at $1.50. When I realised how big it was going to be I bought a masternode while it was under $2.00, and decided to leave it at that.

ICOs – At the time of writing we’re going through a golden period for ICOs. With the improving technology there are some great ICOs coming out that have the potential to make you many times your investment in a very short space of time. Use the same method as above to find the best potential ICOs and get in as early as you can – pre-sale is best, but often ICOs don’t get much exposure until crowdsale time. Get whitelisted for all the top projects; you can always decide to invest or not later down the line. Don’t invest everything into ICOs as they are the riskiest option – they can fold, they could be a scam, or they could launch in a bear market and crash. If they are quality however, they will rise out eventually. Have an ICO fund and know ahead of time how much you are going to put in.

Don’t trade – a small trade here or there can be a fun adrenalin boost, but the most valuable piece of advice my experience has taught me is that hodling a good coin gets you far better results than trading multiple coins, and it is far less stressful. Have a trading fund, and if you find you’ve got the gift then go for it, but the chances are you will end up losing out or making marginal profits when you should have just held.

I have almost 10 ICOs on my list, and when coupled with coins like AION, VEN and NEO, as well as my moon bags, I have very strong potential for big growth in the next few months. After the ICO coins hit the exchange I either sell if I’m happy with the profit (apart from a moonbag) or keep them and hold them as profit takers.

As an overall strategy my aim is to sell to BTC which I will hold and eventually sell a large portion to FIAT, hopefully before the impending crash! And on that subject…

How are you paying tax?

I’ll be honest, I haven’t looked into this much yet. I’m in the UK, and so cryptocurrencies come under capital gains tax, which is 10% after personal allowance. Depending how much my portfolio is by then I plan to enlist the services of an accountant, as technically I would need to work out the price of each bit of bitcoin I bought and how much gain has been made, which would be not impossible but certainly bloody difficult. Naturally there is a record of all these transactions, but it might be just as easy for me to marry up the BTC I bought with FIAT and cash out this exact amount, at least in the first instance. It’s still a grey area that I’m not sure even accountants know how to deal with!

If you’re trading crypto to crypto, you’re fine. My understanding is that tax will only apply when you transfer any crypto to FIAT – trading ‘pretend’ money for ‘real’ money if you like. HMRC can’t tax you in BTC only in pounds, so they’re only interested in pounds you make which they can tax (if you’re in the UK, obvs).

Summary

I hope that has helped those who asked questions. Of course, feel free to ask me to clarify anything or ask more. I’d like to know my mistakes are doing some good!